Exhibit 10.4
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of September 8, 1997 (this "Agreement"),
among Local Financial Corporation (the "Company"), a Delaware corporation,
Xxxxxx Xxxxxxx and Miles Xxxxxxx (collectively, the "Selling Shareholders") and
The Bank of New York (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Selling Shareholders have entered into a
Redemption Agreement, dated as of August 25, 1997 (the "Redemption Agreement"),
which provides for the redemption of all of the capital stock of the Selling
Shareholders by the Company at a purchase price which is subject to certain
adjustments that are specified in the Redemption Agreement. Capitalized terms
which are not otherwise defined herein shall have the meanings set forth in the
Redemption Agreement; and
WHEREAS, the Escrow Agent is willing to serve as the escrow agent for
the Company and the Selling Shareholders in connection with the matters
specified in the Redemption Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Appointment of Escrow Agent; Establishment of Escrow Accounts;
Deposit of Funds. The Escrow Agent is hereby appointed as Escrow Agent
for the Company and the Selling Shareholders in connection with the
matters specified in Sections 5.1 and 5.2 of the Redemption Agreement
and in accordance with the terms and conditions set forth herein. The
parties hereto hereby establish two (2) escrow accounts bearing interest
from investments with the Escrow Agent, which escrow accounts are
entitled the "Local Financial FDIC Assistance Agreement Escrow Account"
and the "Local Financial Closing Adjustment Escrow Account" (each, an
"Escrow Account" and, collectively, the "Escrow Accounts"). The Escrow
Agent accepts such appointment as Escrow Agent for the Company and the
Selling Shareholders.
At the Closing, in accordance with Sections 5.1 and 5.2 of the
Redemption Agreement, the Company shall deposit, by wire transfer of
immediately available funds to the Escrow Agent, $10.0 million dollars
into the Local Financial FDIC Assistance Agreement Escrow Account and
$5.0 million in the Local Financial Closing Adjustment Escrow Account.
2. Escrow Period. The Escrow Period (the "Escrow Period") shall
begin with the date of the Closing. Subject to Section 3 hereof, with
respect to each Escrow Account, the Escrow Period shall end on the date
upon which all of the funds held in such account shall have been paid as
provided herein and in the Redemption Agreement.
The Company and the Selling Shareholders are each aware and
hereby expressly acknowledge that, during the Escrow Period, neither of
them are entitled to any funds held in any of the Escrow Accounts and
that no amounts deposited in any of the Escrow Accounts shall become the
property of or be subject to the debts of the Company, the Selling
Shareholders or any other entity.
3. Release of Escrow Funds.
(a) The Escrow Agent will hold the funds in the Escrow
Accounts in its possession under the provisions of this Agreement
until authorized in writing hereunder to deliver such funds or
any specified portion thereof as follows:
(i) If the Final FDIC Net Resolution Amount
results in a payment being made by the Company to the
FDIC and the amount of such payment exceeds the FDIC
Reserve Amount, the Company shall deliver to the Escrow
Agent a notice that certain of the funds held in the
Local Financial FDIC Assistance Agreement Escrow Account
are to be paid to it (a "Notice of Claim") pursuant to
Section 5.1(b) of the Redemption Agreement, which Notice
of Claim shall set forth the amount of such funds the
Company is requesting be paid to it, and the Company
shall simultaneously deliver a copy of such Notice of
Claim to the Selling Shareholders. The Escrow Agent shall
promptly notify the Selling Shareholders of its receipt
of such Notice of Claim.
(ii) If the Final FDIC Net Resolution Amount
results in either (x) a payment being made by the Company
to the FDIC and the amount of such payment is less than
the FDIC Reserve Amount or (y) a payment being made by
the FDIC to the Company, the Selling Shareholders shall
deliver a Notice of Claim to the Escrow Agent requesting
the payment to the Selling Shareholders of all of the
funds in the Local Financial FDIC Assistance Agreement
Escrow Account pursuant to Section 5.1(c) of the
Redemption Agreement, and the Selling Shareholders shall
simultaneously deliver a copy of such Notice of Claim to
the Company. The Escrow Agent shall promptly notify the
Company of its receipt of such Notice of Claim.
(iii) If the Adjusted Closing Equity is less than
$144,477,000, the Company shall deliver a Notice of Claim
to the Escrow Agent pursuant to Section 5.2(d)(i) of the
Redemption Agreement, which Notice of Claim shall set
forth the amount of the funds held in the Local Financial
Closing Adjustment Escrow Account that the Company is
requesting be paid to it, and the Company shall
simultaneously deliver a copy of such Notice of Claim to
the Selling Shareholders. The Escrow Agent shall promptly
notify the Selling Shareholders of its receipt of such
Notice of Claim.
2
(iv) If the Adjusted Closing Equity is greater
than or equal to $144,477,000, the Selling Shareholders
shall deliver a Notice of Claim to the Escrow Agent
requesting the payment to the Selling Shareholders of all
of the funds in the Local Financial Closing Adjustment
Escrow Account pursuant to Section 5.2(d)(ii) or (iii) of
the Redemption Agreement, and the Selling Shareholders
shall simultaneously deliver a copy of such Notice of
Claim to the Company. The Escrow Agent shall promptly
notify the Company of its receipt of such Notice of
Claim.
(v) As used herein, the term "Asserting Party"
shall refer to the party (or, in the case of the Selling
Shareholders, parties) which has delivered to the Escrow
Agent a Notice of Claim and the term "Non-Asserting
Party" shall refer to the other party (or in the case of
the Selling Shareholders, parties) hereto. Unless the
Escrow Agent receives notice from the Non-Asserting Party
pursuant to Section 3(b) hereof within the fifteen-day
period following the delivery (which shall be deemed to
be the date on which the Escrow Agent receives the
relevant Notice of Claim) by the Asserting Party to the
Non- Asserting Party of a copy of any Notice of Claim
(the "Fifteen-Day Notice Period"), the Escrow Agent will
release and deliver, and free and discharge from this
Escrow Agreement, funds from the relevant Escrow Account
as follows: (w) if the Notice of Claim is delivered
pursuant to Section 3(a)(i) hereof, the Escrow Agent
shall release and deliver the requested amount of funds
from the Local Financial FDIC Assistance Agreement Escrow
Account to the Company and the Escrow Agent shall release
and deliver the balance of the funds in such Escrow
Account, if any, in equal amounts to each of the Selling
Shareholders; (x) if the Notice of Claim is delivered
pursuant to Section 3(a)(ii) hereof, the Escrow Agent
shall release and deliver all of the funds in the Local
Financial FDIC Assistance Agreement Escrow Account in
equal amounts to each of the Selling Shareholders; (y) if
the Notice of Claim is delivered pursuant to Section
3(a)(iii) hereof, the Escrow Agent shall release and
deliver the requested amount of funds from the Local
Financial Closing Adjustment Escrow Account to the
Company and the Escrow Agent shall release and deliver
the balance of the funds in such Escrow Account, if any,
in equal amounts to each of the Selling Shareholders; and
(z) if the Notice of Claim is delivered pursuant to
Section 3(a)(iv) hereof, the Escrow Agent shall release
and deliver all of the funds in the Local Financial
Closing Adjustment Escrow Account in equal amounts to
each of the Selling Shareholders. If the Escrow Agent
receives a Notice of Dispute (as defined herein) within
the Fifteen-Day Notice Period from the Non-Asserting
Party, then the funds held in the relevant Escrow Account
shall not be released and delivered pursuant to the
preceding sentence.
(b) Each party shall have the right to dispute an
asserted claim to the funds in either Escrow Account by the other
party by delivering, to the Escrow Agent
3
(with a copy to the other party), within the Fifteen-Day Notice
Period, a written notice (a "Notice of Dispute") which disputes
the matters set forth in the applicable Notice of Claim.
(c) In connection with the delivery of written notices to
the Escrow Agent pursuant to this Escrow Agreement, other than
investment instructions under Section 5 hereof, the parties
hereto agree as follows:
(i) Each written notice shall be signed by an
officer or an authorized representative of the party
giving such notice (which, in the case of the Selling
Shareholders, may be the Shareholder Representative) and
shall accurately set forth in each case:
(x) the party to whom, or the account to
which, the Escrow Agent is thereby directed to
pay such amount; and
(y) the date upon which the Escrow Agent is
directed to pay such amount (which date, with
respect to a Notice of Claim, shall not be before
the expiration of the Fifteen-Day Notice Period);
and such officer or representative shall certify
as to the compliance of such notice and the
contents thereof with the Redemption Agreement and
this Escrow Agreement.
The Escrow Agent may rely fully on the
provisions set forth in said written notices of the
Company and/or the Selling Shareholders without
responsibility to determine whether such notice complies
with the provisions of this Section 3, this Section 3(c)
being solely for the purpose of setting forth the
obligations and agreements of the parties hereto.
(ii) The Company and the Selling Shareholders
shall act in a timely basis to effectuate the payment of
the funds held in the Escrow Accounts in accordance with,
and subject to all of the provisions and conditions of,
this Escrow Agreement and the Redemption Agreement.
4. Notification of Status of Escrow Accounts. The Escrow Agent
shall provide the Company and the Selling Shareholders with a statement
as of the end of each month during which this Agreement is in force,
setting forth the aggregate amount of funds in each of such Escrow
Accounts.
5. Investment of Escrow Accounts. The Escrow Agent shall invest
the funds in each of the Escrow Accounts, as directed in writing by the
Company and the Selling Shareholders, in short-term certificates of
deposit, short-term obligations of the United States, any state or
agency thereof, or money market mutual funds investing in the foregoing
instruments.
4
6. Rights, Liabilities and Indemnification of the Escrow Agent.
Acceptance by the Escrow Agent of its duties under this Agreement is
subject to the following terms and conditions, which the Company, the
Selling Shareholders and the Escrow Agent hereby agree shall govern and
control the rights, duties and immunities of the Escrow Agent and which
shall survive termination of this Escrow Agreement and/or the
resignation or removal of the Escrow Agent:
(a) The duties and obligations of the Escrow Agent shall
be determined solely by the express provisions of this Agreement
and the Escrow Agent shall be responsible solely for the
performance of such duties and obligations as are specifically
set out in this Agreement and no duties, responsibilities or
obligations shall be inferred or implied.
(b) The Escrow Agent shall not be responsible in any
manner whatsoever for any failure or inability of the Company,
the Selling Shareholders or of any one else, to deliver monies to
the Escrow Agent or otherwise to follow any of the provisions of
this Agreement.
(c) The Company and the Selling Shareholders will jointly
and severally indemnify the Escrow Agent for, and hold it
harmless against, any loss, liability or expense (including
attorney's fees and expenses and other costs of defense) which
may be incurred, or that arises out of or in connection with, its
performance of its duties and obligations under this Agreement;
provided, however, that such indemnification shall not be
available for any loss, liability or expense which arises out of
or results from any action taken or omitted by the Escrow Agent
and for which it shall have been adjudged negligent or having
acted in bad faith or through willful misconduct.
(d) The Escrow Agent shall have no responsibility to
inquire into or determine the genuineness, authenticity or
sufficiency of any securities, checks or other documents or
instruments submitted to it in connection with its duties
hereunder. The Escrow Agent shall be entitled to deem the
signatories of any documents or instruments submitted to it
hereunder and believed by it to be genuine and to have been
signed by the proper person as being those purported to be
authorized to sign such documents and instruments on behalf of
the parties hereto and shall be entitled to rely upon the
genuineness of the signatures of such signatories without inquiry
and without requiring substantiating evidence of any kind.
(e) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in
connection with the transactions contemplated by this Agreement,
except for where the Escrow Agent has been adjudged as having
been negligent, having engaged in willful misconduct or having
acted in bad faith. In no event shall Escrow Agent be liable (i)
for acting in accordance with or relying upon any instruction,
notice, demand, certificate or
5
document from the Company or the Selling Shareholders or any
entity acting on behalf of the Company or the Selling
Shareholders, (ii) for any consequential, punitive or special
damages, (iii) for the acts or omissions of its nominees,
correspondents, designees, subagents or subcustodians, or (iv)
for an amount in excess of the value of the Escrow Accounts.
(f) The Escrow Agent may seek the advice of legal counsel
in the event of any dispute or question as to the construction of
any of the provisions of this Agreement or its duties hereunder,
and it shall incur no liability and shall be fully protected in
respect of any action taken, omitted or suffered by it in good
faith in accordance with the advice of such counsel.
(g) If at any time Escrow Agent is served with any
judicial or administrative order, judgment, decree, writ or other
form of judicial or administrative process (an "Order") which in
any way affects the Escrow Accounts (including but not limited to
orders of attachment or garnishment or other forms of levies or
injunctions or stays relating to the transfer of funds or assets
in the Escrow Accounts), Escrow Agent shall promptly give notice
of such Order to each of the other parties hereto so that any
such party or such parties may seek appropriate relief from such
Order. Escrow Agent is authorized to comply therewith in any
manner as it or its legal counsel of its own choosing deems
appropriate; provided, however, that if any party notifies Escrow
Agent that such party intends to seek relief from such Order,
then Escrow Agent shall not comply with such Order if such party
reasonably demonstrates to the satisfaction of Escrow Agent and
its counsel that delaying compliance with such Order pending
resolution of such party's request for relief will not subject
Escrow Agent to censure or other penalty. If Escrow Agent
complies with any final, non-appealable Order, any Order as to
which no party is seeking relief or with any Order as to which
the party seeking relief shall not have reasonably demonstrated
to the satisfaction of the Escrow Agent and its counsel that
delaying compliance with such Order pending resolution of such
party's request for relief will not subject Escrow Agent to
censure or other penalty, Escrow Agent shall not be liable to any
of the parties hereto or to any other person or entity even
though such Order may be subsequently modified or vacated or
otherwise determined to have been without legal force or effect.
(h) Unless otherwise specifically set forth herein,
Escrow Agent shall proceed as soon as practicable to collect any
checks or other collection items at any time deposited hereunder.
All such collections shall be subject to Escrow Agent's usual
collection practices or terms regarding items received by Escrow
Agent for deposit or collection. 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.
6
7. Fees of Escrow Agent. The Company and the Selling Shareholders
hereby agree that the Escrow Agent shall be entitled to a fee as
described in the attached Schedule A plus all documented out-of-pocket
expenses incurred by the Escrow Agent (the "Escrow Fee") for performance
of the services enumerated herein. The Escrow Fee and the Escrow Agent's
expenses shall be split equally by the Company and the Selling
Shareholders. The performance by the Escrow Agent of its obligations
under this Agreement (other than the taking of any action which, under
the express terms of this Agreement, are discretionary) shall be
independent of the requirement that the Escrow Agent's fees and expenses
be paid, and the Escrow Agent shall not be entitled to delay or withhold
performance of such obligations under this Agreement by reason of
nonpayment of such fees and expenses; provided, that if any fees,
expenses or costs incurred by, or any obligations owed to, Escrow Agent
hereunder are not promptly paid when due, Escrow Agent may reimburse
itself therefor from the Escrow Accounts and may sell, convey or
otherwise dispose of any funds or assets in the Escrow Accounts for such
purpose.
8. Security for Obligations. As security for the due and punctual
performance of any and all of the Company's or the Selling Shareholders'
obligations to Escrow Agent hereunder, now or hereafter arising, the
Company and the Selling Shareholders', individually and collectively,
hereby pledge, assign and grant to Escrow Agent a continuing security
interest in, and a lien on, the Escrow Accounts and all distributions
thereon or additions thereto (whether such additions are the result of
deposits by the Company or the Selling Shareholders or the investment of
funds on deposit in the Escrow Account). The security interest of Escrow
Agent shall at all times be valid, perfected and enforceable by Escrow
Agent against the Company and the Selling Shareholders and all third
parties in accordance with the terms of the Escrow Agreement. The
Company, on the one hand, and the Selling Shareholders, on the other
hand, shall promptly reimburse the other for any fees, expenses or other
payments (including without limitation indemnification payments) paid
directly or indirectly to the Escrow Agent by the other party on behalf
of the reimbursing party.
9. Resignation or Removal of Escrow Agent. The Escrow Agent may
resign as such following the giving of thirty days' prior written notice
to the Company and the Selling Shareholders. Similarly, the Escrow Agent
may be removed and replaced following the giving of thirty days' prior
written notice to the Escrow Agent by the Company and the Selling
Shareholders. In either event, the duties of the Escrow Agent shall
terminate thirty days after the date of such notice (or as of such
earlier date as may be mutually agreeable); and the Escrow Agent shall
then deliver the balance of each of the Escrow Accounts then in its
possession to a successor Escrow Agent as shall be appointed by the
Company and the Selling Shareholders within ten (10) calendar days after
giving the foregoing notice of removal or receiving the foregoing notice
of resignation, as evidenced by written notice to the Escrow Agent from
the Company and the Selling Shareholders.
If the Company and the Selling Shareholders shall have failed to
appoint a successor Escrow Agent prior to the expiration of the thirty
days following the date of the notice of
7
resignation or removal, the then acting Escrow Agent may petition any
court of competent jurisdiction for the appointment of a successor
Escrow Agent or for other appropriate relief; and any such resulting
appointment shall be binding upon the parties hereto. The costs and
expenses (including reasonable attorney's fees and expenses) incurred by
Escrow Agent in connection with such proceeding shall be paid by, and be
deemed a joint and several obligation of, the Company and the Selling
Shareholders.
Upon acknowledgment by any successor Escrow Agent of the receipt
of the then remaining balance of each of the Escrow Accounts (less the
Escrow Agent's costs and expenses or other obligations owed to the
Escrow Agent), the then acting Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this
Agreement, except for any liability, claim or cause of action arising
out of conduct or failure to act of the Escrow Agent constituting gross
negligence, bad faith, fraud, or willful misconduct.
10. Ambiguities and Disputes. (a) In the event of any ambiguity
or uncertainty hereunder or in any notice, instruction or other
communication received by Escrow Agent hereunder, Escrow Agent may, in
its sole discretion, refrain from taking any action other than retaining
possession of the funds in the Escrow Accounts, unless Escrow Agent
receives written instructions, signed by all the Company and the Selling
Shareholders, which eliminates such ambiguity or uncertainty.
(b) In the event of any dispute between or conflicting claims by
or among the Company and the Selling Shareholders and/or any other
person or entity with respect to any Escrow Account, 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 Escrow Account
so long as such dispute or conflict shall continue, and Escrow Agent
shall not be or become liable in any way to the Company or the Selling
Shareholders for failure or refusal to comply with such conflicting
claims, demands or instructions. 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 Escrow Agent or (ii) Escrow Agent shall have received
security or 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. 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 a joint and several obligation of, the Company and the Selling
Shareholders.
11. Notices. Any request, direction, notice or other services
required or permitted to be made or given by any party hereto shall be
in writing and shall be deemed
8
sufficiently given or served for all purposes if given or served in
person or by first class mail or telephone facsimile transmission to the
other address as specified, from time to time, by written notice given
to the other party hereto:
(a) In the case of the Company:
Chairman of the Board
Local Financial Corporation
0000 XX 00xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
(b) In the case of the Selling Shareholders:
c/o Xxxxx Xxxxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx
(c) In the case of Escrow Agent:
The Bank of New York
000 Xxxxxxx Xxxxxx
Xxxxx 00 Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Corporate Trust Administration
12. Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall constitute an original, but all
of which shall constitute one agreement.
13. Governing Law. This Agreement shall be construed under and
governed by the laws of the State of New York.
14. Captions. Captions appearing in this Agreement are for
convenience only and shall not be deemed to explain, limit or amplify
the provisions hereof.
9
15. Amendments. This Agreement may not be amended except by a
writing signed by each of the parties hereto, or any of their
successors.
16. Duties. The relationship between the Company and the Selling
Shareholders on the one hand and the Escrow Agent on the other hand is
one of a principal and an agent having limited authority. The duties and
obligations of the Escrow Agent shall be determined solely by the
express provisions of this Agreement.
17. Entire Agreement. This Agreement shall constitute the entire
agreement of the parties with respect to the subject matter and
supersedes all prior oral or written agreements in regard thereto.
Notwithstanding the foregoing, this Agreement does not supersede or
modify in any respect the Redemption Agreement, which, as between the
Company and the Selling Shareholders, shall remain in full force and
effect.
18. Termination. This Agreement shall terminate upon the
distribution of all property from the Escrow Accounts.
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first above written by their respective duly authorized officers.
LOCAL FINANCIAL CORPORATION
By: /s/ Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx
Secretary
THE SELLING SHAREHOLDERS:
XXXXXX XXXXXXX
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Xxxxxx X. Xxxxx
Shareholder Representative
MILES XXXXXXX
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
Shareholder Representative
THE BANK OF NEW YORK, as Escrow Agent
By: /s/ Xxxx Xxxx Xxxxxxxxx
------------------------------
Title: Vice President
11
