EXHIBIT 2.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
August 31, 1995, (the "Effective Date") by and among REEL-TECH, INC., a
Washington corporation ("Purchaser"), REEL TECH, INC., an Indiana corporation
("Seller") and SEATTLE-FIRST NATIONAL BANK, as escrow agent (the "Escrow
Agent").
RECITALS
WHEREAS, Purchaser and Seller have entered into a Asset Purchase Agreement
dated as of August 31, 1995 (the "Purchase Agreement"), pursuant to which
Purchaser has agreed to purchase substantially all of Seller's assets.
Capitalized terms used herein and not otherwise defined shall have the same
meaning as defined in the Purchase Agreement;
WHEREAS, Section 2.1 of the Purchase Agreement provides that $500,000 of
the Purchase Price (the "Escrowed Funds") will be paid into escrow to effect an
adjustment of the purchase price payable pursuant to the Purchase Agreement and
satisfy indemnity claims made by Purchaser pursuant to the Purchase Agreement;
and
WHEREAS, Purchaser, Seller and the Escrow Agent desire to enter into this
Agreement to establish the terms and conditions under which the Escrow Agent
will hold and disburse the Escrowed Funds;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements contained in this Agreement, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Purchaser, Seller
and the Escrow Agent agree as follows:
1. APPOINTMENT OF ESCROW AGENT. Purchaser and Seller hereby appoint the
Escrow Agent to serve in accordance with the terms of this Agreement, and the
Escrow Agent hereby agrees to act in such capacity upon the express terms,
conditions and provisions hereinafter set forth in this Agreement. The duties
and liabilities of the Escrow Agent shall be determined solely by this Agreement
and not by reference to other agreements between Purchaser and Seller.
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2. DELIVERY INTO ESCROW. Purchaser herewith delivers to the Escrow Agent
the Escrowed Funds. The Escrow Agent agrees to hold the Escrowed Funds,
including any income from investment of the Escrowed Funds, in escrow as agent
for Purchaser and Seller and to distribute the Escrowed Funds as provided
herein. The Escrowed Funds shall be invested by the Escrow Agent in one or more
of the instruments listed below as specified in writing by Purchaser:
i) direct obligations of the United States of America including
obligations issued or held in book entry form on the books
of the Department of Treasury of the United States of
America or obligations the timely payment of principal of
and interest on which are fully guaranteed by the United
States of America;
ii) repurchase agreements which are fully secured by collateral
in the form of the obligations described in clause (i)
above;
iii) certificates of deposit in amounts of $100,000 or more of
any national bank, including the Escrow Agent, with capital
and surplus of $200 million or more; or
iv) a taxable government money market mutual fund restricted to
obligations with maturities of one year or less, composed of
obligations issued or guaranteed as to payment of principal
and interest by the full faith and credit of the United
States of America or repurchase agreements secured by
government obligations.
The Escrow Agent shall have no duty or right to invest the Escrowed Funds until
it receives written investment instructions from Purchaser. The Escrow Agent
shall not be liable for any loss from said investments. The Escrow Agent is
authorized to redeem any such investments as necessary to make any payments or
disbursements required hereunder and shall be held harmless by Purchaser and
Seller, jointly and severally, with respect to any losses or penalties incurred
thereby. The Escrow Agent shall, at least ten (10) days prior to the maturity
of any investment, notify Purchaser of such impending maturity.
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3. TAX FORMS. Each party to this Agreement other than the Escrow Agent
shall provide a completed I.R.S. Form W-8 or Form W-9 to the Escrow Agent at the
signing of this Agreement. For purposes of reporting to tax authorities, the
Escrow Agent will treat all income earned by the Escrow Funds as paid to Seller
at the time the income is received by the Escrow Agent.
4. RELEASE OF THE ESCROWED FUNDS. The Escrowed Funds, including any
income from investment of the Escrowed Funds, will be released as follows:
4.1 If Purchaser has a good faith belief that it is entitled to an
Initial True-Up Amount pursuant to Section 2.2.1 of the Purchase Agreement, it
shall provide a copy of the Initial True-Up Report to Seller and the Escrow
Agent within twenty-one (21) days of the Effective Date. The Escrow Agent shall
deliver to Purchaser from the Escrowed Funds cash in the Initial True-Up Amount
as specified in its written directions and accompanied by the Initial True-Up
Report within ten (10) days of receipt of such Initial True-Up Report.
4.2 If Purchaser has a good faith belief that it is entitled to any
True-Up Amount in addition to any Initial True-Up Amount delivered to Purchaser
pursuant to Subsection 4.1 above and pursuant to Section 2.2.1 of the Purchase
Agreement or an Excluded Inventory Adjustment Amount pursuant to Section 2.2.2
of the Purchase Agreement, it shall provide a copy of the True-Up Report or the
Excluded Inventory Adjustment Report, as applicable, to Seller and the Escrow
Agent; provided, however, that any such True-Up Report must be delivered to
Seller and the Escrow Agent no later than forty-five (45) days after the last
day of the sixth complete Fiscal Month, as defined below, after the Effective
Date and that any such Excluded Inventory Adjustment Report must be delivered to
Seller and the Escrow Agent no later than thirty (30) days after the last day of
the ninth complete Fiscal Month, as defined below, after the Effective Date.
Seller may contest in whole or in part such True-Up Amount or Excluded Inventory
Adjustment Amount by giving Purchaser and the Escrow Agent written notice within
thirty (30) days after Purchaser provides such True-Up Report or Excluded
Inventory Adjustment Report to Seller. If Seller does not timely contest the
True-Up Amount or the Excluded Inventory Adjustment Amount, as the case may be,
the Escrow Agent shall promptly after expiration of the thirty (30) day response
period deliver to Purchaser from the Escrowed Funds cash in the amount of the
True-Up Amount or the Excluded Inventory Adjustment Amount, as
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applicable. If Seller timely contests such True-Up Amount or Excluded Inventory
Adjustment Amount, then the Escrow Agent shall release any portion of the True-
Up Amount or Excluded Inventory Adjustment Amount not disputed by Seller and
shall continue to hold Escrowed Funds in the amount of the True-Up Amount or
Excluded Inventory Adjustment Amount in dispute for delivery to Purchaser in
such amount, if any, as shall be specified by any of the following:
(a) Written instructions executed by both Purchaser and
Seller; or
(b) A court order adjudicating such dispute issued by a
court of competent jurisdiction.
4.3 If Purchaser has a good faith belief that it or any other
Indemnified Party is entitled to indemnification pursuant to Section 7 of the
Purchase Agreement, it shall give written notice to Seller and the Escrow Agent
of such claim (an "Indemnity Claim"), which notice shall specify the basis for
the claim and the estimated dollar amount required to satisfy such claim (the
"Claim Amount") and which notice must be given no later than the last day of the
ninth complete Purchaser fiscal month ("Fiscal Month(s)"), as described in
Schedule 4.3, after the Effective Date. Seller may contest any Indemnity Claim
by giving Purchaser and the Escrow Agent written notice within thirty (30) days
after Purchaser gives written notice of the Indemnity Claim to Seller. If
Seller does not timely contest the Indemnity Claim pursuant to the preceding
sentence, the Escrow Agent shall promptly after expiration of the thirty (30)
day response period deliver to Purchaser from the Escrowed Funds cash in the
amount of the Claim Amount. If Seller timely contests the Indemnity Claim, then
the Escrow Agent shall continue to hold Escrowed Funds in the amount of such
disputed Claim Amount for delivery to Purchaser in such amount, if any, as shall
be specified by any of the following:
(a) Written instructions executed by both Purchaser and
Seller; or
(b) A court order adjudicating such dispute issued by a
court of competent jurisdiction.
4.4 On the forty-first day following the last day of the ninth
complete Fiscal Month after the Effective Date (or the next business day if such
day is not a business day), the Escrow
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Agent shall release to Seller all remaining Escrowed Funds less the sum of all
True-Up Amounts, Excluded Inventory Adjustment Amounts and Claim Amounts which
have not been resolved in accordance with Subsection 4.2 or 4.3 above by that
date. Within five (5) business days after the execution of this Agreement,
Purchaser shall provide to the Escrow Agent in writing the date that is the
Effective Date of the Purchase Agreement.
4.5 All Escrowed Funds not released by the Escrow Agent in accordance
with Subsections 4.1 through 4.4 above shall be released to Seller or Purchaser
in such amount as shall be specified by:
(a) Written instructions executed by both Purchaser and Seller;
or
(b) A court order adjudicating such dispute issued by a court of
competent jurisdiction.
5. DUTY AND LIABILITY OF THE ESCROW AGENT.
5.1 The sole duty of the Escrow Agent, other than as herein
specified, shall be to receive the Escrowed Funds and hold them subject to
release in accordance with the terms of this Agreement. The Escrow Agent's
rights, duties and obligations are strictly limited to those expressly set forth
in this Agreement and the Escrow Agent shall be under no implied obligations nor
subject to take notice of any defaults or any other matter, nor be bound nor
required to give notice or demand, nor required to take any action whatever
except as herein expressly provided. The Escrow Agent shall not be liable for
any loss or damage unless caused by its own gross negligence or willful
misconduct.
5.2 The Escrow Agent may conclusively rely upon and shall be
protected in acting upon any statement, certificate, notice, request, consent,
order or other document believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall have no duty
or liability to verify any such statement, certificate, notice, request,
consent, order or other document and its sole responsibility shall be to act
only as expressly set forth in this Agreement. The Escrow Agent shall be under
no obligation to institute or defend any action, suit or proceeding in
connection with this Agreement. The Escrow Agent may consult counsel in respect
of any question arising under this Agreement, and the Escrow Agent shall not be
liable for any action taken or omitted in good faith upon advice of such
counsel.
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5.3 Purchaser and Seller jointly and severally agree to indemnify and
hold harmless the Escrow Agent from loss, damage or any claim made against the
Escrow Agent arising out of or relating to this Agreement, such indemnification
to include all costs and expenses incurred by the Escrow Agent, including but
not limited to reasonable attorneys' fees; provided, however, that such
indemnification shall not include claims against the Escrow Agent which are
occasioned by gross negligence, bad faith or willful misconduct.
5.4 The Escrow Agent may conclusively rely on the written
instructions of all the parties as to the disposition of funds, assets,
documents, or other property held in escrow.
6. ESCROW AGENT'S FEE.
6.1 Purchaser and Seller each agree to pay one-half of the fees of
the Escrow Agent as set forth in SCHEDULE 6.1 attached hereto. If either or
both parties do not pay, both shall be jointly and severally liable therefor.
The fee for services rendered hereunder is intended as full compensation for the
Escrow Agent's services as contemplated by this Agreement. In addition,
Purchaser and Seller each agree to pay one-half of the Escrow Agent's reasonable
expenses and disbursements, including, but not limited to, the actual cost of
legal services, should the Escrow Agent deem it necessary to retain an attorney.
Should litigation instituted by or against any of the parties require additional
duties of the Escrow Agent or appearance in court, the Escrow Agent shall be
reimbursed by the nonprevailing party for its services and for its expenses
incurred therein, or in the event such litigation is settled, as agreed between
Purchaser and Seller.
6.2 If any controversy arises between the parties hereto or with any
third person, the Escrow Agent shall not be required to resolve the same or to
take any action to do so but may, at its discretion, institute such interpleader
or other proceedings as it deems proper. Any costs and expenses, including
reasonable counsel fees incurred by the Escrow Agent in connection with such
dispute, shall be paid by the nonprevailing party or as otherwise agreed by the
parties.
7. BINDING AGREEMENT AND SUBSTITUTION OF ESCROW AGENT. The terms and
conditions of this Agreement shall be binding on the heirs, executors and
assigns, creditors, transferees, or successors in interest of the parties
hereto, regardless of
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whether such interest is obtained by operation of law or otherwise, including
without limitation by consolidation, transfer, assignment or merger. Any
corporation into which the Escrow Agent may merge, sell, or transfer its escrow
business shall automatically be and become successor Escrow Agent hereunder,
vested with all powers as was its predecessor without the execution or filing of
any instruments, or any further act, deed, or conveyance on the part of the
parties hereto. If, for any reason, the Escrow Agent named herein should be
unable or unwilling to continue to serve as such Escrow Agent, the Escrow Agent
shall give Purchaser and Seller twenty (20) days prior written notice thereof.
Upon the effective date of such resignation, the Escrow Agent shall have no
further duties or obligations hereunder. Purchaser and Seller shall within that
twenty (20) days appoint another escrow agent by a writing signed by Purchaser
and Seller, a copy of which shall be delivered to the withdrawing Escrow Agent.
If the Escrow Agent is not notified within twenty (20) days of a successor
Escrow Agent then the Escrow Agent shall be entitled to transfer all of the
Escrowed Funds to a court of competent jurisdiction with a request to have a
successor appointed. The Escrow Agent shall promptly thereafter execute all
documents necessary to transfer the Escrowed Funds to the substitute escrow
agent.
8. GENERAL.
8.1 All notices, demands and other communications called for or
required by this Agreement shall be in writing and shall be addressed to the
parties at their respective addresses stated below or to such other address as a
party may subsequently designate by ten (10) days' advance written notice to the
other parties. Communications hereunder shall be deemed to have been received
(i) upon delivery in person, (ii) three business days after mailing it by U.S.
certified mail, return receipt requested and postage prepaid, (iii) the first
business day after depositing it with a commercial overnight carrier which
provides written verification of delivery or (iv) the day of transmission by
telefacsimile if sent before 2:00 p.m. recipient's time provided that a copy of
such notice is sent on the same day by U.S. certified mail, return receipt
requested and postage prepaid, with an indication that the original was sent by
telefacsimile and the date of its transmittal.
Seller: Reel Tech, Inc., an Indiana corporation
Attention: Xxxxxxx X. Xxxx
0000 Xxxxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
CC: Xxxxxx X. Xxxxxxx
Xxxxx, Xxxxxx & Xxxxxxx
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0000 Xxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Fax: (000) 000-0000
Purchaser: Reel-Tech, Inc., a Washington corporation
Attention: President
00000 Xxxxxxx Xxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
CC: Data I/O Corporation
Attention: Chief Financial Officer
00000 Xxxxxxx Xxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Escrow Agent: Seattle First National Bank
c/o BankAmerica State Trust Company
Attention: Xxxxx Xxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
8.2 This Agreement, including all matters of construction, validity
and performance, shall be governed by and construed and enforced in accordance
with the laws of the State of Washington, without regard to its conflict of law
provisions which might otherwise require the application of the law of any other
jurisdiction. The parties agree that the exclusive jurisdiction and venue of
any action arising under this Agreement shall be the Superior Court of
Washington for King County, or the United States District Court for the Western
District of Washington at Seattle, and each of the parties hereby irrevocably
agrees, acknowledges and submits itself to the exclusive jurisdiction and venue
of such courts for the purposes of such lawsuit.
8.3 This Agreement cannot be modified, or any of the terms hereof
waived, except by an instrument in writing (referring specifically to this
Agreement) executed by all the parties to this Agreement.
8.4 This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each of the
parties and either original or facsimile counterparts have been delivered to the
other party.
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8.5 The parties hereto agree not to use the name of Seafirst or
Seattle-First National Bank to infer an association with the transaction other
than that of a legal bank.
8.6 The Escrow Agent's immunities and limitations of liability
hereunder and its rights to payment of its fees and expenses shall survive its
resignation or removal and the termination of this Agreement.
8.7 This Agreement and the agreements referenced in the recitals
above contain all of the terms and conditions agreed upon by the parties
relating to the subject matter hereof and supersede and cancel all prior
agreements, negotiations, correspondence, undertakings, and communications of
the parties, whether oral or written, respecting that subject matter.
8.8 The parties hereto may elect to request transfer of funds by
Fedwire from time to time, subject to the conditions stated herein. The parties
hereto agree that the wire transfer security procedures identified on the
attached EXHIBIT 8.8 to this Agreement are commercially reasonable. Parties
hereto further agree that the Escrow Agent should use those procedures to detect
unauthorized wire transfer payment requests prior to executing such requests and
further agree that any request acted upon by the Escrow Agent in compliance with
these security procedures, whether or not authorized, shall be treated as an
authorized request. The parties hereto agree that the Escrow Agent has the
right to change the wire transfer security procedures from time to time and that
use of any changed procedures evidences the acceptance of commercial
reasonability of such change by the parties hereto.
8.9 If legal proceedings are brought to enforce or interpret any
provision of this Agreement, the most prevailing party shall be awarded its
reasonable attorneys' fees and costs in addition to any other relief or remedy
which may be available.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first written above.
SEATTLE FIRST NATIONAL BANK,
as Escrow Agent
By BankAmerica State Trust Company,
Its Authorized Agent
By //S// XXXXXX XXXXX
---------------------------------
Its AVP
------------------------------
SELLER:
REEL TECH, INC., an Indiana corporation
By //S// XXXXXXX X. XXXX
--------------------------------
Its PRESIDENT
------------------------------
PURCHASER:
REEL-TECH, INC., a Washington
corporation
By //S// XXXXX X. XXXXXX
-------------------------------
Its SECRETARY
------------------------------
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SCHEDULE 4.3
Purchaser's Fiscal Months
1995
MONTHLY CLOSING DATES
January 26, 1995
February 23, 1995
MARCH 30, 1995
April 27, 1995
May 25, 1995
JUNE 29, 1995
July 27, 1995
August 24, 1995
SEPTEMBER 28, 1995
October 26, 1995
November 23, 1995
DECEMBER 28, 1995
1996
MONTHLY CLOSING DATES
January 25, 1996
February 22, 1996
MARCH 28, 1996
April 25, 1996
May 23, 1996
JUNE 27, 1996
July 25, 1996
August 22, 1996
SEPTEMBER 26, 1996
October 24, 1996
November 21, 1996
DECEMBER 26, 1996
1997
MONTHLY CLOSING DATES
January 23, 1997
February 20, 1997
MARCH 27, 1997
April 24, 1997
May 22, 1997
JUNE 26, 1997
July 24, 1997
August 21, 1997
SEPTEMBER 25, 1997
October 23, 1997
November 20, 1997
DECEMBER 25, 1997
1998
MONTHLY CLOSING DATES
January 22, 1998
February 19, 1998
MARCH 26, 1998
April 23, 1998
May 21, 1998
JUNE 25, 1998
July 23, 1998
August 20, 1998
SEPTEMBER 24, 1998
October 22, 1998
November 19, 1998
DECEMBER 31, 1998
SCHEDULE 6.1
ESCROW AGENT'S FEES
SEATTLE-FIRST NATIONAL BANK
SCHEDULE OF FEES
ESCROW SERVICES
MINIMUM ACCEPTANCE FEE $750.00
MINIMUM ANNUAL ACCOUNT MAINTENANCE FEE: $750.00
ANNUAL HOLDING FEE:
Securities held per year, per issue $50.00
Legal Documents $50.00
INVESTMENT FEE: (Securities other than Seafirst Managed Mutual Funds)
5% of interest earned
ADMINISTRATIVE FEES:
Deposit, exchange, or withdrawal of stock, bond or document
(per item) $5.00
Receipt of payment of deposit $10.00
Disbursements (per check or funds transfer) $7.50
Returned checks $10.00
List of subscribers for securities offerings per subscriber
($50.00 minimum) $2.00
Interest allocation per subscriber ($50.00 minimum) $1.50
Tax reporting (W-9, 1099) per individual/company (25.00 minimum) $2.00
Foreign tax reporting (W-8, 1042) per individual/company $50.00
Incoming/outgoing wire transfers $10.00
Minimum Final Release of Proceeds Review $25.00
Acceptance fees, annual account maintenance fees and Final Release of Proceeds
Review are based on appraisal of work and time spent.
For investments made through Seafirst-managed mutual funds, there is no
investment fee. Seafirst's fees and charges as investment advisor, shareholder
servicing agent, transfer agent and custodian are disclosed in the applicable
prospectus.
Thereafter, annual account maintenance fees are payable in advance. Annual
account maintenance fees will not be prorated.
Fees are to be paid before escrowed funds are released.
Seafirst Bank shall have a first and paramount lien against all property placed
in escrow for payment of its costs, charges, fees and expenses (including,
without limitation, reasonable attorneys' fees), in the event of a dispute or
misunderstanding.
All fees are subject to Washington State sales tax.
Additional fees may be charged in a reasonable amount for any unusual or
extraordinary services including investment management services rendered and not
covered by this fee schedule.
Fees are subject to change from time to time consistent with changes made by
Seafirst to its standard escrow fee schedule.
NOTE: FINAL ACCOUNT ACCEPTANCE IS SUBJECT TO REVIEW OF DOCUMENTS AD COMPLIANCE
WITH SEAFIRST'S ACCOUNT ACCEPTANCE PROCEDURES.
BANKAMERICA IS IN THE PROCESS OF PURSUING THE SALE OF ITS INSTITUTIONAL TRUST
AND SECURITIES DIVISION. THE SERVICE INCLUDED IN THIS PROPOSAL MAY BE AFFECTED
IN FULL OR PART BY THE PENDING SALE. DETAILS REGARDING THE TIMING OF THE SALE,
WHAT SERVICES WILL BE INCLUDED IN THE SALE TRANSACTION, WHETHER THE SERVICES
WILL BE THE SUBJECT OF ONE OR MULTIPLE SALES TRANSACTIONS AND PURCHASER NAMES
ARE NOT AVAILABLE AT THIS TIME.
DATED: JUNE 26, 1995 CONFIDENTIAL
SCHEDULE 8.8
SECURITY PROCEDURES
WIRE TRANSFER SECURITY PROCEDURES
Requestor is defined as one of the parties to the escrow document.
REQUEST IS MADE IN WRITING:
a. Escrow Agent verifies signature vs. authorized list of
representatives for Requestor.
REQUEST IS MADE IN PERSON:
a. Requestor prepares a written signed request.
b. Escrow Agent verifies signature vs. authorized list of
representatives for Requestor.
REQUEST IS MADE BY PHONE:
a. Requestor provides Escrow Agent with their name, the account
number, and the detailed request.
b. Escrow Agent confirms that the person making the request is
an authorized representative for the Requestor.
c. Escrow Agent uses call back verification to reconfirm the
request*.
d. Requestor sends original follow-up request by mail*.
* If request changes the amount and/or message only, on an
instruction signed by Requestor's authorized representative which
Requestor has previously communicated to Escrow Agent in writing and
Escrow Agent has such written instruction on file, Escrow Agent is not
required to perform the call back verification and Requestor need not
follow-up the request by mail.
Escrow Agent has the right to change the Wire Transfer Security Procedures
from time to time and the Requestors use of any changed procedures
evidences the acceptance of the commercial reasonability of such change.
