[Exhibit A to Escrow Agreement]
CUSTODIAN AND PAYING AGENT AGREEMENT
This Custodian and Paying Agent Agreement (the "Agreement") is entered into
as of July 2, 2002 by and among Xxxxxx Group Inc., a Delaware corporation
("Xxxxxx"), Xxxxxx & Company Limited, a U.K. limited company ("Xxxxxx UK"),
Investment Technology Group, Inc., a Delaware corporation ("ITG"), The Bank of
New York, a New York banking corporation, as custodian and paying agent (the
"Agent"), and Xxxxxxx X. Xxxxxxxxxx and Xxxx X. Xxxxxx, as members of the
Contingent Payment Rights Committee (the "Committee").
Reference is made to the Escrow Agreement dated as of even date herewith
(the "Escrow Agreement") by and among Xxxxxx, Xxxxxx UK, ITG and the Committee.
This is the Agreement referred to therein. Capitalized terms used without
definition herein have the meanings given to them in the Escrow Agreement.
This Agreement sets forth the basis on which the Agent will hold, and make
disbursements from, the Escrow and distribute the Contingent Payment, if any, to
Holders and the duties for which the Agent will be responsible.
In consideration of the foregoing premises (which constitute an integral
part of this Agreement) and mutual covenants hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
ESCROW ACCOUNT
Section 1.01. Appointment and Agreement of Agent. Xxxxxx, Xxxxxx UK, ITG,
and the Committee hereby appoint and designate The Bank of New York as the
Agent, and The Bank of New York hereby accepts such appointment and agrees to
perform the duties of the Agent under the terms and conditions set forth herein.
Section 1.02. Establishment of Escrow Account. Simultaneously with the
execution and delivery hereof, the Agent shall establish an account (the "Escrow
Account") at its office located in New York, New York. The Agent shall maintain
the Escrow Account in accordance with this Agreement. All funds delivered to,
accepted or held by the Agent shall be held in the Escrow Account (and shall be
deemed part thereof) in accordance with this Agreement, until released in
accordance with the terms hereof.
Section 1.03. Initial Funding. Simultaneously with the execution and
delivery hereof, Xxxxxx UK shall deliver $2,365,000 in cash (the "Initial
Funding") to the Agent for deposit into the Escrow Account in accordance with
this Agreement.
Section 1.04. Investment. The Committee will direct the Agent, in writing,
to invest the Escrow Assets solely in the following: (i) obligations issued or
guaranteed by the United States of America or any agency or instrumentality
thereof with a maturity of not more than 365 days and (ii) money market funds
substantially all of whose funds are invested in the foregoing. All earnings and
gains on Escrow Assets, including interest and dividends, shall be paid into the
Escrow Account and shall constitute Escrow Assets. If at any time the Committee
deems it necessary that some or all of the investments constituting Escrow
Assets be redeemed or sold in order to raise money necessary to comply with the
provisions of the Escrow Agreement, the Committee shall direct the Agent, in
writing, to effect such redemption or sale, in such manner and at such time as
the Committee directs.
Section 1.05. Disbursements. From time to time as the Committee shall
direct the Agent in writing, the Agent shall disburse such portion of the Escrow
Assets as the Committee so directs to pay Escrow Expenses. The Agent shall keep
a record of such disbursements.
Section 1.06. Quarterly Statements. As soon as practicable following each
March 31, June 30, September 30 and December 31, until the termination of this
Agreement, the Agent shall deliver to the Committee a statement (a "Quarterly
Statement") setting forth: (a) the amount of the Escrow Assets; (b) the amount
of income or interest earned or accrued with respect to the Escrow Assets, if
any, during the period covered by such Quarterly Statement; and (c) the amount
of Escrow Expenses paid during such period.
Section 1.07. Maintenance of Register of Holders. The Agent shall maintain
a register of the Holders (the "Register") at its office in New York, New York.
The initial Register shall be provided to the Agent by Xxxxxx immediately prior
to the Effective Time. The Agent shall record any transfers of Contingent
Payment Rights in the Register to the extent transfers of Contingent Payment
Rights are permissible under the terms of the Merger Agreement and the Escrow
Agreement; provided that the Agent shall be entitled to rely solely on the
Committee in determining whether or not any transfer is permitted. The Committee
and the Agent may treat the person or entity in whose name any Contingent
Payment Right is listed on the Register as the Holder thereof for the purposes
of receiving the distribution of the Contingent Payment and for all other
purposes.
ARTICLE II
TERMINATION AND DISTRIBUTION
Section 2.01. Termination of Merger Agreement. In the event that the Merger
Agreement is terminated under Section 7.1 thereof prior to the Effective Time,
the Committee shall direct the Agent to immediately pay all Escrow Expenses, if
any, that have been incurred and have not been paid, and to deliver the
remaining Escrow Assets to Xxxxxx UK, and this Agreement and the Escrow shall
terminate.
Section 2.02. Delivery of Escrow Assets to Xxxxxx UK; Termination of the
Escrow. Pursuant to the Escrow Agreement, following the earliest of (i) the
final settlement or other final resolution of the Claims, (ii) a final
determination by the Committee to cease Pursuit of all Claims and (iii) the
fourth anniversary of the Effective Time (which date shall be extended in the
event of any outstanding claims of indemnification or reimbursement under
Section 3.09, 5.01, 5.05 or 6.02 of the Escrow Agreement), the Committee shall
discharge all of the Escrow's obligations, including by directing the Agent to
pay the Escrow Expenses and reserve for the payment of such costs and expenses
of distributing the Contingent Payments pursuant to Section 2.03 hereof.
Following such discharge, the Committee shall direct the Agent to liquidate all
remaining Escrow Assets, if any, and to deliver the proceeds in cash to Xxxxxx
UK. Following such delivery to Xxxxxx UK, the Escrow shall terminate. At no time
shall there be any distribution of Escrow Assets to the Holders.
Section 2.03. Delivery of Contingent Payment to Agent; Distribution to
Holders. Promptly following the termination of the Escrow pursuant to Section
2.02 hereof, ITG shall deliver to the Agent cash in an amount equal to the
lesser of (i) the amount of cash, if any, delivered to Xxxxxx UK by the Agent
pursuant to Section 2.02 hereof, plus the amount of any Recoveries that were not
deposited in the Escrow Account net of any amounts deducted therefrom pursuant
to Section 6.02 of the Escrow Agreement, and (ii) $12,465,000 minus the Escrow
Reduction Amount, if any. The Agent shall distribute the amount so received by
it from ITG to the Holders, without interest, pro rata based on the number of
Contingent Payment Rights allocated to each such Holder on the Register. At no
time shall there be any distribution of the Contingent Payment except pursuant
to the preceding sentence. Following such distribution by the Agent, this
Agreement shall terminate. The distribution of any Contingent Payment shall be
in compliance with applicable laws.
SECTION 2.04. Pre-Closing Recoveries. Notwithstanding anything to the
contrary in the third sentence of Section 2.03 hereof, if any Recoveries are
received prior to the Effective Time, the Committee shall be entitled to direct
the Agent to withdraw from the Escrow Account (i) the amount of such Recoveries
less Escrow Expenses incurred prior to the Effective Time plus (ii) such portion
of the Initial Funding as the Committee determines (provided that in no event
shall such amount be in excess of the amount that would leave $500,000 in the
Escrow Account prior to the Effective Time) (the sum of clauses (i) and (ii),
the "Escrow Reduction Amount"), and deliver the Escrow Reduction Amount in cash
to Xxxxxx UK prior to the Effective Time.
ARTICLE III
MATTERS CONCERNING AGENT
Section 3.01. Indemnification of Agent. Xxxxxx (if prior to the Effective
Time) or ITG (if after the Effective Time) shall indemnify the Agent and hold
the Agent harmless from and against, and shall promptly advance to the Agent or
its Advisors all funds necessary with respect to, any and all claims, demands,
obligations, liabilities, costs and expenses, including amounts paid in
satisfaction of judgments, in compromise (so long as Xxxxxx or ITG, as
applicable, has approved such compromise, with such approval not to be
unreasonably withheld or delayed), or fines or penalties, and counsel or other
Advisor fees (collectively, "Losses") incurred in connection with the
performance of the Agent's duties under this Agreement, except to the extent
caused by the Agent's willful misconduct or gross negligence. Notwithstanding
the foregoing, all Losses indemnified pursuant to the foregoing shall be paid
out of the Escrow Assets until such time as the Escrow Assets are exhausted or
the Escrow is terminated pursuant to Section 2.02 before ITG shall be obligated
to make any payments pursuant to the foregoing. The obligations of Xxxxxx and
ITG set forth in this Section 3.01 shall survive the termination of this
Agreement and the removal or resignation of the Agent.
Section 3.02. Agent Not Liable. The Agent, in the performance of its duties
hereunder, shall not be liable or responsible for anything done or omitted to be
done hereunder in good faith as herein provided, except for its own willful
misconduct or gross negligence. The Agent shall be fully protected in relying
upon any notice, certificate or other written communication, including, without
limitation, any written notice delivered by the Committee to the Agent
instructing the Agent to take any action or refrain from taking any action,
believed by the Agent to be genuine and purported to be signed or given by any
person or persons purporting to have authority to act on behalf of any party
hereto. The Agent shall have the right, but not the obligation, to consult with
counsel of its choice and shall not be liable for action taken or omitted to be
taken by the Agent in accordance with the advice of such counsel. The Agent
shall have no responsibility or liability for any diminution in value of any
assets held hereunder which may result from any investments or reinvestment made
in accordance with this Agreement.
Section 3.03. Resignation; Successor Agent. The Agent or any successor
Agent, as the case may be, may resign its duties and be discharged from all
further duties or obligations hereunder at any time upon giving twenty (20)
Business Days' prior written notice to the parties hereto. Xxxxxx (if such
resignation occurs prior to the Effective Time) or the Committee (if such
resignation occurs after the Effective Time) will designate a successor Agent
hereunder within said twenty (20) Business Day period.
Section 3.04. Compensation. The Agent shall be entitled to compensation for
its services hereunder as set forth in Schedule A hereto, which is made a part
hereof, and for reimbursement of its reasonable and documented out-of-pocket
expenses, including the fees and expenses of attorneys or agents which it may
find necessary to engage in the performance of its duties hereunder, all to be
paid out of the Escrow Assets, and the Agent shall have, and is hereby granted,
a prior lien upon any property, cash, or assets of the Escrow Account with
respect to its unpaid fees and non-reimbursed expenses superior to the interests
of any other persons or entities. The provisions of this Section 3.04 shall
survive any termination, satisfaction or discharge of this Agreement, as well as
the resignation or removal of the Agent.
Section 3.05. Limited Duties of Agent. The Agent shall have only those
duties as are specifically provided herein, which shall be deemed purely
ministerial in nature, and shall under no circumstance be deemed a fiduciary for
any of the parties to this Agreement. The Agent shall neither be responsible
for, nor chargeable with, knowledge of the terms and conditions of any other
agreement, instrument or document between the other parties hereto, in
connection herewith, including, without limitation, the Merger Agreement and the
Escrow Agreement. This Agreement sets forth all matters pertinent to the Escrow
contemplated hereunder, and no additional obligations of the Agent shall be
inferred from the terms of this Agreement, the Escrow Agreement or any other
agreement.
Section 3.06. Merger of Agent. Any entity into which the Agent may be
merged or converted or with which the Agent may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which the Agent shall
be a party, or any entity to which all or substantially all of the business of
the Agent shall be transferred, shall succeed to all the Agent's rights,
obligations and immunities hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 3.07. Judgments, Etc. In the event that any Escrow property shall
be attached, garnished or levied upon by any court order (including by
bankruptcy), or the delivery thereof shall be stayed or enjoined by an order of
a court, or any order, judgment or decree shall be made or entered by any court
order affecting the property deposited under this Agreement, the Agent is hereby
expressly authorized, in its sole discretion, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in the event that the Agent obeys or complies with any such writ, order or
decree it shall not be liable to any of the parties hereto or to any other
person, firm or entity by reason of such compliance, notwithstanding such writ,
order or decree be subsequently reversed, modified, annulled, set aside or
vacated.
Section 3.08. Tax Filings. The Agent shall report to Xxxxxx UK, as of the
end of each fiscal quarter, all income earned from the investment of the Escrow
Assets.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy upon confirmation of receipt, (b) on the
first business day following the date of dispatch if delivered by a nationally
recognized next-day courier service, or (c) on the third business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) if to ITG or to Xxxxxx or Xxxxxx UK after the Effective Time, to:
Investment Technology Group, Inc.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to Xxxxxx or Xxxxxx UK prior to the Effective Time, to:
Xxxxxx Group Inc.
0 Xxxxxxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(c) if to the Agent, to:
Prior to July 6, 2002:
The Bank of New York
Insurance Trust and Escrow Unit
0 Xxxx Xxxxx -00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
On or after July 8, 2002:
The Bank of New York
Insurance Trust and Escrow Xxxx
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(d) if to the Committee or any Member, to it, him or her:
c/x Xxxxxx Group Inc.
0 Xxxxxxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(e) if to the Holders, then to them at their respective addresses set forth
in the Register.
Section 4.02. Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered one and the same agreement and shall become
effective when both counterparts have been signed by each of the parties and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
Section 4.03. Entire Agreement; No Third Party Beneficiaries. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 4.04. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 4.05. Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
Section 4.06. Assignment. Except as set forth in Section 3.06 hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties, and any
attempt to make any such assignment without such consent shall be null and void.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 4.07. Headings. Sections, subheadings and other headings used in
this Agreement are for convenience only and shall not affect the construction of
this Agreement.
Section 4.08. Amendment and Modification. This Agreement may be amended or
modified only by a subsequent writing signed by each of the Members, ITG, Xxxxxx
and Xxxxxx UK; provided, that if any amendment or modification shall effect the
rights or obligations of the Agent hereunder, any such amendment or modification
must be signed by the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duty authorized as of the
day and year first above written.
XXXXXX GROUP INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: Chairman and Chief Executive Officer
XXXXXX & COMPANY LIMITED
By: /s/ Xxxx X. Xxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Director
INVESTMENT TECHNOLOGY GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Chairman
THE BANK OF NEW YORK,
as Custodian and Paying Agent
By: /s/ Aldrin X.X. Xxxxx
-------------------------------------------
Name: Aldrin X.X. Xxxxx
Title: Assistant Treasurer
MEMBERS OF THE CONTINGENT PAYMENT RIGHTS COMMITTEE:
/s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxx X. Xxxxxx
------------------------------------------------
Name: Xxxx X. Xxxxxx
