ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made this 20th day of December,
1996, by and among THE BANK OF NEW YORK, a New York banking corporation (the
"Escrow Agent"), WASHINGTON MUTUAL, INC., a Washington corporation ("WMI"),
KEYSTONE HOLDINGS PARTNERS, L.P., a Texas limited partnership ("KH Partners"),
and the FEDERAL DEPOSIT INSURANCE CORPORATION (the "FDIC"), as manager of the
FSLIC Resolution Fund (the "FRF"), as successor in interest to the Federal
Savings and Loan Insurance Corporation.
Recitals
WHEREAS, WMI and KH Partners, together with certain of KH Partners'
affiliates, have entered into an Agreement for Merger, dated as of July 21, 1996
and amended as of November 1, 1996 (as amended, the "Merger Agreement"),
pursuant to which Keystone Holdings, Inc. ("Keystone Holdings") will merge with
and into WMI (the "Merger");
WHEREAS, pursuant to Section 2 of the Merger Agreement, the Escrow
Shares (as defined in Section 1 below) are to be delivered by WMI into escrow at
the direction of KH Partners and the FDIC;
WHEREAS, KH Partners owned all of the issued and outstanding stock of
Keystone Holdings immediately prior to the Merger and has under the Merger
Agreement a contingent right to have 64.9% of the Escrow Shares released to it
from the Escrow (as defined in Section 1 below);
WHEREAS, the FDIC is selling, assigning, transferring and delivering
certain warrants to WMI at the closing of the Merger pursuant to a Warrant
Exchange Agreement, dated as of July 21, 1996 (the "Warrant Exchange
Agreement"), by and among WMI, the Keystone Entities (as defined in the Section
1 below), KH Partners, New West Federal Savings and Loan Association, certain
other persons and the FDIC and, as part of the consideration to be received in
exchange for the Warrants, has a contingent right to have 35.1% of the Escrow
Shares released to it from the Escrow; and
WHEREAS, the parties desire to appoint the Escrow Agent as escrow agent
hereunder, and the Escrow Agent desires to accept such appointment.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined in
this Agreement shall have the meanings given to them below:
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"Aggregate Escrow Distribution" shall mean the Distributed Escrow
Shares plus (i) all dividends and distributions (of whatever nature) other than
dividends payable in shares of WMI Common Stock paid on or with respect to the
Distributed Escrow Shares from the Effective Time to and including the date the
Distributed Escrow Shares are paid pursuant to Section 2.3 of the Merger
Agreement and the terms hereof; (ii) any additional securities with respect
thereto, and (iii) any interest or earnings upon such dividends, distributions
or additional or substitute securities in accordance with the terms hereof. In
the case of any Installment, the Aggregate Escrow Distribution shall be
determined in accordance with the preceding sentence.
"Agreement" shall have the meaning specified in the preamble hereof.
"Case" shall mean Case No. 92-782C resulting from a complaint filed on
December 28, 1992 in the Untied States Court of Federal Claims and styled:
AMERICAN SAVINGS BANK, F.A.,
KEYSTONE HOLDINGS, INC.,
KEYSTONE HOLDINGS PARTNERS, L.P.,
N.A. CAPITAL HOLDINGS, INC.,
NEW AMERICAN CAPITAL, INC. and
NEW AMERICAN HOLDINGS, INC.
v.
THE UNITED STATES
"Case Proceeds" shall equal the amount, if any, of cash received by WMI
or its subsidiaries (including the Keystone Entities after the Effective Time)
on or before the Escrow Expiration Date in respect of (1) any judgment, fees,
costs and expenses, interest and other amounts that have been awarded to the
plaintiffs (including any successors thereto) in the Case, or (2) any final
settlement of the Case; provided, however, that any judgment referred to in (1)
above constitutes a final, nonappealable judgment in the Case. In the case of
any Installment, the Case Proceeds with respect to such Installment shall be
determined in accordance with the preceding sentence.
"Distributed Escrow Shares" shall mean that number of whole shares of
WMI Common Stock (or any substitute securities with respect thereto) resulting
from dividing the Net Case Proceeds by the Market Price Per Share; provided
that, in no event shall the Distributed Escrow Shares exceed the number of
Escrow Shares. The Distributed Escrow Shares with respect to any Installment
shall be calculated in accordance with the preceding sentence except that in no
event shall the Distributed Escrow Shares, when added to the Distributed Escrow
Shares with respect to earlier Installments, exceed the number of Escrow Shares.
"Effective Date" shall mean December 20, 1996.
"Effective Time" shall mean 2:00 p.m., Pacific Standard Time, on the
Effective Date.
"Escrow" shall mean the escrow created hereby.
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"Escrow Agent" shall have the meaning specified in the preamble hereof.
"Escrow Expiration Date" shall mean the date that is the sixth
anniversary of the Effective Date; provided, however, that (i) if, prior to such
date, there has been any judgment granted or entered in favor of WMI or its
subsidiaries (including the Keystone Entities after the Effective Time), then
the Escrow Expiration Date shall be automatically extended to the earlier of the
tenth anniversary of the Effective Date and the date upon which the number of
Escrow Shares equals zero and (ii) if, prior to such sixth anniversary or any
extension pursuant to clause (i) of this definition, there has been any
settlement or final nonappealable judicial resolution of the Case involving two
or more Installments, then the Escrow Expiration Date shall not occur until all
such Installments have been paid.
"Escrow Fund" shall have the meaning specified in Section 3 hereof.
"Escrow Shares" shall mean eight million (8,000,000) shares of WMI
Common Stock; provided that the number of Escrow Shares shall be appropriately
adjusted to reflect any reclassification, recapitalization, split-up,
combination or exchange of shares of WMI Common Stock, or any stock dividend
thereon declared with a record date between the date of this Agreement and the
Escrow Expiration Date; provided, further, that, in the event that the Escrow
Expiration Date is extended beyond the sixth anniversary of the Effective Date
in accordance with the definition of "Escrow Expiration Date" herein, the number
of Escrow Shares, as adjusted in accordance with the preceding proviso, shall be
reduced on the last day of each full calendar month following the sixth
anniversary of the Effective Date by an amount equal to 1.25% of the number of
Escrow Shares (as so adjusted) on the sixth anniversary of the Effective Date;
provided further, that if, prior to the sixth anniversary of the Effective Date,
there has been any settlement or final nonappealable judicial resolution of the
Case involving two or more Installments, then there shall be no reduction in the
number of Escrow Shares pursuant to the immediately preceding proviso.
"FDIC" shall have the meaning specified in the preamble hereof.
"Fixed Fee Agreement" shall mean that certain Fixed Fee Agreement dated
as of August 9, 1996 between Xxxxxx & Xxxxxx and Keystone Holdings.
"FRF" shall have the meaning specified in the preamble hereof.
"Holder" shall have the meaning specified in Section 6 hereof.
"Installment" shall mean, in the event of a final, nonappealable
judicial resolution or a settlement of the Case occurring after the Effective
Time involving two or more installments or structured payments of cash over a
period of time, one of such payments.
"Investment Rate" shall have the meaning specified in Exhibit 1 hereto.
"Keystone Entities" shall mean Keystone Holdings, New American Holdings,
Inc., a Delaware corporation, New American Capital, Inc., a Delaware
corporation, N.A. Capital
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Holdings, Inc., a Delaware corporation, and American Savings Bank, F.A., a
federal savings association.
"KH Partners" shall have the meaning specified in the preamble hereof.
"Market Price Per Share" shall mean $41.6125; provided, however, that
such price shall be appropriately adjusted to reflect any reclassification,
recapitalization, split-up, combination or exchange of shares of WMI Common
Stock, or any stock dividend thereon declared with a record date between the
date hereof and the Escrow Expiration Date.
"Merger" shall have the meaning specified in the Recitals hereof.
"Net Case Proceeds" shall mean the Case Proceeds, minus the sum of (1)
the Tax on the Case Proceeds, (2) the out-of-pocket, third-party fees, costs and
expenses paid or accrued by WMI or its subsidiaries to attorneys, accountants,
experts or other third party service providers in connection with the Case from
July 21, 1996 (excluding any amount paid to Xxxxxx & Xxxxxx under the Fixed Fee
Agreement), (3) 200% of the allocated time costs of employees of WMI or its
subsidiaries for time reasonably devoted to the Case from the Effective Date,in
each case, to and including the date the Case Proceeds are paid to WMI or its
subsidiaries (including the Keystone Entities after the date hereof), (4) fees
and other amounts, if any, paid or accrued by WMI to the Escrow Agent pursuant
to this Agreement (5) all amounts paid by any Keystone Entity to Xxxxxx & Xxxxxx
under the Fixed Fee Agreement in excess of $10 million. In the event that the
Case Proceeds are payable in two or more Installments, Net Case Proceeds with
respect to any given Installment shall mean all Case Proceeds received by WMI
from such Installment and all prior Installments, if any, minus (x) the sum of
(I) the Tax on the Case Proceeds with respect to all Installments or portions
thereof (whether received or to be received) includible, in WMI's judgment, in
its income for federal income tax purposes for the year in which such
Installment is received or in prior years and (II) the amounts described in
clauses (2), (3), (4) and (5) of the preceding sentence, and (y) the aggregate
Net Case Proceeds calculated pursuant to this sentence with respect to all prior
Installments, if any.
"Net Pre-Tax Case Proceeds" shall mean the amount, if any, resulting
from subtracting from Case Proceeds the sum of the amounts described in Clauses
(2), (3), (4) and (5) in the definition of Net Case Proceeds.
"Notes" shall have the meaning specified in Section 8 hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, incorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Tax on the Case Proceeds" shall mean (1) the product of .28 and the
Net Pre-Tax Case Proceeds, in the event the Case Proceeds are accrued for
federal income tax purposes prior to the Effective Time, and (2) the product of
.355 and the Net Pre-Tax Case Proceeds, in the event the Case Proceeds are
accrued for federal income tax purposes on or after the Effective Time.
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"Warrant Exchange Agreement" shall have the meaning specified in the
Recitals hereof.
"WMI" shall have the meaning specified in the preamble hereof.
"WMI Common Stock" shall mean the common stock, no par value, of WMI.
2. Appointment of Escrow Agent. WMI, KH Partners, and the FDIC hereby
appoint the Escrow Agent, and the Escrow Agent hereby accepts its appointment,
as escrow agent to hold and dispose of the Escrow Fund solely in accordance with
the terms hereof.
3. Delivery of Escrow Shares. Concurrently with the execution and
delivery of this Agreement, KH Partners and the FDIC have directed WMI to
deliver, or cause to be delivered, and WMI has so delivered or caused to be
delivered, the Escrow Shares, registered in the name of the Escrow Agent, to the
Escrow Agent. By execution hereof, the Escrow Agent evidences its receipt from
WMI of the Escrow Shares. The term "Escrow Fund" shall mean the Escrow Shares
together with (i) all dividends and distributions (of whatever nature) (other
than dividends payable in shares of WMI Common Stock paid on or with respect to
the Escrow Shares), (ii) any additional or substitute securities with respect
thereto, and (iii) any interest or earnings upon such dividends, distributions
or additional or substitute securities in accordance with the terms of this
Agreement (including without limitation amounts payable under the Notes.
4. Subaccounts. The Escrow Agent shall establish and maintain a subaccount
with respect to each Holder (as defined herein) representing the pro rata
portion of the Escrow Fund attributable to each such Holder.
5. Investment of Funds.
(a) The Escrow Agent shall invest and reinvest the cash
portion of the Escrow Fund in the Institutional Service Shares of the Federated
U.S. Treasury Cash Reserves Fund except as otherwise directed in a joint letter
signed by both KH Partners and the FDIC.
The Escrow Agent shall not be liable for any loss suffered in
connection with any investments made pursuant to Section 5(a) hereof or to joint
instructions received from KH Partners and the FDIC. No instructions, requests
or notices from KH Partners and the FDIC to the Escrow Agent shall be effective
until received by the Escrow Agent in writing, and no such instructions,
requests or notices shall be effective unless executed by both KH Partners and
the FDIC.
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(b) As and when any amounts invested as aforesaid may be
needed for disbursement from the Escrow Fund required hereunder (including the
funding of loans made pursuant to Section 8 hereof), the Escrow Agent shall
cause a sufficient amount of such investments to be sold or otherwise converted
into cash to the credit of the Escrow Fund. Any written request by a Holder for
a loan pursuant to Section 8 hereof shall also be deemed written authority to
the Escrow Agent from such Holder for the Escrow Agent to sell or otherwise
convert a portion of the assets in such Holder's subaccount necessary to fund
the loan. The Escrow Agent shall not be held liable for any loss of income due
to the liquidation of any investment which the Escrow Agent, acting in good
faith, believes necessary to make payments or disbursements in accordance with
this Agreement.
6. Transfers. KH Partners and the FDIC are the initial holders of
contingent rights to receive the Escrow Shares. It is understood that KH
Partners intends to distribute its contingent right in the Escrow Fund to the
partners of KH Partners immediately after the Effective Time. Such partners, the
FDIC and their transferees may transfer any or all of their respective
contingent rights to the Escrow Fund, provided that no transfer shall be
effective unless and until the proposed transferor has delivered to WMI the
following documents:
(a) an opinion of counsel reasonably satisfactory to WMI that
such transfer is exempt from the registration requirements of the Securities Act
of 1933 and similar requirements under all applicable state securities laws,
accompanied by such other documentation as WMI shall reasonably require to
demonstrate compliance with applicable requirements of federal and state
securities laws, and
(b) a written instrument executed by the proposed transferee
whereby such party agrees to be bound by all applicable obligations contained in
this Agreement.
As used herein, the term "Holder" shall mean any Person owning from
time to time a contingent right to receive a portion of the Escrow Fund. No
Holder shall be allowed to transfer such Holder's contingent right to its
allocated portion of the Escrow Fund until the Holder has repaid all outstanding
Notes (as defined below in Section 8). The Escrow Agent shall not be required to
treat any purported transfer as effective until such time as it has received (x)
written notice of such transfer from the transferor, (y) written notice from WMI
that the opinion of counsel and other documentation described above has been
received, and (z) receipt of any tax or other information or documents
reasonably requested by the Escrow Agent. The Escrow Agent shall maintain a list
of the Holders and their addresses.
7. Voting of Escrow Shares. For so long as any Escrow Shares (or any
additional or substitute securities with respect thereto) are held by the Escrow
Agent in accordance with the terms of this Agreement, each Holder of the
contingent right to receive such shares shall have the absolute right to have
its pro rata portion of the Escrow Shares (and any additional or substitute
securities with respect thereto) voted on all matters with respect to which the
vote of the holders of WMI Common Stock is required or solicited in accordance
with the written instructions of such Holder at the time of the applicable
record date as given to the Escrow Agent. WMI shall provide the Escrow Agent
written notice of any such record date. The right of a Holder to instruct the
Escrow Agent to vote any portion of the Escrow Shares shall be
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determined as of the record date established by WMI with respect to such vote.
If no written instructions are timely received by the Escrow Agent from a
Holder, then the Escrow Agent shall not vote any of the shares in the Escrow
Fund to which such Holder owns a contingent right.
8. Loans from the Escrow Fund. Each Holder shall have the right to
request that the Escrow Agent make a loan to it out of the cash portion of the
subaccount established with respect to it pursuant to Section 4. Such request
must be delivered in writing to the Escrow Agent no later than 30 days following
notice to such Holder of the payment to the Escrow Agent of any cash dividends
or distributions on the Escrow Shares attributable to such Holder. Notice to
Holders of such payments shall be given by the Escrow Agent. Such request may be
for a loan in a principal amount equal to no more than 45 percent of the amount
of such dividend or distribution. Such request shall be accompanied by (a) an
executed promissory note substantially in the form attached hereto as Exhibit 1
(the "Note"), (b) an opinion of counsel substantially in the form attached
hereto as Exhibit 2 that the Note will not violate any applicable usury or
similar laws and (c) receipt of any tax or other information or documents
reasonably requested by the Escrow Agent. The loan shall accrue interest and be
payable as provided in Exhibit 1. The Escrow Agent shall calculate the
Investment Rate as defined in Exhibit 1 within 30 days following the end of each
calendar quarter and notify the borrowers of such rate.
9. Release of Escrow Funds. The Escrow Agent will hold the Escrow Fund
in its possession until authorized hereunder to deliver the Escrow Fund or any
specified portion thereof as provided in this Section 9. The Escrow Agent shall
take all actions called for in any notice delivered by WMI under this Section 9
within ten (10) business days of the date such notice is received; provided that
the Escrow Agent shall not deliver to any Holder that Holder's Aggregate Escrow
Distribution until any such Holder's Notes have been fully repaid or offset
pursuant to subsection (d).
(a) Unless the Escrow Expiration Date shall have occurred,
within thirty (30) days of the date on which Case Proceeds are received by WMI
or its subsidiaries (including the Keystone Entities), WMI shall deliver written
instructions to the Escrow Agent to deliver to each Holder such Holder's pro
rata portion of the Aggregate Escrow Distribution and, (unless the provisions of
subsection (c) apply) after making such distribution as to each and every Holder
(or after setting aside a Holder's allocable portion of the Aggregate Escrow
Distribution with respect to any Holder who has not repaid any outstanding Note
or who has not delivered information or documents reasonably requested by the
Escrow Agent), to return any remaining Escrow Shares to WMI for cancellation
(together with the remainder of the Escrow Fund). The Escrow Agent shall not be
required to make any payment to any Holder until such time as it has received
any tax or other information or documents reasonably requested by it. No Holder
shall be entitled to receive or shall receive any fractional shares of WMI
Common Stock or cash in lieu of fractional shares.
(b) In the event that the Escrow Expiration Date has occurred
and no Case Proceeds have been received by WMI or its subsidiaries (including
the Keystone Entities), then WMI shall deliver written instructions to the
Escrow Agent to return the Escrow Shares to WMI for cancellation together with
the remainder of the Escrow Fund.
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(c) Unless the Escrow Expiration Date shall have occurred, in
the event that the Case Proceeds are received in Installments, then, within
thirty (30) days of the date on which any Installment is received by WMI or its
subsidiaries (including the Keystone Entities), WMI shall deliver written
instructions to the Escrow Agent (i) to pay each Holder the pro rata portion of
the Aggregate Escrow Distribution with respect to such Installment attributable
to such Person, and (ii) after making the last Aggregate Escrow Distribution
with respect to the last Installment as to each and every Holder (or after
setting aside a Holder's allocable portion of the Escrow Fund with respect to
any Holder who has not repaid any outstanding Note or who has not delivered
information or documents reasonably requested by the Escrow Agent), to return
any remaining Escrow Shares to WMI for cancellation, (together with the
remainder of the Escrow Fund). No Holder shall be entitled to receive or shall
receive any fractional shares of WMI Common Stock or cash in lieu of fractional
shares.
(d) Upon receipt of the instructions described in (a), (b) or
(c) above, the Escrow Agent shall promptly notify the obligors under each
outstanding Note that such Note is due and payable in full within seven days of
the date of such notice and shall take all reasonable steps to effect such
distribution within 30 days of receipt of WMI's written instructions. In the
event that any obligor fails to pay the Note in full within ten (10) days of the
date of such notice, the Escrow Agent shall offset the amount of the Note (plus
any interest or other amounts due thereunder) from the pro rata portion of the
Aggregate Escrow Distribution otherwise due such obligor. In the event that (i)
any obligor fails to pay such obligor's Note in full within ten (10) days of the
date of such notice; (ii) the Escrow Expiration Date has occurred; and (iii) no
Case Proceeds have been received by WMI or its subsidiaries (including the
Keystone Entities) or such Case Proceeds were insufficient to pay off the Note,
then the Note shall be in default and the Escrow Agent shall deliver the Note to
WMI and assign all of its right, title and interest in the Note to WMI, without
recourse.
(e) Beginning on the last day of the full calendar month
immediately following the sixth anniversary of this Agreement and on the last
day of every succeeding month, WMI shall deliver written instructions to the
Escrow Agent to return to WMI a number of shares equal to 1.25% of the number of
Escrow Shares (as adjusted pursuant to the definition of Escrow Shares in the
Merger Agreement) held by the Escrow Agent on the sixth anniversary of this
Agreement (together with any dividends and distributions received on such shares
and any interest or earnings on such dividends); provided, that if there has
been a final, nonappealable judicial resolution or settlement of the Case
involving two or more Installments prior to the sixth anniversary of this
Agreement, the provisions of this subsection shall not apply.
10. Escrow Agent's Responsibility.
(a) The Escrow Agent's sole responsibility shall be for the
safekeeping of the Escrow Fund, the establishment and maintenance of subaccounts
pursuant to Section 4, the investment of the Escrow Fund pursuant to Section 5,
the providing of loans as provided in Section 8, the disbursement thereof in
accordance with Section 9 and such other duties and obligations expressly set
forth in this Agreement. The Escrow Agent shall not be required to take any
other action with reference to any matters which might arise in connection with
the
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Escrow Fund, this Agreement, the Merger Agreement, the Warrant Exchange
Agreement or any other agreement between or among any or all of the parties
hereto (other than the Escrow Agent) or to which any such party is a party or to
comply with any direction or instruction (other than those contained herein or
delivered in accordance with this Agreement). The Escrow Agent may act upon any
written instruction or other instrument which the Escrow Agent in good faith
believes to be genuine and to be signed and sent by the proper Persons. The
Escrow Agent shall not be required to take any action until such time as it has
received written instructions as provided above and any tax or other information
or documents reasonably requested by it. The Escrow Agent shall not be required
to expend or risk any of its own funds or otherwise incur any financial
liability (other than as expressly set forth herein) in the performance of its
duties hereunder. The Escrow Agent shall not be liable for any action taken by
it in good faith and believed to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement or for anything which the Escrow
Agent may do or refrain from doing in connection herewith unless the Escrow
Agent is guilty of gross negligence, bad faith or willful misconduct. 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 Bank wire or
telex or other wire or communication facility unless such unavailability is the
result of the Escrow Agent's willful misconduct, bad faith or gross negligence).
The Escrow Agent may from time to time consult with legal counsel of its own
choice for advice concerning its obligations under this Agreement, and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. The Escrow Agent has no duty to determine or inquire into the
occurrence of any event or the performance or failure of performance of any of
the parties hereto with respect to any agreements or arrangements with each
other or with any other party or parties including, without limitation, the
Merger Agreement or the Warrant Exchange Agreement.
(b) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement, and no duties and
obligations shall be inferred or implied. The Escrow Agent's duties and
obligations are purely ministerial in nature, and nothing herein shall be
construed to give rise to any fiduciary obligations of the Escrow Agent. In the
event of any disagreement or the presentation of any adverse claim or demand in
connection with the disbursement of the Escrow Fund, the Escrow Agent shall, at
its option, be entitled to refuse to comply with any such claims or demands
during the continuance of such disagreement and may refrain from delivering any
items affected thereby, and in so doing, the Escrow Agent shall not become
liable to the undersigned or to any other Person, due to its failure to comply
with such adverse claim or demand. The Escrow Agent shall be entitled to
continue, without liability, to refrain and refuse to act:
(i) until authorized to disburse by a court order
from a court having jurisdiction of the parties and the money, after
which time the Escrow Agent shall be entitled to act in conformity with
such adjudication; or
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(ii) until all differences shall have been adjusted
by agreement and the Escrow Agent shall have been notified thereof and
shall have been directed in writing, signed jointly or in counterpart
by the undersigned and by all Persons making adverse claims or demands,
at which time the Escrow Agent shall be protected in acting in
compliance therewith.
(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 (collectively, "order") which in any way
affects Escrow Property (including but not limited to orders of attachment or
garnishment or other forms of levies or injunctions or stays relating to the
transfer of the Escrow Fund), the Escrow Agent shall deliver prompt notice of
the order to other parties hereto and to each Holder so that any party or Holder
may, solely at its own expense, intervene, and the Escrow Agent is otherwise
authorized to comply with any such final order in any manner as it or its legal
counsel of its own choosing deems appropriate; and if the Escrow Agent complies
with any such final order, Escrow Agent shall not be liable to any of the
parties hereto or to any other person or entity even though such final order,
may be subsequently modified or vacated or otherwise determined to have been
without legal force or effect.
(d) The Escrow Agent shall treat all communications pursuant
to this Agreement, whether oral or written, confidentially and shall not make
any public disclosure of communications to or from any party hereto. In the
event that the Escrow Agent is requested in any proceeding to disclose any
communications, the Escrow Agent shall give prompt notice to KH Partners, the
FDIC, any Holder and WMI of such request so that KH Partners, the FDIC, such
Holder or WMI may seek an appropriate protective order or other remedy.
11. Indemnification of Escrow Agent. WMI agrees to indemnify and hold
the Escrow Agent and its officers and employees harmless for and from all
claims, losses, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses, including any legal fees in any appeal or
bankruptcy proceeding) arising out of or in connection with its acting as Escrow
Agent under this Agreement, except in those instances where the Escrow Agent has
been guilty of gross negligence, bad faith or willful misconduct. In addition,
WMI agrees to pay to the Escrow Agent its reasonable fees and expenses in
connection with the performance of its duties under this Agreement as set forth
in the Escrow Fee Schedule as Schedule 1. Under no circumstances shall the
Escrow Agent be entitled to charge the Escrow Fund for any amounts otherwise due
to the Escrow Agent from WMI. The provisions of this Section 11 shall survive
the termination of this Agreement and/or the removal or resignation of the
Escrow Agent.
12. Termination. This Agreement shall terminate upon the complete
disbursement of the remaining assets constituting the Escrow Fund in accordance
with this Agreement. Upon such termination, the Escrow Agent shall close its
records, and all of the Escrow Agent's liability and obligations in connection
with the Escrow Fund and this Agreement shall terminate, other than liabilities
and obligations incurred by it hereunder prior to such resignation becoming
effective.
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13. Notices and Communications. All notices and communications
hereunder shall be in writing and shall be deemed to be duly given if delivered
in person or by courier, if by facsimile transmission (with receipt thereof
acknowledged), or if sent by certified mail, return receipt requested and shall
be deemed to have been received on the date of delivery in person, by courier,
or by facsimile transmission, or on the date set forth in the return receipt, as
follows:
If to the Escrow Agent, at:
The Bank of New York
000 Xxxxxxx Xxxxxx
00 Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Specialized Agency Group
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
If to KH Partners, at:
Keystone Holdings Partners, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxx X. Xxxxxx
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
Copies to:
Xxxxx, Xxxx & Xxxxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Xx.
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
and
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
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If to the FDIC, at:
Federal Deposit Insurance Corporation
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attn: Director, Division of Resolutions
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
Copy to:
Legal Division
Federal Deposit Insurance Corporation
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxx X. Xxxxxx, Senior Counsel
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
If to WMI, at:
Washington Mutual, Inc.
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Senior Vice President
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
Copy to:
Xxxxxx Pepper & Shefelman
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxx X. Xxxxxxx
Facsimile Number: (000) 000-0000
Telephone Number: (000) 000-0000
Any party may change its address for notice purposes by providing
written notice thereof in accordance with this Section. Notices to a Holder
other than KH Partners or the FDIC shall be made in the manner described above
to the address of such Holder as shown on the Escrow
Agent's records. Whenever under the terms hereof the time for giving a notice
or performing an act falls upon a Saturday, Sunday, or banking holiday, such
time shall be extended to the next day on which the Escrow Agent is open for
business.
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14. Resignation; Removal.
(a) The Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving 30 days' prior written notice of such
resignation to WMI, KH Partners and the FDIC, specifying a date when such
resignation shall take effect; provided, that no such resignation shall be
effective until a successor Escrow Agent shall have been appointed and shall
have accepted its appointment in writing as hereinafter set forth. Upon such
notice, KH Partners, the FDIC and WMI shall use commercially reasonable efforts
to mutually agree upon and appoint a successor Escrow Agent. If KH Partners, the
FDIC and WMI are unable to agree upon a successor Escrow Agent within 30 days
after such notice or such appointed Escrow Agent has not accepted such
appointment in writing within such 30 day period, the Escrow Agent shall be
entitled to appoint its successor, which shall be a commercial bank organized
under the laws of the United States or any state thereof that has a combined
capital and surplus of at least $1 billion. Upon delivery of the Escrow Property
to successor Escrow Agent, Escrow Agent shall have no further duties,
responsibilities or obligations hereunder.
(b) Any successor Escrow Agent (whether succeeding a resigning
or removed Escrow Agent) shall deliver a written acceptance of its appointment
to the resigning Escrow Agent, WMI, KH Partners, and the FDIC, and immediately
thereafter, (i) the resigning Escrow Agent shall transfer and deliver the Escrow
Fund to the successive Escrow Agent, whereupon the resignation of the resigning
Escrow Agent shall become effective, and (ii) the successor Escrow Agent shall
constitute the "Escrow Agent" for all purposes hereunder and all applicable
provisions of this Agreement shall apply to the successor Escrow Agent as though
it had been named herein. Any such resignation shall not relieve the resigning
Escrow Agent from any liability incurred by it hereunder prior to such
resignation becoming effective.
(c) The Escrow Agent shall continue to serve until its
successor accepts the duties of Escrow Agent hereunder. KH Partners, the FDIC
and WMI shall have the right at any time upon their mutual consent to remove the
Escrow Agent and substitute a new Escrow Agent, by giving 30 days' notice
thereof to the then acting Escrow Agent. Any successor Escrow Agent appointed
under this Section 14 shall be qualified to act as an escrow agent under
applicable law.
15. Miscellaneous.
(a) This Agreement, in all respects, including all matters of
construction, validity and performance, is governed by the internal laws of the
State of New York as applicable to contracts executed and delivered in New York
by citizens of such state to be performed wholly within such state without
giving effect to the principles of conflicts of laws thereof. Each of the
parties hereto hereby submits to the personal jurisdiction of and each agrees
that all proceedings relating hereto shall be brought in courts located within
the City and State of New York.
(b) Unless the context otherwise requires, under this
Agreement words in the singular number include the plural, and words in the
plural include the singular; and words of
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the masculine gender include the feminine and the neuter, and when the context
so indicates words of the neuter gender may refer to any gender.
(c) All titles and headings in this Agreement are intended
solely for convenience of reference and shall in no way limit or otherwise
affect the interpretation of any of the provisions hereof.
(d) The provisions of this Agreement may be waived, altered,
amended or supplemented, in whole or in part, only by a writing signed by all of
the parties hereto or their successors or assigns.
(e) Neither this Agreement nor, except as explicitly provided
in this Agreement, any right or interest hereunder may be assigned in whole or
in part by any party without the prior written consent of the other parties.
(f) This Agreement constitutes the entire agreement between
the Escrow Agent, on the one hand, and KH Partners, the FDIC and WMI, on the
other hand. This Agreement supersedes all proposals, oral or written, and all
other communications, oral or written, between the parties relating to the
subject matter of this Agreement.
(g) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) Each party hereto and each Holder, except the Escrow
Agent, shall provide the Escrow Agent with their Tax Identification Number (TIN)
as assigned by the Internal Revenue Service.
(i) If any provision hereunder shall require the action by or
notice to KH Partners, the provision shall be read to require the action by or
notice to Xxxxxx X. Xxxx if KH Partners shall no longer be in existence.
(j) The rights and remedies conferred upon the parties 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.
(k) Each party hereby represents and warrants (i) that this
Agreement has been duly authorized, executed and delivered on its behalf and
constitutes its legal, valid and binding obligation and (ii) that the execution,
delivery and enforcement of this Agreement by such party does not and will not
violate any applicable law or regulation.
(l) The Escrow Agent does not have any interest in the Escrow
Fund but is serving as escrow holder only and having only possession thereof.
WMI shall pay or reimburse the Escrow Agent upon request for any transfer taxes,
stamp taxes or other similar taxes relating to the Escrow Fund incurred in
connection herewith and shall indemnify the Escrow Agent for
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and hold the Escrow Agent harmless from any amounts that it is obligated to pay
in the way of such taxes. WMI, KH Partners and the FDIC acknowledge that any
such taxes paid by WMI shall be deemed an "amount" paid to the Escrow Agent
pursuant to clause (4) of the first sentence in the definition of Net Case
Proceeds herein and in Section 1 of the Merger Agreement. Any payments of income
from this Escrow Account shall be subject to withholding regulations then in
force with respect to United States taxes. The parties hereto will provide the
Escrow Agent with appropriate W-9 forms for tax I.D., number certifications, or
W-8 forms for non-resident alien certifications. It is understood that the
Escrow Agent shall be responsible for income reporting only with respect to
income earned on investment of funds which are a part of the Escrow Fund and is
not responsible for any other reporting. This paragraph shall survive
notwithstanding any termination of this Escrow Agreement or the resignation or
removal of the Escrow Agent.
(m) At any time the Escrow Agent may request an instruction in
writing from WMI, the FDIC and KH Partners, and may at its own option include in
such request the course of action it proposes to take and the date on which it
proposes to act, regarding any matter arising in connection with its duties and
obligations hereunder. The Escrow Agent shall not be liable for acting in
accordance with such a proposal on or after the date specified therein, provided
that the specified date shall be at least three business days after WMI, the
FDIC and KH Partners receive the Escrow Agent's request for instructions and its
proposed course of action, and provided further that, prior to so acting, the
Escrow Agent has not received the written instructions requested.
(n) In the event of any ambiguity or uncertainty hereunder or
in any notice, instruction or other communication received by the Escrow Agent
hereunder, Escrow Agent may, in its sole discretion, refrain from taking any
action other than retain possession of the Escrow Fund, unless the Escrow Agent
receives written instructions, signed by all the parties hereto (other than the
Escrow Agent) , which eliminates such ambiguity or uncertainty.
(o) In the event of any dispute between or conflicting claims
by or among the parties hereto (other than the Escrow Agent) and/or any other
person or entity with respect to any of the Escrow Fund, 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 the Escrow Fund so long as such
dispute or conflict shall continue, and the Escrow Agent shall not be or become
liable in any way to the parties hereto 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 reasonably satisfactory to the
Escrow Agent or (ii) the Escrow Agent shall have received an indemnity
satisfactory to it sufficient to hold it harmless from and against any and all
losses 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 by the Escrow Agent in connection with such proceeding shall
be paid by WMI.
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IN WITNESS WHEREOF, the parties, by their officers thereunto duly
authorized, have executed and delivered this Agreement the date first above
written.
KEYSTONE HOLDINGS PARTNERS, L.P.
By: KH Group Management, Inc.
Its General Partner
By: /s/ Xxx X. Xxxxxx
Name: Xxx X. Xxxxxx
WASHINGTON MUTUAL, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
FEDERAL DEPOSIT INSURANCE CORPORATION,
as manager of the FSLIC Resolution Fund
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Assistant Director
THE BANK OF NEW YORK
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
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EXHIBIT 1
PROMISSORY NOTE
$____________________(U.S.) [Insert Location of Escrow Agent's Office]
[Insert Date of Note]
FOR VALUE RECEIVED, the undersigned ("Borrower") hereby
promises to pay to the order of The Bank of New York as Escrow Agent (the
"Escrow Agent") under that certain Escrow Agreement dated __________________
(the "Escrow Agreement") among the Escrow Agent, Washington Mutual, Inc.,
Keystone Holdings Partners, L.P. and the Federal Deposit Insurance Corporation,
as manager of the FSLIC Resolution Fund, at the Escrow Agent's office at
_________________________________________, or at such other place as the holder
of this Note (hereinafter, "Holder") may from time to time designate in writing,
the sum of $__________________, in lawful money of the United States, together
with interest thereon at a variable rate as set forth below. Interest for each
full calendar quarter during the term of this Note shall be calculated on the
basis of a 360-day year of four 90-day quarters. Interest for any partial
calendar quarter at the beginning or end of the term of this Note shall be
calculated on the basis of a 365 or 366-day year and the actual number of days
in that quarter.
Section 1. Interest Rate.
This Note shall bear interest at a variable rate, adjusted as
of the first day of each calendar quarter, equal to the greater of: (i) the
Applicable Federal Rate and (ii) the Investment Rate. "Applicable Federal Rate"
shall mean a per annum rate equal to the applicable Federal rate as set forth in
Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended, or any
successor provision. "Investment Rate" shall mean a per annum rate of interest
equal to the per annum rate of return on the investment of the cash portion of
the Escrow Fund for the immediately preceding calendar quarter as calculated by
the Escrow Agent.
Section 2. Interest Payments.
Beginning on [insert the last day of the calendar quarter in
which the date of the Note occurs] and on the last day of each and every
calendar quarter thereafter throughout the term of this Note, Borrower shall
make quarterly payments to Holder of all accrued and unpaid interest.
Section 3. Maturity.
Unless sooner repaid by Borrower, the entire unpaid principal
amount plus all accrued but unpaid interest, and all other amounts owing
hereunder shall be due and payable in full on the Maturity Date.
Exhibit 1, Page 1
As used herein, "Maturity Date" shall mean the earlier to
occur of (i) the day which is seven days following notice given by the Escrow
Agent as provided in Section 9 of the Escrow Agreement or (ii) the Escrow
Expiration Date.
Section 4. Default; Remedies.
If the payment of any amount payable hereunder is not made
within ten days of when due, then, at the option of Holder, the entire
indebtedness evidenced hereby shall become immediately due and payable and all
such amounts, including all accrued but unpaid interest, shall thereafter bear
interest at a variable rate, adjusted at the time at which the rate would
otherwise have been adjusted pursuant to Section 1, of five percent (5%) per
annum above the rate hereunder that would have been applicable from time to time
had there been no default (the "Default Rate") until such default is cured.
Failure to exercise this option shall not waive the right to exercise the same
in the event of any subsequent default. In the event of such default the
undersigned promise to pay all collection expenses, including reasonable
attorneys' fees incurred with or without suit and on appeal. Interest at the
Default Rate shall commence to accrue upon default under this Note, including
the failure to pay this Note on the Maturity Date. In addition, upon default,
Holder shall deliver this Note to Washington Mutual, Inc. and shall assign all
of its rights, title and interest in the Note to Washington Mutual, Inc.,
without recourse.
Section 5. Consent to Jurisdiction; Waiver of Immunities.
Borrower hereby irrevocably submits to the jurisdiction of any
state or federal court sitting in Seattle, Washington, in any action or
proceeding brought to enforce or otherwise arising out of or relating to this
Note and hereby waives any objection to venue in any such court, and waives any
claim that such forum is an inconvenient forum. Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing herein shall impair the right of Holder to bring any
action or proceeding against Borrower, or any of its property, in the courts of
any other jurisdiction.
Section 6. Late Charge.
If any amount payable hereunder is paid more than ten (10)
days after the due date thereof, Borrower promises to pay a late charge of five
percent (5%) of the delinquent amount as liquidated damages for the extra
expense of handling past due payments.
Section 7. Miscellaneous.
(a) Every person or entity at any time liable for the payment
of the indebtedness evidenced hereby waives presentment for payment, demand and
notice of nonpayment of this Note. Every such person or entity further hereby
consents to any extension of the time of payment hereof or other modification of
the terms of payment of this Note, the release of all or any part of the
security herefor or the release of any party liable for the payment of the
indebtedness evidenced hereby at any time and from time to time at the request
Exhibit 1, Page 2
of anyone now or hereafter liable therefor. Any such extension or release may be
made without notice to any of such persons or entities and without discharging
their liability.
(b) Each person or entity who signs this Note is jointly and
severally liable for the full repayment of the entire indebtedness evidenced
hereby.
(c) The headings to the various sections have been inserted
for convenience of reference only and do not define, limit, modify, or expand
the express provisions of this Note.
(d) This Note is made with the reference to and is to be
construed in accordance with the laws of the state of New York.
DATED as of the day and year first above written.
[BORROWER'S SIGNATURE]
Exhibit 1, Page 3
EXHIBIT 2
FORM OF LEGAL OPINION
[Date]
[Escrow Agent's Name and Address]
Ladies and Gentlemen:
The undersigned has acted as counsel to [Name of Borrower] ("Borrower") in
connection with a loan (the "Loan") being made pursuant to that certain Escrow
Agreement dated December 20, 1996 by and among The Bank of New York, Washington
Mutual, Inc., Keystone Holdings Partners, L.P. and the Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund, as successor in interest
to the Federal Savings and Loan Insurance Corporation. The Loan is being made
out of the Escrow Fund (as defined in the Escrow Agreement) and will be
evidenced by a note substantially in the form attached hereto. This opinion is
being delivered pursuant to Section 8 of the Escrow Agreement.
Subject to the assumptions and limitations set forth below, it is our opinion
that:
1. The Loan will not violate any applicable usury law of the states of
___________, _____________ or _________________ [insert state of Borrower's
residence, state where Escrow Agent maintains Escrow Fund and state whose law
governs the note].
2. Under the laws of such states, Borrower will not be able to raise
the defense of usury in any proceeding brought to enforce or collect the Loan or
the note evidencing the Loan.
This opinion is limited to the internal laws of the states of _______________,
______________ and ______________, without reference to choice of law doctrine.
[Counsel may, if such counsel deems it appropriate, rely on a certificate from
Borrower as to the purpose of the Loan or the intended use of the Loan
proceeds.]
[Deviations from this form of opinion shall be permitted only with the written
consent of Washington Mutual, Inc., which consent will not be unreasonably
withheld.]
Exhibit 1, Page 4
