Exhibit 10.54
EXECUTION COPY
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this “
Agreement ”), dated as of February 18,
2009, is by and among NOVASTAR MORTGAGE, INC., a Virginia
corporation (“ NMI ”); NOVASTAR
FINANCIAL, INC., a Maryland corporation (“ NFI
”); TABERNA PREFERRED FUNDING I, LTD. (“ Taberna
I ”); TABERNA PREFERRED FUNDING II, LTD. (“
Taberna II ”); KODIAK CDO I, LTD. (“
Kodiak ” and, collectively with Taberna I and
Taberna II, the “ Holders ”), and
WOLFBLOCK LLP, a Pennsylvania limited liability partnership
(“ Escrow Agent ”).
WITNESETH :
WHEREAS, on the date hereof, NMI,
NFI, the Holders and other parties thereto have executed an
Exchange Agreement (the “ Exchange Agreement
”), a fully executed copy of which is attached hereto as
Exhibit A , which Exchange Agreement provides for the
exchange of certain Securities and Existing Securities (as defined
therein) on the terms and conditions set forth therein;
and
WHEREAS, on the date hereof, NMI,
NFI, the Holders, and other parties thereto have executed a
Settlement Agreement (the “ Settlement
Agreement ”), a fully executed copy of which is
attached hereto as Exhibit B , which Settlement
Agreement provides for the settlement of outstanding claims and
actions on the terms and conditions set forth therein;
and
WHEREAS, the Settlement Agreement
provides for certain settlement amounts, as more particularly set
forth therein, to be deposited with Escrow Agent, which settlement
amounts shall be held and disposed of by Escrow Agent in accordance
with the terms of this Agreement;
NOW, THEREFORE, in consideration of
the premises and the covenants herein contained, the parties hereto
hereby agree as follows:
1. Definitions . All terms
used herein and not otherwise defined herein have the same meaning
that such terms have in the Exchange Agreement or the Settlement
Agreement, as applicable.
2. Escrow Agent . Escrow
Agent is hereby appointed as escrow agent to hold and distribute
the Deposits defined in Section 3 hereof, in accordance with
the terms hereof, and Escrow Agent hereby accepts such appointment
and agrees to act in such capacity.
3. Deposits . On or about the
date hereof, Escrow Agent shall have received the following from
NMI:
(a) A wire transfer in the amount of
$2,005,738.51 (the “ Kodiak Settlement Amount
”);
(b) A wire transfer in the amount of
$3,316,921.08 (the “ Taberna Settlement Amount
”); and
(c) A wire transfer in the amount of
$387,000 (the “ Restructuring Costs Amount
”).
Items (a) through
(c) referenced above shall, hereinafter, collectively be
referred to as the “ Deposits
”.
Escrow Agent shall invest the
Deposits in non-interest bearing accounts, with or through a
commercial bank or similar institution having assets on deposit of
at least One Billion Dollars. Escrow Agent shall advise the parties
hereto of the name and address of such institution and the account
number assigned to each of the Deposits.
4. Release Conditions .
Escrow Agent’s release and disbursement of the Deposits
pursuant to Section 5 below is conditioned upon Escrow
Agent’s receipt, on or before 5:00 p.m. (New York time)
April 30, 2009 (the “ Expiry Date ”)
of the following (collectively, the “ Release
Conditions ”):
(a) The Deposits;
(b) A copy of the final,
non-appealable dismissal order of the Bankruptcy Court dismissing
Case No. 08-12125, as issued by the United States Bankruptcy
Court for the District of Delaware (the “ Dismissal
Order ”); and
(c) A certificate, substantially in
the form of Exhibit C attached hereto, executed by
NMI, NFI, and the Holders, certifying that: (i) the exchange
of those certain Securities and Existing Securities (as defined in
such Exchange Agreement) has occurred in accordance with the terms
and conditions of the Exchange Agreement; (ii) those
conditions set forth in Section 7 of the Settlement Agreement
have been satisfied or waived by the applicable parties thereto;
and (iii) Escrow Agent is authorized to disburse the Deposits
in accordance with the provisions of this Agreement (the “
Certificate ”).
5. Closing and Release of
Deposits . On the date all of the foregoing Release Conditions
have been fully met, Escrow Agent shall:
(a) Disburse the Kodiak Settlement
Amount to The Bank of New York Mellon Trust Company, National
Association (“ BNYM ”), as the Kodiak
Indenture Trustee (as defined in the Settlement Agreement), in
accordance with wire instructions provided by the Kodiak Indenture
Trustee to the Escrow Agent with respect to such Kodiak Settlement
Amount;
(b) Disburse the Taberna Settlement
Amount to BNYM, as the Taberna Indenture Trustee (as defined in the
Settlement Agreement), in accordance with wire instructions
provided by the Taberna Indenture Trustee to the Escrow Agent with
respect to such Taberna Settlement Amount;
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(c) Disburse $150,000.00 of the
Restructuring Costs Amount to Winston & Strawn LLP, as
payment for legal fees incurred, in accordance with wire
instructions provided to the Escrow Agent;
(d) Disburse $30,000.00 of the
Restructuring Costs Amount to Gardere Wynne Sewell LLP, as payment
for legal fees incurred, in accordance with wire instructions
provided to the Escrow Agent;
(e) Disburse $175,000.00 of the
Restructuring Costs Amount to WolfBlock LLP, as payment for legal
fees incurred;
(f) Disburse $7,000.00 of the
Restructuring Costs Amount to Richards, Layton & Finger,
P.A., as payment for legal fees incurred, in accordance with wire
instructions provided to the Escrow Agent; and
(g) Disburse the remaining $25,000
of the Restructuring Costs Amount as instructed, such instructions
to be in writing and approved by both NMI and the Holders, to pay
(or reimburse) expenses of the Trustees (as defined in the
Settlement Agreement) and the trustees under the Operative
Documents (as defined in the Exchange Agreement), including, to the
extent not otherwise provided for in Section 5(d) and
(f) hereof, (i) the legal fees of the Trustees and the
trustees under the Operative Documents, (ii) expenses to make
the 2009 II/B Preferred Securities (as defined in the Exchange
Agreement) eligible for clearance and settlement as book-entry
securities through the facilities of The Depository Trust Company
and listed for trading through the PORTAL Market and
(iii) CUSIP fees.
6. Failure of Release Conditions
by the Expiry Date . If for any reason, by 5:00 p.m. (New York
time) on the Expiry Date, the foregoing Release Conditions have not
been fully met, Escrow Agent shall immediately return the Kodiak
Settlement Amount, the Taberna Settlement Amount and the
Restructuring Costs Amount to NMI, pursuant to wire instructions
provided by NMI to Escrow Agent.
7. Termination . This
Agreement shall terminate upon the earlier to occur of (a) the
disbursement of the Deposits pursuant to Section 5 or
(b) the return of the Deposits pursuant to Section 6.
Upon such termination, Escrow Agent shall thereupon and thereafter
be free and discharged of all obligations and liabilities
hereunder.
8. Escrow Agent .
(a) As escrow agent hereunder,
Escrow Agent shall have no duties or responsibilities, except those
duties and responsibilities expressly set forth herein. Escrow
Agent may consult with counsel and shall be fully protected with
respect to any action taken or omitted by it in good faith on the
advise of counsel, and shall have no liability hereunder except for
its gross negligence or willful misconduct. Escrow Agent may rely
on any certificate, statement, request, consent, agreement or other
instrument which it believes
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in good faith to be genuine and to have been
signed or presented by a proper person or persons. Escrow Agent
shall not be bound by any modification to or amendment of this
Agreement unless in writing and signed by the parties hereto, and
if its duties as Escrow Agent hereunder are affected, unless it
shall have given its prior written consent thereto. In the event
that Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions from the parties hereto
with respect to the Deposits which, in its opinion, are in conflict
with any provisions of this Agreement, Escrow Agent shall be
entitled to refrain from taking any action other than to keep
safely the Deposits, until it shall be directed otherwise in
writing by all of the parties hereto.
(b) Notwithstanding anything herein
to the contrary or which might be construed to the contrary, the
Escrow Agent shall be fully and completely discharged and released
from any obligation or duty with respect to the Deposits when the
Escrow Agent has disbursed the same in accordance with this
Agreement.
(c) If any dispute arises as to any
action to be taken by the Escrow Agent or any distribution of the
Deposits, or as to Escrow Agent’s rights and duties under
this Agreement, or if the Escrow Agent is in doubt as to such
duties, or if any attachment, garnishment, or other similar
proceeding is instituted or procured as to all or any part of the
Deposits, and if any writ, order, or rule of attachment,
garnishment, or other similar order is levied upon or entered
against any portion of the Deposits, the Escrow Agent shall have
the right to: (i) interplead the Deposits, or any part
thereof, with a court of competent jurisdiction and upon notifying
the other parties to this Agreement of such action, all liability
of the Escrow Agent under the terms of this Agreement shall
terminate, except to the extent of accounting for the Deposits; or
(ii) institute an action for a declaratory judgment as to the
ownership of the Deposits.
(d) Escrow Agent shall not receive
compensation for the performance of its duties
hereunder.
(e) Escrow
