EXHIBIT 4.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is entered into as of the 25th day
of March, 1997, by and between 50-OFF STORES, INC., a Texas corporation
("ISSUER") and BANK ONE, TEXAS, NA ("ESCROW AGENT").
RECITALS:
A. Issuer proposes to offer for sale to certain holders of Rights an
aggregate of 122,009 units (the "UNITS") at a price of $100 per Unit, payable at
the time of subscribing for a Unit. Each Unit represents 20 shares of Series A
Preferred Stock and 20 shares of Common Stock, both in Reorganized 50-OFF, as
such stock may be issued pursuant to Issuer's Plan of Reorganization, as
Amended, dated March 27, 1997 (the "PLAN," which term shall include any
amendments or modifications thereto), filed in its bankruptcy case, pending in
the United States Bankruptcy Court for the Western District of Texas, San
Antonio Division (the "BANKRUPTCY COURT"), administered under case number 96-
54430-C (the "BANKRUPTCY CASE"). If successful, the payment of $3,050,000 for
at least 30,500 Units will be paid into the escrow created by this Agreement.
B. Issuer intends to allow holders of Rights issued pursuant to the Plan
to purchase the Units, all as described more fully in the Plan.
C. Issuer desires to establish an escrow account in which funds received
from subscribers would be deposited pending completion of the Escrow Period as
defined below). BANK ONE, TEXAS, NA agrees to serve as Escrow Agent in
accordance with the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Issuer hereby appoints BANK ONE, TEXAS, NA as Escrow Agent and Escrow
Agent shall establish an escrow account (the "ESCROW ACCOUNT") on its books
styled "50-OFF Stores, Inc., Rights Offering Escrow Account." Commencing upon
the execution of this Agreement, Escrow Agent shall act as Escrow Agent and
hereby agrees to receive and disburse the proceeds from the offering of the
Units in accordance with the terms herewith. Issuer agrees to notify the Escrow
Agent promptly of the closing of the offering and sale of the Units.
2. Issuer shall cause all checks received from subscribers for Units to be
promptly deposited into the Escrow Account. Subscribers shall forward checks to
Escrow Agent made payable to the order of the 50-OFF Stores, Inc., Rights
Offering Escrow Account. Subject to the provisions of paragraph 11 hereof, any
checks that are received by Escrow Agent that are not made payable to the 50-OFF
Stores, Inc., Rights Offering Escrow Account shall be returned to
the subscriber which forwarded such check. Escrow Agent shall furnish to the
Issuer at the time of each deposit of the above-mentioned funds a list
containing the name of each subscriber, the subscriber's address, the number of
Units purchased, and the amount of the check being delivered to the Escrow
Agent. Prior to the receipt of the Minimum (as described below) and prior to
the Bankruptcy Court entering an order confirming the Plan, the Issuer is aware
and understands that it is not entitled to any proceeds from subscriptions
deposited into the Escrow Account and no amounts deposited in the Escrow Account
during the Escrow Period shall become the property of the Issuer or any other
entity, or be subject to the debts of the Issuer or any other entity.
3. The Escrow Period shall commence on the date hereof and shall terminate
ten (10) business days following the earlier to occur of the following dates:
(a) The later of both of the following two events to occur: (i) the date
upon which Escrow Agent confirms upon written request of the Issuer
that it has received into the Escrow Account and collected gross
subscription proceeds from the sale of 30,500 Units aggregating
$3,050,000 in deposited funds (the "Minimum"), and (ii) the Bankruptcy
Court entering an order confirming the Plan; or
(b) The "Cessation Date," which for the purposes of this Agreement shall be
June 30, 1997, unless (i) Issuer elects to continue to offer the Units
for sale until some later date, as permitted by the Bankruptcy Court,
and (ii) Issuer notifies Escrow Agent in writing no later than June 20,
1997, of such extension specifying the extended Cessation Date; or
(c) The date upon which a determination is made by the Issuer to terminate
the Offering prior to the sale of the Minimum, as communicated to
Escrow Agent in writing.
Notwithstanding anything to the contrary contained herein, the
Cessation Date is intended to signify the date of the cessation of the
Offering and not the termination of the Escrow Period of this Agreement;
and upon the occurrence of any of the events described in (a), (b) or (c)
above, the Escrow Period shall continue for such ten (10) business-day
period solely for the limited purposes of collecting subscribers' checks
that have been deposited prior to such event and disbursing funds from the
Escrow Account as provided herein. Escrow Agent will not accept deposits of
the subscribers' checks after notice that any of the events described in
subparagraphs (a), (b) and (c) has occurred.
4. The Escrow Agent will deposit the subscribers' checks for collection
and credit the proceeds to the Escrow Account to be held by it under the terms
of this Agreement. Notwithstanding anything to the contrary contained herein,
Escrow Agent is under no duty or responsibility to enforce collection of any
checks delivered to Escrow Agent hereunder. The Escrow Agent hereby is
authorized to forward each check for collection and deposit the proceeds
Page 2
in the Escrow Account. As an alternative, the Escrow Agent may telephone the
bank on which the check is drawn to confirm that the check has been paid.
Additionally, to insure that such funds have cleared normal banking channels for
collection, Escrow Agent is authorized to hold funds to be released after the
time period that national banks may hold funds deposited into their accounts to
verify funds. Issuer shall immediately reimburse Escrow Agent any monies paid
to it if thereafter the subscriber's check is returned unpaid. Any item
returned unpaid to the Escrow Agent on its first presentation for payment may be
returned to the subscriber and need not be again presented by the Escrow Agent
for collection. Issuer agrees to reimburse Escrow Agent for the cost incurred
with any returned check. For purposes of this Agreement, the term "collected
funds" or the term "collected" when referring to the proceeds of subscribers'
checks shall mean all funds received by Escrow Agent that have cleared normal
banking channels and are in the form of cash.
5. If prior to the Cessation Date, subscriber's checks in an amount of at
least the Minimum have been deposited in the Escrow Account, upon request from
Issuer, Escrow Agent will confirm the amounts collected by it from subscriber's
checks. If such amount is at least equal to the Minimum and if the Bankruptcy
Court has entered an order confirming the Plan, the Issuer may send Escrow Agent
a written notice providing a list of all accepted subscribers, specifying the
total amount of their subscription to be remitted to Issuer, and containing a
request to terminate the Escrow Period pursuant to paragraph 3(a) and remit such
amount, less any fees or other amounts then owing from Issuer to Escrow Agent
hereunder, to the Issuer as promptly as possible, but in no event later than ten
(10) business days after such termination, by issuing its bank check payable to
the Issuer or by depositing such amount directly into the account of Issuer
maintained with BANK ONE, TEXAS, NA, as designated in writing by Issuer to
Escrow Agent. The Escrow Period shall not terminate upon receipt by Escrow Agent
of such notice, but shall continue for such (10) business-day period solely for
the limited purposes of collecting subscribers' checks that have been deposited
prior to Escrow Agent's receipt of such notice and disbursing funds from the
Escrow Account as provided herein. Escrow Agent will not accept deposits of
subscriber's checks after receipt of such notice.
If, on the Cessation Date, the Minimum Amount has not been deposited with
the Escrow Agent and collected, or if Issuer notifies the Escrow Agent in
writing that Issuer elects to terminate the Offering as provided in paragraph
3(c) above, the Escrow Agent shall then issue and mail its bank checks to the
subscribers in the amount of the subscribers' respective checks, without
deduction, penalty or expense to the subscriber, and shall, for this purpose, be
authorized to rely upon the names and addresses of subscribers furnished it as
contemplated above. No subscriber shall be paid interest with respect to such
deposited funds. The purchase money returned to each subscriber shall be free
and clear of any and all claims of the Issuer and any of its creditors. For
each subscription for which the Escrow Agent has not collected funds but has
submitted the subscriber's check for collection, the Escrow Agent shall promptly
issue a check to such subscriber in the amount of the collected funds from such
subscriber's check after the Escrow Agent has collected such funds. If Escrow
Agent has not yet submitted such subscriber's
Page 3
check for collection, the Escrow Agent shall promptly remit the subscriber's
check directly to such subscriber.
At such time as Escrow Agent shall have made the payments and remittances
provided in the Agreement, the Escrow Agent shall be completely discharged and
released of any and all further liabilities and responsibilities hereunder.
6. Notwithstanding the provisions of paragraph 12, as consideration for
its agreement to act as Escrow Agent as herein described, Issuer agrees to pay
the Escrow Agent an administration fee of $3,750 upon execution of this
Agreement, plus the fees described on the attached fee schedule. Further,
Issuer agrees to pay all disbursements and advances incurred or made by the
Escrow Agent in performance of its duties hereunder, including reasonable fees,
expenses and disbursements of its counsel, all in accordance with the attached
fee schedule or the other provisions of this Agreement. No such fees or
reimbursements shall be paid out of or chargeable to the funds on deposit in the
Escrow Account until such time as the Minimum has been collected and the
Bankruptcy Court enters an order confirming the Plan. Any dispute regarding the
reasonableness of the Escrow Agent's fees and expenses will be determined by the
Bankruptcy Court; the Escrow Agent consents to the Bankruptcy Court exercising
jurisdiction over any such dispute.
If the Issuer rejects any subscription for which Escrow Agent has already
collected funds, the Escrow Agent shall promptly issue a refund check to the
rejected subscriber in the amount of the subscriber's check. If the Issuer
rejects any subscription for which the Escrow Agent has not yet collected funds
but has submitted the subscriber's check for collection, the Escrow Agent shall
promptly issue a check in the amount of the collected funds from the
subscriber's check to the rejected subscriber after the Escrow Agent has cleared
such funds. If Escrow Agent has not yet submitted a rejected subscriber's check
for collection, the Escrow Agent shall promptly remit the subscriber's check
directly to the subscriber.
7. This Agreement shall automatically terminate upon the earlier of (i)
twenty (20) days after the Cessation Date or (ii) twenty (20) days after the
date upon which the Escrow Agent has delivered the final portion of Escrow
Account funds pursuant to the terms of this Agreement.
8. Escrow Agent reserves the right to resign hereunder, upon ten (10) days
prior written notice to Issuer. In the event of said resignation, and prior to
the effective date thereof, Issuer, by written notice to Escrow Agent, shall
designate a successor escrow agent to assume the responsibilities of Escrow
Agent under this Agreement, and Escrow Agent immediately shall deliver any
undisbursed Escrow Account funds to such successor escrow agent. If Issuer
shall fail to designate such a successor escrow agent within such time period,
the Escrow Agent may deliver any undisbursed funds into the registry of the
Bankruptcy Court.
9. The parties hereto agree that the following provisions shall control
with respect to the rights, duties, liabilities, privileges and immunities of
the Escrow Agent:
Page 4
a. Subject to the provisions of paragraph 12 hereof, the Escrow Agent
shall have no responsibility except for the safekeeping and delivery of
the amounts deposited in the Escrow Account in accordance with this
Agreement. The Escrow Agent shall not be liable for any act done or
omitted to be done under this Agreement or in connection with the
amounts deposited in the Escrow Account, except as a result of the
Escrow Agent's gross negligence or willful misconduct. The Escrow Agent
is not a party to nor is it bound by, nor need it give consideration to
the terms of provisions of, even though it may have knowledge of (i)
any agreement or undertaking by, between or among the Issuer and any
other party, except this Agreement, (ii) any agreement or undertaking
that may be evidenced by this Agreement, (iii) any other agreements
that may now or in the future be deposited with the Escrow Agent in
connection with this Agreement. The Escrow Agent is not a party to, is
not responsible for, and makes no representation with respect to the
offer, sale or distribution of the Units including, but not limited to,
matters set forth in any offering documents prepared and distributed in
connection with the offer, sale and distribution of the Units. Except
with regard for actions for gross negligence or in willful misconduct
of the Escrow Agent's duties, the Issuer covenants that it will not
commence any action against the Escrow Agent at law, in equity, or
otherwise as a result of any action taken or thing done by the Escrow
Agent pursuant to this Agreement, or for any disbursement made as
authorized herein upon failure of the Issuer to give the notice within
the times herein prescribed. The Escrow Agent has no duty to determine
or inquire into any happening or occurrence of or of any performance or
failure of performance of the Issuer or of any other party with respect
to agreements or arrangements with any other party. If any question,
dispute or disagreement arises among the parties hereto and/or any
other party with respect to the funds deposited in the Escrow Account
or the proper interpretation of this Agreement, the Escrow Agent shall
not be required to act and shall not be held liable for refusal to act
until the question or dispute is settled, and the Escrow Agent has the
absolute right at its discretion to do either or both of the following:
(i) withhold and/or stop all further performance under this Agreement
until the Escrow Agent is satisfied, by receipt of a written
document in form and substance satisfactory to the Escrow Agent
and executed and binding upon all interested parties hereto (who
may include the subscribers), that the question, dispute, or
disagreement had been resolved; or
(ii) file a suit in interpleader and obtain by final judgment,
rendered by the Bankruptcy Court, an order binding all parties
interested in the matter. In any such suit, or should the Escrow
Agent become involved in litigation in any manner whatsoever on
account of this Agreement or the Escrow
Page 5
Account, the Escrow Agent shall be entitled to recover from the
Issuer its attorneys' fees and costs.
The Escrow Agent shall never be required to post a bond in connection
with any services hereunder. The Escrow Agent may consult with counsel
of its own choice and shall have full and complete authorization and
protection for and shall not be liable for any action taken or suffered
by it hereunder in good faith and believed by it to be authorized
hereby, nor for action taken or omitted by it in accordance with the
advice of such counsel (who shall not be counsel for the Issuer).
b. The Escrow Agent shall be obligated only for the performance of such
duties are specifically set forth in this Agreement and may rely and
shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed
by it to be genuine and to have been signed or presented by the proper
party or parties and to take statements made therein as authorized and
correct without any affirmative duty of investigation.
c. The Issuer hereby agrees to indemnify the Escrow Agent for, and to hold
it harmless against, any loss, liability, or expense (including,
without limitation, all legal expenses incurred in enforcing any of the
provisions of this Agreement or otherwise in connection herewith)
incurred without gross negligence or willful misconduct on the part of
the Escrow Agent, arising out of or in connection with its entering
into this Agreement and carrying out its duties hereunder, including
the costs and expenses of defending itself against any claim of
liability hereunder or arising out of or in connection with the sale of
the Units. This covenant shall survive the termination of this
Agreement.
d. The Escrow Agent shall not be bound by any modification, amendment,
termination, cancellation, rescission or supersession of this Agreement
unless the same shall be in writing and signed by all of the other
parties hereto and, if its duties as Escrow Agent hereunder are
affected thereby, unless it shall have given prior written consent
thereto.
10. Notices required to be sent hereunder shall be delivered by hand, sent
by an express mail service or sent via United States mail, postage prepaid,
certified, return receipt requested, to the following address:
If to Issuer: Xxxxxxx X. Xxxxxxxx XX
50-OFF Stores, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxx 00000
(000)000-0000
Page 6
with a copy to: Xxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxx, Xxxxx & Xxx, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
(000) 000-0000
If to Escrow Agent: BANK ONE, TEXAS, NA
Corporate Trust Department
000 Xxxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
(000) 000-0000 / (000) 000-0000
No notice to the Escrow Agent or Issuer shall be deemed to be delivered
until actually received by the Escrow Agent. From time to time any party hereto
may designate an address other than the address listed above by giving the other
parties hereto not less than five (5) days advance notice of such change in
address in accordance with the provisions hereof.
11. Notwithstanding any provision herein to the contrary, prior to the
Cessation Date the Escrow Agent shall not refuse any subscription or return any
check (even if such check has been presented for payment and dishonored or even
if such check is payable to the wrong payee) without the advance written
approval of the Issuer. This provision is intended to allow the Issuer the
opportunity to waive or seek to cure any defects in any subscription.
12. Pending distribution in accordance with the provisions of paragraph 5
hereof, all collected and available funds held by the Escrow Agent pursuant to
this Escrow Agreement shall be invested at the written direction of the Issuer
in direct obligations of the United States of America issued in the name of
"Bank One, Texas, NA, as Escrow Agent for the benefit of the Subscribers
described in that Escrow Agreement dated March 25, 1997 by and between Escrow
Agent and 50-OFF Stores, Inc." for the payment of which the full faith and
credit of the United States of America is pledged (such obligations shall be
limited to Treasury Bills, Treasury Bonds and Treasury Notes). Issuer
acknowledges that the Escrow Agent will not be required to invest funds below
the authorized minimum denominations; provided, however, that in all events,
funds held by the Escrow Agent which are not so invested shall not exceed
$100,000 in the aggregate at any time. The method of investment of such funds
shall be subject to Bankruptcy Court approval, which the Issuer will seek on an
expedited basis. Interest earned on funds held in escrow, if any, shall be
credited against the fees of the Escrow Agent. Additional interest, if any,
shall be remitted to the Issuer to assist in covering the costs of the Rights
Offering.
13. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Texas and the laws of the United States applicable to
transactions in Texas.
Page 7
EXECUTED on the date first written above.
50-OFF STORES, INC. (Issuer) BANK ONE, TEXAS, NA (Escrow Agent)
By: /s/ XXXXXXX X. XXXXXXXX XX By: /s/ Bank One, Texas, N.A.
--------------------------------- ---------------------------------
Xxxxxxx X. Xxxxxxxx XX Name:
President -------------------------------
Title:
------------------------------
Page 8
