EXHIBIT 10.2
EXECUTION COPY
ESCROW AND SECURITY
AGREEMENT
This ESCROW AND SECURITY AGREEMENT
(this “ Escrow and Security Agreement ”) is made
and entered into as of February 4, 2005 among LFS-Merger Sub, Inc.,
a Texas corporation (the “ Pledgor ”), The Bank
of New York, as Trustee under the Indenture referred to below (in
such capacity, the “ Trustee ”), The Bank of New
York, as securities intermediary and escrow agent (in such
capacity, the “ Escrow Agent ”), and J.P. Morgan
Securities Inc., Banc of America Securities LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (collectively, the “
Initial Purchasers ”), in favor of the holders (the
“ Holders ”) of the Notes (as defined herein)
issued on the date hereof by the Pledgor under the Indenture
referred to below.
W I T N E S S E T
H
WHEREAS, the Pledgor and the Initial
Purchasers are parties to a Purchase Agreement dated January 28,
2005 (as such agreement may be amended, the “ Purchase
Agreement ”), pursuant to which the Pledgor will issue
and sell to the Initial Purchasers an aggregate of $152,000,000
principal amount of its 10¾% Senior Subordinated Notes due
2015 (the “ Notes ”);
WHEREAS, the Pledgor and the Trustee
have entered into that certain Indenture dated as of the date
hereof (as amended, restated, supplemented or otherwise modified
from time to time, the “ Indenture ”), pursuant
to which the Pledgor is issuing the Notes on the date
hereof;
WHEREAS, pursuant to the Purchase
Agreement, the Pledgor is required on the date hereof (the “
Closing Date ”) (i) to direct the Initial Purchasers
to deposit $149,712,400.00 (the gross proceeds from the sale of the
Notes, and herein referred to as the “ Gross Proceeds
”) and (ii) to deposit or cause to be deposited an additional
$2,768,722.22 (the “ Additional Escrow Amount ”
and, together with the Gross Proceeds, the “ Escrow
Amount ”) (to be provided either through a deposit of
cash or Cash Equivalents or a letter of credit with terms and
conditions reasonably satisfactory to the Initial Purchasers),
which in the aggregate shall be an amount sufficient to redeem the
Notes in cash at the redemption price equal to 98.495% of the
principal amount of the Notes, plus accrued and unpaid interest
from and including the date hereof to but excluding April 5, 2005,
with the Escrow Agent in the Collateral Account (as defined herein)
to be held by the Escrow Agent for the benefit of the Trustee, the
Holders of the Notes and the Initial Purchasers;
WHEREAS, in the event that (x) the
conditions contained in this Escrow and Security Agreement for the
release of the Escrowed Funds are not satisfied on or prior to
April 1, 2005, or (y) if the Merger Agreement (as defined herein)
is terminated in accordance with its terms prior to such date, the
Pledgor shall be required to redeem the Notes pursuant to the terms
of the Indenture (the “ Obligations
”);
WHEREAS, to secure the Obligations
of Pledgor, the Pledgor has agreed to (i) pledge to the Trustee for
its benefit and the ratable benefit of the Holders of the Notes and
the Initial Purchasers, a security interest in and lien upon the
Escrowed Funds and the other Collateral (each as hereinafter
defined) and (ii) execute and deliver this Escrow and Security
Agreement in order to secure the payment and performance by the
Pledgor of the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of
the promises herein contained, and in order to induce the Holders
of the Notes to purchase the Notes, the Pledgor, the Trustee, the
Initial Purchasers and the Escrow Agent hereby agree, for the
benefit of the Trustee and for the ratable benefit of the Holders
of the Notes and the Initial Purchasers, as follows:
SECTION 1. Definitions;
Appointment; Deposit and Investment
1.1 Definitions
“ Cash Equivalents
” means any money market fund that invests solely in U.S.
Government Securities.
“ Collateral Account
” means an account established and maintained by the Escrow
Agent in the name “LFS-Merger Sub Collateral Account,”
which account shall at all times be under the control (within the
meaning of Section 8-106 of the U.C.C. (as defined below)) of the
Trustee and subject to the terms and conditions of this Escrow and
Security Agreement.
“ Escrow Agent ”
shall mean the Person named as the “escrow agent” in
the first paragraph of this Escrow and Security Agreement until a
successor escrow agent shall have become such, in accordance with
Section 1 hereof, and thereafter “Escrow Agent” shall
mean the Person who is then the Escrow Agent hereunder.
“ Escrowed Funds
” means the Escrow Amount and all investments thereof made
hereunder, plus all interest, dividends and other distributions and
payments thereon received by the Escrow Agent.
“ Government Book-Entry
Security ” means U.S. Government Securities maintained in
book-entry form through the United States Federal Reserve
Banks.
“ Initial Purchasers’
Commission ” means $4,117,091.00, the amount payable to
the Initial Purchasers pursuant to the Purchase Agreement and
Section 7(a) hereof unless the Special Redemption
occurs.
“ Merger ” shall
have the meaning ascribed thereto in the Purchase
Agreement.
“ Merger Agreement
” means the Agreement and Plan of Merger, dated as of
December 2, 2004, among ECCA Holdings Corporation, the Pledgor and
Eye Care Centers of America, Inc., as such agreement may be
amended, modified or supplemented from time to time so long as such
amendments, modifications or supplements are not, individually or
in the aggregate, material adverse to Eye Care Centers of America,
Inc. or any of its subsidiaries (after giving effect to the
consummation of the Transactions (as defined in the Offering
Memorandum)) or the Holders of the Notes.
2
“ Offering Memorandum
” means the Final Offering Memorandum of the Pledgor dated
January 28, 2005 pursuant to which the Notes were offered to the
Holders.
“ Special Redemption
Date ” means the earlier of (x) the date specified by the
Pledgor in an officers’ certificate delivered in accordance
with Section 7(b) hereof and (y) April 5, 2005.
“ Special Redemption
Price ” means the price equal to 98.495% of the principal
amount of the Notes, plus accrued and unpaid interest from and
including the date hereof to but excluding the Special Redemption
Date.
“ U.S. Government
Securities ” means securities that are (i) direct
obligations of the United States of America for the payment of
which its full faith and credit is pledged or (ii) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment
of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America which, in either case,
are not callable or redeemable at the option of the issuer thereof
and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian,
with respect to any such U.S. Government Securities or a specific
payment of principal of or interest on any such U.S. Government
Securities held by such custodian for the account of the holder of
such depository receipt; provided , however , that
(except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the U.S. Government Securities or the specific payment
of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt.
All capitalized terms used herein
without definition shall have the respective meanings ascribed to
them in the Indenture. Unless otherwise defined herein or in the
Indenture, terms used in Articles 8 or 9 of the Uniform Commercial
Code as in effect in the State of New York (the “
U.C.C. ”) are used herein as therein
defined.
1.2 Appointment of the Escrow
Agent . The Pledgor hereby appoints The Bank of New York as
Escrow Agent in accordance with the terms and conditions set forth
herein and The Bank of New York hereby accepts such appointment.
Any and all Escrowed Funds shall be deposited with the Escrow Agent
in the Collateral Account, in U.S. Dollars, by wire transfer as
follows: The Bank of New York, ABA# 021000018, A/C# 427101, Account
Name: LFS-Merger Sub, Inc. Collateral Account, Ref: LFS-Merger Sub,
Inc., Attn.: Patricia Gallagher. The Escrow Agent shall not be
required, or have any duty, to notify anyone of any payment or
maturity under the terms of any instrument deposited hereunder, nor
to take any legal action to enforce payment of any check, note or
security deposited hereunder or to exercise any right or privilege
which may be afforded to the holder of any such
security.
3
1.3 Establish Account . The
Escrow Agent shall establish and maintain the Collateral Account
herein provided for in accordance with the terms of this Escrow and
Security Agreement.
1.4 Pledge and Grant of Security
Interest . The Pledgor hereby pledges to the Trustee for its
benefit and for the ratable benefit of the Holders of the Notes
and, solely with respect to the Initial Purchasers’
Commission (but only to the extent payable hereunder and under the
Purchase Agreement), the Initial Purchasers, and hereby grants to
the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes and the Initial Purchasers, as applicable, a
continuing first-priority security interest in and to all of the
Pledgor’ s right, title and interest in, to and under the
following, whether characterized as investment property,
certificated securities, uncertificated securities, general
intangibles or otherwise: (a) the Collateral Account, all funds
held therein and all certificates and instruments, if any, from
time to time representing or evidencing the Collateral Account, (b)
all Collateral Investments (as hereinafter defined) and all
certificates and instruments, if any, representing or evidencing
the Collateral Investments, and any and all security entitlements
to the Collateral Investments, and any and all related securities
accounts in which security entitlements to the Collateral
Investments are carried, (c) all cash, notes, deposit accounts,
checks and other instruments, if any, from time to time hereafter
delivered to or otherwise possessed by the Escrow Agent, as Escrow
Agent only and not in any other capacity, for or on behalf of the
Pledgor in substitution for or in addition to any or all the then
existing Collateral (as hereinafter defined), and (d) all proceeds
of and other distributions on or with respect to any and all of the
foregoing Collateral (including, without limitation, all dividends,
interest, principal payments, cash, options, warrants, rights,
investments, subscriptions and other property or proceeds,
including proceeds that constitute property of the types described
in clauses (a) through (c) of this Section 1.4) (clauses (a)
through (d) being hereinafter collectively referred to as the
“ Collateral ”). The Escrow Agent (in its
capacity as a securities intermediary) hereby agrees that it will
comply with entitlement orders originated by the Trustee (in its
capacity as a secured party/purchaser) without further consent by
the Pledgor (in its capacity as a debtor/entitlement holder), it
being acknowledged and agreed that so long as no Event of Default
exists, the Escrow Agent shall honor entitlement orders issued by
the Pledgor in accordance with Sections 5 or 7 hereof.
1.5 Deposit of Escrowed Funds
. On the Closing Date, the Pledgor shall deposit, or direct the
deposit, of the Escrow Amount into the Collateral
Account.
SECTION 2. Security for
Obligations . The pledge and lien granted by Pledgor pursuant
to Section 1.4 hereof secures the prompt and complete performance
when due (whether at stated maturity, by acceleration or otherwise)
of the Obligations.
4
SECTION 3. Delivery of
Collateral . All certificates or instruments representing or
evidencing the Collateral, including, without limitation, amounts
invested as provided in Section 5 hereof, shall be delivered to and
held by Escrow Agent pursuant to the terms hereof and shall be in
suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all
in form and substance sufficient to convey a valid security
interest in such Collateral to the Trustee, or shall be credited to
the Collateral Account which shall be maintained as a securities
account by the Escrow Agent.
SECTION 4. Maintaining the
Collateral Account . Except as otherwise provided by the
provisions of Section 7 and Section 14 hereof:
(a) So long as the Obligations shall
remain outstanding, the Pledgor will maintain the Collateral
Account with the Escrow Agent.
(b) Except as provided in Section 7
hereof, it shall be a term and condition of the Collateral Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to the Collateral Account, that no amount
(including interest on Collateral Investments) shall be paid or
released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person from the Collateral
Account.
(c) The Collateral Account shall be
established and maintained as a securities account (as defined in
Section 8-501 of the U.C.C.).
(d) The Collateral Account shall be
subject to such applicable laws, and such applicable regulations of
the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or
hereafter be in effect.
SECTION 5. Investing of Amounts
in the Collateral Account . The Escrow Agent shall invest all
amounts on deposit in the Collateral Account in the name of the
Escrow Agent in Cash Equivalents (“ Collateral
Investment ”). In no event shall the Escrow Agent be
liable for any loss in the investment or reinvestment of amounts
held in the Collateral Account unless such loss results from the
Escrow Agent’s bad faith, gross negligence or wilful
misconduct.
SECTION 6. Delivery of Collateral
Investments; Filing . (a) The Escrow Agent shall become the
holder on behalf of the Trustee of the Collateral Investments (or
applicable security entitlements thereto) through the following
delivery procedures: (i) in the case of Collateral Investments
which are uncertificated securities, registration of one of the
following as owner of such uncertificated securities: the Escrow
Agent or a Person designated by the Escrow Agent, or Person other
than a securities intermediary or financial intermediary, that
becomes the registered owner of such uncertificated securities and
acknowledges that it holds the same for the Escrow Agent; and (ii)
in the case of Collateral Investments in the form of Government
Book-Entry Securities, the making by securities intermediary (other
than a clearing corporation) to whose account such Government
Book-Entry Securities have been credited on the books of a Federal
Reserve Bank (or on the books of another such securities
intermediary (other than a clearing corporation)) of book entries
indicating that such Government Book-Entry Securities have been
credited to an account of the Escrow Agent, and the sending by such
securities intermediary to the Escrow Agent of confirmation of such
transfer to the Escrow Agent’s account.
5
(b) Prior to or concurrently with
the execution and delivery hereof and prior to the transfer to the
Escrow Agent of Collateral Investments (or acquisition by the
Escrow Agent of any security entitlement thereto) the Escrow Agent
shall establish the Collateral Account on its books as an account
segregated from all other custodial or collateral accounts. All
investments made from funds in the Collateral Account including
Collateral Investments shall be credited to the Collateral Account
and the Escrow Agent hereby agrees to treat all property credited
to the Collateral Account as a “financial asset” as
defined in Section 8-102(a)(9) of the U.C.C. Subject to the other
terms and conditions of this Escrow and Security Agreement, all
Collateral Investments held by the Escrow Agent pursuant to this
Escrow and Security Agreement shall be held in the Collateral
Account subject (except as expressly provided in Sections 7(a) and
7(b) hereof) to the control (within the meaning of Section 8-106 of
the U.C.C.) of the Escrow Agent and exclusively for the benefit of
the Trustee and for the ratable benefit of the Holders of the Notes
and segregated from all other funds or other property otherwise
held by the Escrow Agent.
(c) All Collateral shall be retained
in the Collateral Account and pending disbursement pursuant to the
terms hereof.
SECTION 7. Disbursements .
The Escrow Agent shall hold the assets in the Collateral Account
and release the same only as follows:
(a) If the Escrow Agent receives, at
any time prior to 5:00 p.m. (New York City time) on April 1, 2005,
an Officers’ Certificate in the form attached hereto as
Exhibit A, the Escrow Agent shall, on the date specified on such
certificate (which date shall be at least one (1) Business Day
after delivery of such certificate), upon receipt of an
Officers’ Certificate in the form attached hereto as Exhibit
B on such date, disburse from the Collateral Account (A) first, to
pay any expenses (x) payable by the Pledgor to the Escrow Agent
hereunder or (y) payable by the Peldgor pursuant to the Purchase
Agreement, in each case that have not been paid, (B) second, to the
Initial Purchasers an amount equal to 100% of the Initial
Purchasers’ Commission (as defined in the Purchase Agreement)
and (C) third, to, or at the written direction of, the Pledgor the
remainder of all Escrowed Funds (after payment of the Initial
Purchasers’ Commission) held in the Collateral Account or
otherwise;
(b) If (i) the Escrow Agent
receives, at any time prior to 11:00 a.m. (New York City time) on
April 1, 2005, an Officers’ Certificate from the Pledgor
certifying that the Merger Agreement has been terminated in
accordance with its terms or (ii) the Escrow Agent has not
received the Officers’ Certificates in accordance with
paragraph (a) above or clause (i) of this paragraph prior to 11:00
a.m. (New York City time) on April 1, 2005, the Escrow Agent shall
promptly notify the Trustee in writing and the Trustee, on the same
Business Day, shall promptly notify each Holder in accordance with
the provisions of the Indenture that all of the outstanding Notes
shall be redeemed on the Special Redemption Date (which shall be
two (2) Business Days after delivery of such notice to the Holders
but in any event on or prior to April 5, 2005), at the Special
Redemption Price, and shall state that the Notes must be
surrendered to the Paying Agent in order to collect the Special
Redemption Price. Prior to 11:00 a.m. (New York City time) on the
Special Redemption Date, the Escrow Agent shall release cash in an
amount equal to the Special Redemption Price to the Paying Agent as
per the written instructions of the Trustee (which shall specify
the Special Redemption Price and the wire payment instructions).
The
6
Notes shall be redeemed as specified in Article
5.9 of the Indenture. The balance of any Collateral remaining in
the Collateral Account and not required by the Trustee to fund the
Special Redemption Price shall be disbursed (A) first, to pay any
expenses (x) payable by the Pledgor to the Escrow Agent hereunder
or by (y) payable by the Pledgor pursuant to the Purchase
Agreement, in each case that have not been paid and (B) second, to,
or at the written direction of, the Pledgor in an amount equal to
the remainder of all Escrowed Funds held in the Collateral Account
or otherwise.
(c) If the Pledgor is required to
effect the redemption contemplated by subclause (b) above and for
any reason the amount of Collateral to be released is insufficient
to pay the Special Redemption Price to redeem all of the
outstanding Notes as provided in the Indenture, the Pledgor agrees
to pay to the Paying Agent on or prior to the Special Redemption
Date, the amount of funds necessary to permit all outstanding Notes
to be redeemed in accordance with the provisions in the
Indenture.
(d) Upon the release of any
Collateral from the Collateral Account or otherwise in accordance
with the terms of this Escrow and Security Agreement, the security
interest evidenced by this Escrow and Security Agreement in such
released Collateral will automatically terminate and be of no
further force and effect.
(e) The Escrow Agent shall not be
required to liquidate any Collateral Investment in order to make
any release hereunder unless (i) required to do so to effect any
distribution pursuant to Section 7(a) or Section 7(b) hereof; (ii)
instructed to do so by written instructions executed by the
Pledgor, the Trustee and J.P. Morgan Securities Inc. (the “
Representative ”); or (iii) pursuant to Section 13
hereof.
(f) Notwithstanding anything in this
Escrow and Security Agreement to the contrary, the Escrow Agent
shall disburse Escrowed Funds as directed pursuant to (i) a final
judgment (without further right of appeal) or (ii) a written notice
executed by the Pledgor, the Trustee and the
Representative.
SECTION 8. Representations and
Warranties . (a) The Pledgor hereby represents and warrants
that:
(1) The execution, delivery and
performance by the Pledgor of this Escrow and Security Agreement
will not (x) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or, except for those
created by under this Escrow and Security Agreement, result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Pledgor pursuant to, any agreement or
instrument to which the Pledgor is a party or by which the Pledgor
is bound or to which any of the property or assets of the Pledgor
is subject, (y) result in any violation of the provisions of the
charter or by-laws or similar organizational documents of the
Pledgor or (z) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority.
(2) Pursuant to the Indenture, the
Pledgor has directed the Trustee to enter into this Agreement and
to perform its obligations hereunder.
7
(3) Other than filings of U.C.C.
financing statements, no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required (i) for the performance by the Pledgor of its obligations
under this Escrow and Security Agreement, (ii) for the pledge by
the Pledgor of the Collateral pursuant to this Escrow and Security
Agreement or (iii) for the exercise by the Escrow Agent of the
rights provided for in this Escrow and Security Agreement or the
remedies in respect of the Collateral pursuant to this Escrow and
Security Agreement.
(4) The Pledgor is the beneficial
owner of the Collateral, free and clear of any Lien or claims of
any Person (except for the security interests granted under this
Escrow and Security Agreement). No financing statement covering the
Pledgor’s interest in the Collateral is on file in any public
office, other than financing statements, if any, filed pursuant to
this Escrow and Security Agreement. Upon the execution and delivery
of this Escrow and Security Agreement by all parties hereto, the
Trustee will have a first-priority perfected security interest in
the Collateral prior to any other security interest created under
the U.C.C.
(5) This Escrow Agreement and
Security Agreement has been duly authorized, executed and delivered
by the Pledgor and, when duly executed and delivered in accordance
with its terms by each of the other parties hereto, will constitute
a valid and legally binding agreement of the Pledgor enforceable
against the Pledgor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’
rights generally or by equitable principles relating to
enforceability.
(6) To the Pledgor’s
knowledge, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the
Pledgor is or may be a party or to which any property of the
Pledgor is or may be the subject that, if decided adversely to the
Pledgor, could have an adverse effect of the ability of the Pledgor
to perform its obligations under this Escrow and Security Agreement
or to consummate the transactions contemplated hereby.
(7) The Pledgor has delivered, or
caused to be delivered, the Escrow Amount to the Escrow Agent on
the date hereof in an amount sufficient to redeem the Notes on
April 5, 2005 (the last possible Special Redemption Date) at the
Special Redemption Price in accordance with the provisions of the
Indenture. The Escrow Agent shall have no responsibilities to
calculate or verify such amount at any time.
(8) The pledge of the Collateral
pursuant to this Escrow and Security Agreement is not prohibited by
law or governmental regulation (including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal
Reserve System) applicable to the Pledgor.
(9) No Default or Event of Default
exists under the terms of the Indenture.
(b) The Escrow Agent hereby
represents and warrants that:
(1) The Escrow Agent may act as a
securities intermediary, as defined in Section 8-102 of the
U.C.C.
8
(2) The execution, delivery and
performance by the Escrow Agent of this Escrow and Security
Agreement will not (x) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under any material agreement or material instrument known
to the signer hereof to which the Escrow Agent is a party or by
which the Escrow Agent is bound, (y) result in any violation of the
provisions of the charter or by-laws or similar organizational
documents of the Escrow Agent or (z) result in the violation of any
law or statute or any judgment, order, rule or regulation of any
court or arbitrator or governmental or regulatory authority; no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by the Escrow Agent of its obligations and rights under
this Escrow and Security Agreement.
(3) This Escrow Agreement and
Security Agreement has been duly authorized, executed and delivered
by the Escrow Agent and, when duly executed and delivered in
accordance with its terms by each of the other parties hereto, will
constitute a valid and legally binding agreement of the Escrow
Agent enforceable against the Escrow Agent in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally or by equitable principles
relating to enforceability.
(4) There are no legal or
governmental proceedings pending or, to the best of the Escrow
Agent’s knowledge, threatened to which the Escrow Agent or
any of its respective subsidiaries is a party or to which any of
the properties of the Escrow Agent or any such subsidiary is
subject that would materially adversely affect the power or ability
of the Escrow Agent to perform its respective obligations under
this Escrow and Security Agreement or to consummate the
transactions contemplated hereby.
(c) The Trustee hereby represents
and warrants that:
(1) The execution, delivery and
performance by the Trustee of this Escrow and Security Agreement
will not (x) conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under
any material agreement or material instrument known to the signer
hereof to which the Trustee is a party or by which the Trustee is
bound, (y) result in any violation of the provisions of the charter
or by-laws or similar organizational documents of the Trustee or
(z) result in the violation of any law or statute or any judgment,
order, rule or regulation of any court or arbitrator or
governmental or regulatory authority; no consent, approval,
authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Trustee of
its obligations and rights under this Escrow and Security
Agreement.
(2) This Escrow Agreement and
Security Agreement has been duly authorized, executed and delivered
by the Trustee and, when duly executed and delivered in accordance
with its terms by each of the other parties hereto, will constitute
a valid and legally binding agreement of the Trustee enforceable
against the Trustee in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’
rights generally or by equitable principles relating to
enforceability.
9
(3) There are no legal or
governmental proceedings pending or, to the best of the
Trustee’s knowledge, threatened to which the Trustee or any
of its respective subsidiaries is a party or to which any of the
properties of the Trustee or any such subsidiary is subject that
would materially adversely affect the power or ability of the
Trustee to perform its respective obligations under this Escrow and
Security Agreement or to consummate the transactions contemplated
hereby.
SECTION 9. Further Assurances
. The Pledgor will, promptly upon request by the Escrow Agent
(which request the Escrow Agent will submit at the direction of the
Trustee), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all
assignments, instruments and other documents, deliver any
instruments to the Escrow Agent and take any other actions that are
necessary or desirable to perfect, continue the perfection of, or
protect the first priority of the Trustee’s security interest
in and to the Collateral, to protect the Collateral against the
rights, claims, or interests of third persons (other than any such
rights, claims or interests created by or arising through the
Escrow Agent) or to effect the purposes of this Escrow and Security
Agreement. The Pledgor also hereby authorizes the Trustee to file
any financing or continuation statements in the United States with
respect to the Collateral without the signature of the Pledgor (to
the extent permitted by applicable law). The Pledgor will promptly
pay all reasonable costs incurred in connection with any of the
foregoing within 60 days of receipt of an invoice therefor. The
Pledgor also agrees, whether or not requested by the Trustee, to
take all actions that are necessary to perfect, continue the
perfection of, or to protect the first priority of, the
Trustee’s security interest in and to the Collateral,
including the filing of all necessary financing and continuation
statements, and to protect the Collateral against the rights,
claims or interests of third persons (other than any such rights,
claims or interests created by or arising through the
Trustee).
Section 10. Covenants . The
Pledgor covenants and agrees with the Escrow Agent, the Initial
Purchasers and the Trustee that from and after the date of this
Escrow and Security Agreement until the earlier of (i) the release
of all Collateral to the Initial Purchasers and the Pledgor in
accordance with Section 7(a) hereof and (ii) the payment of the
Special Redemption Price for all Notes redeemed as provided by
Section 5.9 of the Indenture and Section 7(b) hereof and the
payment of the other amounts pursuant to Section 7(b)
hereof:
(a) that (i) it will not (and will
not purport to) sell or otherwise dispose of, or grant any option
or warrant with respect to, any of the Collateral, (ii) it will not
create or permit to exist any Lien on any of the Collateral (except
for the security interests granted under this Escrow and Security
Agreement and any Lien created by or arising through the Trustee)
and at all times will be the sole beneficial owner of the
Collateral and (iii) it will not take any action to enable the
secured parties under the Existing Credit Agreement to obtain
“control” within the meaning of Section 9-106 of the
U.C.C. with respect to the Collateral; and
(b) that it will not (i) enter into
any agreement or understanding that restricts or inhibits or
purports to restrict or inhibit the Trustee’s rights or
remedies hereunder, including, without limitation, the
Trustee’s right to direct the sale or disposal of the
Collateral as otherwise permitted hereunder or (ii) fail to pay or
discharge any tax, assessment or levy of any nature with respect to
the Collateral not later than the date of any proposed sale under
any judgment, writ or warrant of attachment with respect to the
Collateral.
10
SECTION 11. Escrow Agent Rights
and Duties . (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. The Escrow Agent shall not be subject to, nor
required to comply with, any other agreement between or among any
or all of the other parties hereto or to which any of them 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 and
Security Agreement) from any such party 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) 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 Escrowed 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 Escrowed 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 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.
(c) 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 bad faith,
willful misconduct or gross negligence on its part. In no event
shall the Escrow Agent be liable (i) for acting in accordance with
or relying upon any instruction, notice, demand, certificate or
document from Pledgor or any Person acting on behalf of the Pledgor
so long as such action is taken in accordance with the provisions
of this Escrow and Security Agreement, (ii) for the acts or
omissions of its nominees, correspondents, designees, subagents or
subcustodians, or (iii) for an amount in excess of the value of the
Escrowed Funds, valued as of the date of deposit, plus any accrued
interest thereon. Anything in this Escrow and Security Agreement to
the contrary notwithstanding, in no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even
if the Escrow Agent has been advised of the likelihood of such loss
or damage and regardless of the form of action.
(d) The Escrow Agent may consult
with legal counsel of its own selection (with the expense to be
reimbursed in accordance with the terms of Section 14 hereof) as to
any matter relating to this Escrow and Security Agreement, and the
Escrow Agent shall not incur any liability in acting in good faith
in accordance with any advice from such counsel.
(e) 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, war, terrorism or other
catastrophe, or the unavailability of the Federal Reserve Bank wire
or telex or other wire or communication facility).
11
(f) The Pledgor, with the consent of
the Representative and the Trustee may remove the Escrow Agent at
any time by giving to Escrow Agent five (5) calendar days’
prior notice in writing signed by the Pledgor, the Representative
and Trustee. The Escrow Agent may resign at any time by giving to
the Pledgor, the Representative and Trustee fifteen (15) calendar
days’ prior written notice thereof.
(i) Within two (2) calendar days
after giving the foregoing notice of removal to Escrow Agent or
receiving the foregoing notice of resignation from Escrow Agent,
the Pledgor, the Representative and the Trustee shall reasonably
agree on and appoint a successor Escrow Agent. If a successor
Escrow Agent has not accepted such appointment by the end of such
two-day period, the Escrow Agent may, in its sole discretion, apply
to a court of competent jurisdiction for the appointment of a
successor Escrow Agent or for other appropriate relief. The costs
and expenses (including reasonable attorneys’ fees and
expenses) incurred by the Escrow Agent in connection with such
proceeding shall be paid by, and be deemed an obligation of, the
Pledgor.
(ii) Upon receipt of the identity of
the successor Escrow Agent, the Escrow Agent shall either deliver
the Escrowed Funds then held hereunder to the successor Escrow
Agent, less Escrow Agent’s fees, costs and expenses or other
obligations owed to the Escrow Agent, or hold such Escrowed Funds
(or any portion thereof), pending distribution, until all such
fees, costs and expenses or other obligations are paid.
(iii) Upon delivery of the Escrowed
Funds to such successor Escrow Agent, the Escrow Agent shall have
no further duties, responsibilities or obligations
hereunder.
(g) Any corporation or other company
into which the Escrow Agent may be merged or converted or with
which it may be consolidated, or any corporation or other company
resulting from any merger, conversion or consolidation to which the
Escrow Agent shall be a party, or any corporation or other company
succeeding to all or substantially all of the corporate trust
business of the Escrow Agent, shall be the successor of the Escrow
Agent hereunder without the execution or filing of any paper or any
further action on the part of any of the parties hereto.
(h) The Escrow Agent shall upon the
request of the Pledgor from time to time, provide a statement
identifying transactions, transfers or holdings of Escrowed Funds
and each such statement shall be deemed to be correct and final
upon receipt thereof by the other parties hereto unless the Escrow
Agent is notified in writing to the contrary within thirty (30)
Business Days of the date of such statement.
(i) The Escrow Agent shall not be
responsible in any respect for the form, execution, validity, value
or genuineness of documents or securities deposited hereunder, or
for any description therein, or for the identity, authority or
rights of Persons executing or delivering or purporting to execute
or deliver any such document, security or endorsement.
12
(j) In the event of any ambiguity or
uncertainty hereunder or in any notice, instruction or other
communication received by the Escrow Agent hereunder, the Escrow
Agent may, in its sole discretion, refrain from taking any action
other than retain possession of the Escrowed Funds, unless the
Escrow Agent receives joint written instructions, signed by
Pledgor, Representative and the Trustee, which eliminates such
ambiguity or uncertainty.
(k) In the event of any dispute
between or conflicting claims, demands or instructions by or among
the other parties to this Escrow and Security Agreement and/or any
other Person with respect to any Escrowed Funds, the Escrow Agent
shall be entitled, in its sole discretion, to refuse to comply with
any and all claims, demands or instructions with respect to such
Escrowed Funds so long as such dispute or conflict shall continue,
and the Escrow Agent shall not be or become liable in any way for
failure or refusal to comply with such conflicting claims, demands
or instructions. The Escrow Agent shall be entitled to refuse to
act until, in its sole discretion, either (i) such conflicting or
adverse claims or demands shall have been determined by a final
order, judgment or decree of a court of competent jurisdiction,
which order, judgment or decree is not subject to appeal, or
settled by agreement between the conflicting parties as evidenced
in a writing satisfactory to the Escrow Agent or (ii) the Escrow
Agent shall have received security or an indemnity satisfactory to
it sufficient to hold it harmless from and against any and all
Losses (as defined below) which it may incur by reason of so
acting. The Escrow Agent may, in addition, elect, in its sole
discretion, to commence an interpleader action or seek other
judicial relief or orders as it may deem, in its sole discretion,
necessary. The costs and expenses (including reasonable
attorneys’ fees and expenses) incurred in connection with
such proceeding shall be paid by, and shall be deemed an obligation
of, the Pledgor.
(l) The rights and remedies
conferred upon the Escrow Agent and the Pledgor hereto shall be
cumulative, and the exercise or waiver of any such right or remedy
shall not preclude or inhibit the exercise of any additional rights
or remedies. The waiver of any right or remedy hereunder shall not
preclude the subsequent exercise of such right or
remedy.
(m) The Escrow Agent does not have
any interest in the Escrowed Funds hereunder but is serving as
escrow holder only and having only possession thereof. Pledgor
shall pay or reimburse the Escrow Agent upon request for any
transfer taxes or other taxes relating to the Escrowed Funds
incurred in connection herewith and shall indemnify and hold
harmless the Escrow Agent any amounts that it is obligated to pay
in the way of such taxes. Upon execution of this Agreement, the
parties hereto shall provide the Escrow Agent with a fully executed
W-9 IRS form. The parties hereto agree that (i) for tax reporting
purposes, and for any tax year, all interest or other income earned
under the Escrow and Security Agreement shall be allocable to the
Pledgor and (ii) to the extent permitted by applicable law, the
Pledgor will include all amounts earned under the Escrow and
Security Agreement in its gross income for federal, state and local
income tax (collectively, “income tax”) purposes and
pay any income tax resulting therefrom, and the Escrow Agent shall
allocate all such earnings for tax reporting purposes to the
Pledgor. Any payments of income from the account established
hereunder may be subject to withholding regulations then in force
with respect to United States taxes, and if required, the parties
hereto will promptly provide the Escrow Agent with completed and
executed W-9, W-8BEN or other appropriate forms. It is understood
that the Escrow Agent shall be responsible for income reporting
only with respect to any income which may be earned on investment
of funds which are a part of the Escrowed Funds and is not
responsible for any other reporting.
13
(n) The rights and powers granted to
the Escrow Agent hereunder are being granted in order to preserve
and protect the security interest of the Trustee and the Holders of
the Notes in and to the Collateral granted hereby and shall not be
interpreted to and shall not impose any duties on the Escrow Agent
in connection therewith other than those expressly provided herein
or imposed under applicable law. Except as provided by applicable
law or by the Indenture, the Escrow Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Escrow Agent
accords similar property held by the Escrow Agent for similar
accounts, it being understood that the Escrow Agent in its capacity
as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges,
maturities or other matters relative to any Collateral, whether or
not the Escrow Agent has or is deemed to have knowledge of such
matters, (b) taking any necessary steps to preserve rights against
any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral, provided , however
, that nothing contained in this Escrow and Security Agreement
shall relieve the Escrow Agent of any responsibilities in its
capacity as a securities intermediary under applicable
law.
Section 12. Indemnity . The
Pledgor shall indemnify, hold harmless and defend the Escrow Agent
and its directors, officers, agents and employees, from and against
any and all claims, actions, obligations, liabilities, damages,
costs and expenses (“ Losses ”) directly or
indirectly arising out of, relating to or in connection with its
acceptance of its appointment hereunder or its performance as
Escrow Agent, provided that such Losses do not arise from
the Escrow Agent’s bad faith, wilful misconduct or gross
negligence.
SECTION 13. Remedies upon Event
of Default . If any Event of Default under the Indenture or any
default hereunder (any such Event of Default or default being
referred to in this Escrow and Security Agreement as an “
Event of Default ”) not cured within 30 days after
notice thereof to the Pledgor shall have occurred and be
continuing:
(a) The Trustee and the Holders of
the Notes shall have, in addition to all other rights given by law
or by this Escrow and Security Agreement or the Indenture, all of
the rights and remedies with respect to the Collateral of a secured
party under the U.C.C. in effect in the State of New York at that
time. In addition, with respect to any Collateral that shall then
be in or shall thereafter come into the possession or custody of
the Escrow Agent, the Escrow Agent, at the written direction of the
Trustee, shall, sell or cause the same to be sold at any
broker’s board or at public or private sale, in one or more
sales or lots, at such price or prices as the Trustee may deem
commercially reasonable, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of
any or all Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind
whatsoever created by or through the Pledgor. Unless any of the
Collateral threatens, in the reasonable judgment of the Trustee, to
decline speedily in value or is or becomes of a type sold on a
recognized market, the Trustee will give the Pledgor reasonable
notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is
to be made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of
14
banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially
reasonable. Any requirements of reasonable notice shall be met if
such notice is mailed to the Pledgor as provided in Section 16.1
hereof at least five (5) days before the time of the sale or
disposition. The Trustee, Escrow Agent or any Holder of Notes may,
in its own name or in the name of a designee or nominee, buy any of
the Collateral at any public sale and, if permitted by applicable
law, at any private sale. All expenses (including court costs and
reasonable attorneys’ fees, expenses and disbursements) of,
or incident to, the enforcement of any of the provisions hereof
shall be recoverable from the proceeds of the sale or other
disposition of the Collateral.
(b) The Pledgor further agrees to
use its reasonable best efforts to do or cause to be done all such
other acts as may be necessary to make such sale or sales of all or
any portion of the Collateral pursuant to this Section 13 valid and
binding and in compliance with any and all other applicable
requirements of law. The Pledgor further agrees that a breach of
any of the covenants contained in this Section 13 will cause
irreparable injury to the Trustee, Escrow Agent and the Holders of
the Notes, that the Trustee, Escrow Agent and the Holders of the
Notes have no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained in this
Section 13 shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred.
SECTION 14. Compensation;
Expenses . The Escrow Agent shall be entitled to receive an
administrative fee of $1,500.00 from the Pledgor upon execution of
this Escrow and Security Agreement. 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 Escrowed Funds and may sell, convey or
otherwise dispose of any Escrowed Funds for such purpose. As
security for the due and punctual performance of the obligations to
the Escrow Agent under this Section 14, Section 12 hereof and all
other obligations owing to the Escrow Agent hereunder, now or
hereafter arising, the Pledgor hereby pledges, assigns and grants
to the Escrow Agent a continuing security interest in, and a lien
on, the Escrowed Funds and all distributions thereon or additions
thereto. The security interest of the Escrow Agent shall at all
times be valid, perfected and enforceable by the Escrow Agent
against all such parties and all third parties in accordance with
the terms of this Escrow Agreement. The Pledgor will upon demand
pay to the Escrow Agent the amount of any and all reasonable
expenses, including, without limitation, the reasonable fees,
expe
