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Exhibit
10.3
ESCROW
AGREEMENT
This Escrow Agreement is
dated as of November 13, 2007, by and among The Providence
Service Corporation, a Delaware corporation (the “
Company ”), The Bank of New York Trust Company, N.A.,
as escrow agent (“ Escrow Agent ”), and The Bank
of New York Trust Company, N.A., as trustee (the “
Trustee ”) under the Indenture described
below.
WITNESSETH
WHEREAS, the Company has
entered into that certain Agreement and Plan of Merger, dated as of
November 6, 2007 (the “ Acquisition Agreement
”), by and between the Company, PRSC Acquisition Corporation,
Charter LCI Corporation, a Delaware corporation
(“LCI”), and the stockholders of LCI (the “
Seller ”) and CLCI Agent, LLC, as stockholder
representative, pursuant to which LCI will merge with PRSC
Acquisition Corporation (the “ Acquisition
”).
WHEREAS, pursuant to that
certain Indenture, dated November 13, 2007 (the “
Indenture ”), between the Company and the Trustee, the
Company is issuing $70,000,000 aggregate principal amount of 6.5%
Convertible Senior Subordinated Notes due 2014 (the “
Notes ”). The Company has agreed, for the benefit of
the Trustee and for the benefit of the Holders, to enter into this
Escrow Agreement with respect to the Notes. Capitalized terms not
defined herein shall have the meaning assigned to them in the
Indenture.
WHEREAS, the Company desires
to deposit in escrow, to be held by the Escrow Agent subject to the
release conditions set forth herein, certain funds representing
that portion of the purchase price of the Notes to be received by
the Company.
WHEREAS, this Escrow
Agreement shall govern the terms upon which the Escrow Agent will
receive and hold, and make disbursements from, the escrow and the
duties for which the Escrow Agent will be responsible.
NOW THEREFORE, in
consideration of the foregoing and of the mutual covenants
hereinafter set forth, the Company, the Escrow Agent and the
Trustee (for the benefit of the Holders) agree as
follows:
1. Appointment of Escrow
Agent . The Company, on the one hand, and the Trustee, on the
other hand, do hereby appoint and designate the Escrow Agent as
escrow agent for the purposes set forth herein, and the Escrow
Agent does hereby accept such appointment under the terms and
conditions set forth herein.
2. Establishment of Escrow
Funds . Simultaneously with the execution of this Escrow
Agreement, the Company shall deposit, or cause to be deposited,
$70,000,000 (the “ Escrow Funds ”) with the
Escrow Agent. If and to the extent the conditions set forth in
Section 5 of this Escrow Agreement have been met with respect
to the release of the Escrow Funds, the Escrow Funds shall be
delivered to the Company by the Escrow Agent in accordance with
such Section 5. If and to the extent the conditions set forth
in Section 6 of this Escrow Agreement have been met with
respect to the release of the Escrow Funds, Escrow Funds in an
amount equal to the Mandatory Repurchase Amount shall be delivered
to the Trustee (or Paying Agent under the Indenture, as applicable)
to fund the Repurchase (as defined in the Indenture) and, if
applicable, that portion of the Escrow Funds representing the
Excess Amount shall be delivered to the Company. The
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Escrow Agent shall hold, subject to the
terms and conditions hereof, such cash and shall make such
investments and reinvestments of the escrowed cash as may be
permitted pursuant to Section 3 hereof, which, together with
the income from such investments, shall become the Escrow
Funds.
3. Investment of Escrow
Funds . The Escrow Funds shall be received by the Escrow Agent
and deposited into an escrow account to be named the PRSC
Convertible Note Fund. The Escrow Agent agrees to invest and
reinvest funds in the Escrow Account, but only upon written
instructions signed by the Company and only to the extent such
instructions direct such funds to be invested in the following (the
“ Permitted Investments ”):
(a) obligations issued or
guaranteed as to full and timely payment by the United States of
America or by any person controlled or supervised by or acting as
an instrumentality of the United States of America which
obligations are backed by the full faith and credit of the United
States of America pursuant to authority granted by Congress;
or
(b) money market mutual funds
that are registered with the United States Securities and Exchange
Commission meeting the requirements of Rule 2a-7 under the
Investment Company Act of 1940, and at least 95% of the assets of
which constitute cash equivalents.
Promptly after the initial deposit is
made, the Company shall give the Escrow Agent written directions to
invest the Escrow Funds without distinction between principal and
income, in Permitted Investments and from time to time the Company
may direct the reinvestment in other Permitted Investments. The
Escrow Agent will credit all such investments and reinvestments to
the escrow account and hereby agrees to treat any such investment
or reinvestment as a financial asset within the meaning of
Section 8-102(a)(9) of the New York Uniform Commercial Code.
The Escrow Agent is hereby authorized to execute purchases and
sales of permitted investments through the facilities of its own
trading or capital markets operations or those of any affiliated
entity. In the absence of written investment direction, the Escrow
Agent shall hold funds received hereunder uninvested. The Escrow
Agent shall have the right to liquidate any investments held in
order to provide funds necessary to make required payments under
this Escrow Agreement. The Escrow Agent in its capacity as escrow
agent hereunder shall not have any liability for any loss sustained
as a result of any investment or non-investment prior to its
maturity of for the failure of the parties to give the Escrow Agent
instructions to invest or reinvest the Escrow Funds or any earnings
thereon.
4. No Right in Escrow
Funds or Notes . The Company expressly acknowledges and agrees
that prior to the satisfaction of the release conditions in
Section 5, the Company shall have no interest or rights in the
Escrow Funds. In the event of the investment of the Escrow Funds,
the Company shall have no interest or rights in such investments or
investment securities.
5. Release Conditions
. Upon receipt by the Trustee of an Acquisition Certificate (as
defined below) substantially in the form attached hereto as
Exhibit A , the Company and the Trustee shall execute the
joint written instructions, substantially in the form attached
hereto as Exhibit B , instructing the Escrow Agent to
release the Escrow Funds to the Company. Upon receipt of the fully
executed joint written instructions, the Escrow Agent shall, as
soon as reasonably practicable, wire the Escrow Funds to the
Company (together with all interest, income and earnings thereon).
If the Escrow Agent is required to wire the Escrow Funds (together
with all interest, income and earnings thereon) on a day that is
not a Business Day, then the Escrow Agent shall not be obligated to
wire such amounts to the Company until the next succeeding Business
Day. An “ Acquisition Certificate ” means a
certificate signed by the Company’s Chief Executive Officer
and Chief Financial Officer that certifies that (i) the
Company and Seller have each performed, complied or
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received waivers of each term, condition
and covenant contained in the Acquisition Agreement (except for
Section 1.5) and related documents, and (ii) upon receipt
of the Escrow Funds, the Company will immediately pay to Seller, by
wire transfer of same day funds, such Escrow Funds and such other
amounts as required by the Acquisition Agreement necessary for the
consummation of the Acquisition.
6. Escrow Conditions Not
Met . Upon the earlier to occur of (i) the receipt by the
Escrow Agent of written notice from the Company that the
Acquisition will not be consummated or (ii) the condition in
Section 5 is not satisfied by the close of business on
December 31, 2007 (or such later date as the Company and the
Trustee shall notify the Escrow Agent), the Escrow Agent shall send
notice to the Trustee that the condition of the escrow has not been
met. Upon receipt of notice that the Company has failed to meet the
condition entitling the Company to the Escrow Funds, the Escrow
Funds shall be delivered to the Trustee for the benefit of the
Holders. If the Mandatory Repurchase Price (as defined in the
Indenture) exceeds the Escrow Funds (together with all interest,
income and earnings thereon), the Company shall promptly give the
Escrow Agent written instructions instructing the Escrow Agent to
wire the Escrow Funds (together with all interest, income and
earnings thereon) to the Trustee (for the benefit of the Holders)
and the Escrow Agent shall promptly comply with such instructions.
If the Escrow Funds (together with all interest, income and
earnings thereon) exceed the Mandatory Repurchase Price (the
“ Excess Amount ”), the Company shall promptly
give the Escrow Agent written instructions instructing the Escrow
Agent to wire the Mandatory Repurchase Price to the Trustee (for
the benefit of the Holders) and to wire such Excess Amount to the
Company and the Escrow Agent shall promptly comply with such
instructions.
7. Notices . All
notices and communications hereunder shall be in writing and shall
be deemed to be duly given if sent by first class mail to the
address as follows:
If to the Escrow Agent,
to:
The Bank of New York Trust
Company, N.A.
700 S. Flower Street, Suite
500
Los Angeles, California
90017
Attention: Corporate
Unit
Fax:
(213) 630-6298
If to the Trustee,
to
The Bank of New York Trust
Company, N.A.
700 S. Flower Street, Suite
500
Los Angeles, California
90017
Attention: Corporate
Unit
Fax:
(213) 630-6298
If to the Company,
to:
The Providence Service
Corporation
5524 East Fourth
Street
Tucson, Arizona
85711
Attention: General
Counsel
Fax:
(520) 747-6605
With a copy to:
Blank Rome, LLP
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One Logan Sq., 130 N. 18th
St.
Philadelphia, Pennsylvania
19103
Attention: Steven Dubow,
Esq.
Fax:
(215) 832-5755
or at such other address as any of the
above may have furnished to the other parties in writing by
registered mail, return receipt requested and any such notice or
communication given in the manner specified in this Paragraph 7
shall be deemed to have been given to a party on the date received
by such party. In the event that the Escrow Agent, in its sole
discretion, shall determine that an emergency exists, the Escrow
Agent may use or accept such other means of notice or communication
as the Escrow Agent deems advisable.
The Escrow Agent agrees to accept and
act upon facsimile transmission of written instructions and/or
directions pursuant to this Agreement given by the Company;
provided, however, that (i) the Company, subsequent to such
facsimile transmission of written instructions and/or directions,
shall provide the originally executed instructions and/or
directions to the Escrow Agent in a timely manner and
(ii) such originally executed instructions and/or directions
shall be signed by an authorized officer of the Company.
8. Reliance . The
Escrow Agent may act upon any instrument or other writing believed
by it in good faith to be genuine and to be signed or presented by
the proper person or persons and shall not be liable in connection
with the performance by it of its duties pursuant to the provisions
hereof, except for its own willful misconduct or gross
negligence.
9. Escrow Agent Duties
. The duties and responsibilities of the Escrow Agent hereunder
shall be determined solely by the express provisions of this Escrow
Agreement, and no other or further duties or responsibilities shall
be implied. The Escrow Agent shall not have any liability under,
nor duty to inquire into the terms and provisions of any agreement
or instructions, other than outlined in this Escrow
Agreement.
(a) The duties,
responsibilities and obligations of the Escrow Agent shall be
limited to those expressly set forth herein and no duties,
responsibilities or obligations shall be inferred or implied.
Escrow Agent shall not be subject to, nor require to comply with,
any other agreement to which the Company is a party, even though
reference thereto may be made herein, or to comply with any
direction or instruction (other than those contained herein or
delivered in accordance with this Escrow Agreement) from the
Company or any entity acting on its behalf. The Escrow Agent shall
not be required to, and shall not, expend or risk any of its own
funds or otherwise incur any financial liability in the performance
of any of its duties hereunder.
(b) This Agreement is for the
exclusive benefit of the parties hereto and their respective
successors hereunder, and shall not be deemed to give, either
express or implied, any legal or equitable right, remedy, or claim
to any other entity or person whatsoever.
(c) If at any time the Escrow
Agent is served with any judicial or administrative order,
judgment, decree, writ or other form of judicial or administrative
process which in any way affects the Escrow Funds (including but
not limited to orders of attachment or garnishment or other forms
of levies or injunctions or stays relating to the transfer of
Escrow Funds), the Escrow Agent is authorized to comply therewith
in any manner as it or its legal counsel of its own choosing deems
appropriate; and if the Escrow Agent complies with any such
judicial or administrative order, judgment, decree, writ or other
form of judicial or administrative process, the Escrow Agent shall
not be liable to any of the parties hereto or to any other person
or entity even though such order, judgment, decree, writ or process
may be subsequently modified or vacated or otherwise determined to
have been without legal force or effect.
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(d) The Escrow Agent shall
not be liable for any action taken or omitted or for any loss or
injury resulting from its actions or its performance or lack of
performance of its duties hereunder in the absence of gross
negligence or willful misconduct on its part. In no event shall
Escrow Agent be liable (i) for acting in accordance with or
relying upon any instruction, notice, demand, certificate or
document from the Company or the Trustee or any entity acting on
behalf of the Company or the Trustee, (ii) for any
consequential, punitive or special damages, (iii) for the acts
or omissions of its nominees, correspondents, designees, subagents
or subcustodians, or (iv) for an amount in excess of the value
of the Escrow Funds, valued as of the date of deposit.
(e) If any fees, expenses or
costs incurred by, or any obligations owed to, the Escrow Agent
hereunder are not promptly paid when due, the Escrow Agent may
reimburse itself therefor from the Escrow Funds and may sell,
convey or otherwise dispose of any Escrow Funds for such
purpose.
(f) As security for the due
and punctual performance of the Company’s obligations to the
Escrow Agent hereunder, now or hereafter arising, each of the
Company and the Trustee hereby pledge, collaterally assign and
grant to the Escrow Agent a continuing security interest in, and a
lien on, the Escrow Funds and all distributions thereon or
additions thereto (whether such additions are the result of
deposits by the Company or the Trustee or the investment of Escrow
Funds). The security interest of Escrow Agent shall at all times be
valid, perfected and enforceable by Escrow Agent against the
Company and all third parities in accordance with the terms of this
Escrow Agreement.
(g) The Escrow Agent shall
not incur any liability for not performing any act or fulfilling
any duty, obligation or responsibility hereunder by reason of any
occurrence beyond the control of the Escrow Agent (including but
not limited to any act or provision of any present or future law or
regulation or governmental authority, any act of God or war, or the
unavailability of the Federal Reserve Ban
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