ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of July 16, 1998 by and among CAPROCK COMMUNICATIONS CORP. (the
"Company"), CAPROCK TELECOMMUNICATIONS CORP. ("Telecommunications"), CAPROCK
FIBER NETWORK, LTD. (the "Partnership"), IWL COMMUNICATIONS, INCORPORATED
("IWL") and PNC BANK, NATIONAL ASSOCIATION, as trustee for the benefit of the
holders ("Holders") of the Notes (as hereinafter defined) under the Indenture
(as hereinafter defined) (the "Trustee"). For purposes of this Agreement, the
Company, Telecommunications and the Partnership are sometimes herein
individually referred to as an "Issuer" and collectively referred to as the
"Issuers".
W I T N E S S E T H
WHEREAS, the Issuers, IWL and the Trustee have entered into that
certain indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Issuers are issuing $150,000,000 aggregate principal amount of 12%
Senior Notes due 2008 (the "Notes") on the date hereof;
WHEREAS, pursuant to a Purchase Agreement dated as of July 10, 1998
(the "Purchase Agreement") among the Issuers, IWL and the initial purchasers
named therein, and the Indenture, the Issuers are required to direct that at the
Closing Time (as defined in the Purchase Agreement) $145 million (the "Funds")
be deposited with the Trustee for the benefit of the Holders of the Notes to
secure the Issuers' obligation to (i) repay the principal, premium and interest
on the Notes in the event that the Notes become due and payable prior to the
release of the Funds in accordance with the terms of this Agreement and (ii)
repurchase Notes that are tendered to the Issuers pursuant to Section 10.21 of
the Indenture in the event that the Combination (as hereinafter defined) is not
consummated or certain other conditions are not satisfied, or if it appears in
the sole judgment of the Issuers that the Combination will not be consummated or
such other conditions will not be satisfied, by 11:59 p.m. New York City time on
August 31, 1998 (the "Termination Date") (collectively, the "Obligations"); and
WHEREAS, to secure the Obligations of the Issuers, the Issuers have
agreed to (i) pledge to the Trustee, for the ratable benefit of the Holders of
the Notes, a security interest in the Funds and other Collateral (as hereinafter
defined) and (ii) execute and deliver this Agreement in order to secure the
payment and performance by the Issuers of all the Obligations.
NOW, THEREFORE, in consideration of the promises herein contained, and
in order to induce the Holders of the Notes to purchase the Notes, the Issuers
and the Trustee hereby agree, for the benefit of the Trustee and for the ratable
benefit of the Holders of the Notes, as follows:
SECTION 1. DEFINITIONS; APPOINTMENT; DEPOSIT AND INVESTMENT.
1.1. DEFINITIONS.
"Account Agreement" means the Account Agreement dated as of July 16,
1998 among the Company, Telecommunications, the Partnership, the Trustee and PNC
Bank, National Association, as securities intermediary, which agreement is
attached as EXHIBIT A to this Agreement..
"Cash Collateral Account" means an account established and maintained
by the Trustee at its office at 1600 Market Street, 30th Floor, Philadelphia,
Pennsylvania, in the name of the Issuers which account shall at all times be
segregated from all other custodial or collateral accounts and be under the sole
dominion and control of the Trustee and subject to the terms and conditions of
this Agreement.
"Collateral Investment Account" means an account established and
maintained by the Trustee at its office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ in the name of the Issuers, which account shall at
all times be segregated from all other custodial or collateral accounts and be
under the sole dominion and control of the Trustee and subject to the terms and
conditions of this Agreement.
"Combination" means, collectively, the merger transactions and
interest exchange transaction contemplated by the Merger Agreement.
"Government Book-Entry Security" means U.S. Government Obligations
maintained in book-entry form through the United States Federal Reserve Banks
pursuant to (A) the United States Treasury Department regulations codified at
31 C.F.R. Part 357, as modified by the amendments promulgated at 61 Fed.
Reg. 43, 626-43, 638 (Aug. 23, 1996), or (B) substantially identical
regulations promulgated by any other agency or instrumentality of the United
States whose securities qualify as "U.S. Government Obligations" hereunder.
"Merger Agreement" means that certain Agreement and Plan of Merger and
Plan of Exchange dated as of February 16, 1998 among the Company,
Telecommunications, the Partnership, IWL and certain other parties thereto, as
amended on April 30, 1998, June 20, 1998, July 8, 1998 and as further amended,
restated,
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supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Officer's Certificate" shall mean a certificate signed by the
President or any Vice President of each Issuer (or its general partner) and IWL
stating that (i) the Combination has been consummated; (ii) all regulatory
approvals required by the Merger Agreement have been received and are in effect
except for such approvals the failure of which to receive or have in effect will
not have a material adverse effect on the Company's financial condition, results
of operations and cash flow and (iii) consummation of the Combination has not
violated or conflicted with or give rise to a right to terminate any agreement
or instrument that would have a material adverse effect on the Company's
financial condition, results of operations or cash flow to which the Company,
Telecommunications, the Partnership or IWL is a party.
"Opinion of Counsel" shall mean, an opinion or opinions of legal
counsel to the Company, which counsel shall be reasonably satisfactory to the
Trustee (provided that ▇▇▇▇▇▇, Hardt, Kopf, ▇▇▇▇ & Dinan, P.C. is hereby agreed
to be reasonably satisfactory to the Trustee), that opine to the matters
certified in clauses (i), (ii) and (iii) of the definition of "Officer's
Certificate"; provided that the opinion with respect to the matters referred to
in clause (iii) may be to the best of such counsel's knowledge.
"Temporary Cash Investment" means any of the following:
(a) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United States
of America or any agency thereof with a maturity of 365 days or less,
(b) time deposit accounts, certificates of deposit and money market
deposits maturing within one year of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor,
(c) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (a) above entered into
with a bank meeting the qualifications described in clause (b) above,
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(d) commercial paper, maturing not more than one year after the date
of acquisition, issued by a corporation (other than an Affiliate of any one of
the Issuers) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to ▇▇▇▇▇'▇ Investors Service, Inc. or
"A-1" (or higher) according to Standard & Poor's Ratings Service, and
(e) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Service or ▇▇▇▇▇'▇ Investors Service, Inc.
"Trustee" shall mean the Person named as the "Trustee" in Section 1.2
of this Agreement until a successor Trustee shall have become such, and
thereafter "Trustee" shall mean the Person who is then the Trustee hereunder.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America.
All capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Indenture. Unless otherwise defined
herein or in the Indenture, (i) terms used in Article 8 or 9 of the Uniform
Commercial Code as in effect in the State of New York (the "U.C.C.") are used
herein as therein defined and (ii) terms used in "Revised Article 8," as such
term is defined in 31 C.F.R. (Section) 357.2, as modified by the amendments
promulgated at 61 Fed. Reg. 43, 628 (Aug. 23, 1996), are used herein as
therein defined.
1.2. APPOINTMENT OF TRUSTEE. The Issuers and IWL hereby appoint PNC
Bank, National Association, as Trustee in accordance with the terms and
conditions set forth herein, and PNC Bank, National Association, hereby accepts
such appointment. The initial purchasers under the Purchase Agreement have
delivered to the Trustee the Funds, and the Trustee shall deposit such Funds
into the Cash Collateral Account and invest such monies in accordance with the
instructions of the Issuers.
1.3. PLEDGE AND GRANT OF SECURITY INTEREST. The Issuers hereby pledge
to the Trustee for its benefit and for the ratable benefit of the Holders of the
Notes, and grant to
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the Trustee for its benefit and for the ratable benefit of the Holders of the
Notes, a continuing first priority security interest in and to all of the
Issuers' right, title and interest in, to and under the following (hereinafter
collectively referred to as the "Collateral"), whether characterized as
certificated securities, uncertificated securities, investment property, general
intangibles or otherwise: (a) the Cash Collateral Account, all funds held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Cash Collateral Account, (b) the Collateral
Investments Account and all Collateral Investments (as hereinafter defined) and
all certificates and instruments, if any, representing or evidencing the
Collateral Investments, and any and all security entitlements to the Collateral
Investments, and any and all related securities accounts in which security
entitlements to the Collateral Investments are carried, (c) all cash, notes,
certificates of deposit, deposit accounts, checks and other instruments from
time to time hereafter delivered to or otherwise possessed by the Trustee for or
on behalf of the Issuers in substitution for or in addition to any or all the
then existing Collateral, and (d) all proceeds of and other distributions on or
with respect to any of the foregoing (and any other proceeds or distributions),
including, without limitation, all dividends, interest, principal payments,
cash, options, warrants, rights, instruments, subscriptions and other property
or proceeds from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any of the foregoing or any
security entitlement thereto.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Obligations.
SECTION 3. DELIVERY OF COLLATERAL. Simultaneous with the
execution and delivery of this Agreement, the parties to the Account Agreement
shall execute and deliver the Account Agreement. All certificates or
instruments representing or evidencing the Collateral, including, without
limitation, amounts invested as provided in Section 5, shall be delivered to and
held by the Trustee pursuant hereto and, in the case of Collateral Investments
referred to in Section 6(a)(iii), to the Account Agreement. Such certificates
or instruments shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance sufficient to establish and maintain in favor of the
Trustee a valid security interest in such Collateral, and shall be credited to
the Collateral Investments Account. All monies and other assets held in the
Cash Collateral Account and the Collateral Investments Account are property of
the Issuers subject to the security interests created hereby.
SECTION 4. MAINTAINING THE CASH COLLATERAL ACCOUNT. (a) So long
as any Obligation shall remain unpaid, the Cash Collateral Account shall be
maintained with the Trustee.
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(b) It shall be a term and condition of the Cash Collateral Account,
notwithstanding any term or condition to the contrary in any other agreement
relating to the Cash Collateral Account, and except as otherwise provided by the
provisions of Section 7 and Section 14, that no amount (including interest on
Collateral Investments) shall be paid or released to or for the account of, or
withdrawn by or for the account of, any of the Issuers or any other Person from
the Cash Collateral Account.
SECTION 5. INVESTING OF AMOUNTS IN THE CASH COLLATERAL ACCOUNT.
If requested by the Issuers, the Trustee will, subject to the provisions of
Section 7 and Section 14, from time to time (a) invest amounts on deposit in the
Cash Collateral Account in such Temporary Cash Investments, each in the name of
or for the account of the Trustee, as the Issuers may designate in writing and
(b) invest interest paid on the Temporary Cash Investments referred to in clause
(a) above, and reinvest other proceeds of any such Temporary Cash Investments
that may mature or be sold, in each case in such Temporary Cash Investments each
in the name of or for the account of the Trustee, as the Issuers may designate
in writing (the Temporary Cash Investments referred to in clauses (a) and (b)
above being collectively "Collateral Investments"). Interest and proceeds that
are not invested or reinvested in Collateral Investments as provided above shall
be deposited and held in the Cash Collateral Account. The Trustee shall in no
event be liable for any loss in the investment or reinvestment of amounts held
in the Cash Collateral Account in accordance with the written instructions of
the Issuers. In the event the Trustee does not receive any information as to
how to invest funds in the Cash Collateral Account it shall invest such funds in
the Provident Institutional T-Fund Dollar Shares Money Market Mutual Fund.
SECTION 6. DELIVERY OF COLLATERAL INVESTMENTS; FILING. (a) The
Trustee shall become the holder of the Collateral Investments (or applicable
security entitlements thereto) through the following delivery procedures: (i)
in the case of Collateral Investments which are certificated securities in
registered form, delivery of the applicable certificate(s), specially endorsed
to the Trustee or registered in the name of the Trustee, to the possession of
(A) the Trustee, (B) a securities intermediary or financial intermediary acting
on behalf of the Trustee, or (C) another person, other than a securities
intermediary or financial intermediary, which person acknowledges that it holds
for the Trustee; (ii) in the case of Collateral Investments which are
uncertificated securities, registration of one of the following as owner of such
uncertificated securities: the Trustee or a person designated by the Trustee,
or person other than a securities intermediary or financial intermediary, that
becomes the registered owner of such uncertificated securities and acknowledges
that it holds the same for the Trustee; and (iii) in the case of all other
Collateral Investments including, without limitation, any Collateral Investments
in commercial paper not constituting securities, interests in money market funds
and Government Book-Entry Securities, such Collateral Investments will be held
pursuant to the terms of the Account Agreement subject to the Control Agreement
referred to therein.
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(b) All Collateral shall be retained in the Cash Collateral Account
and the Collateral Investments Account pending disbursement pursuant to the
terms hereof.
(c) Concurrently with the execution and delivery of this Agreement,
the Issuers are delivering to the Trustee duly executed financing statements in
accordance with the Uniform Commercial Code as in effect in the State of New
York and the State of Texas, covering the categories of Collateral described in
this Agreement.
SECTION 7. DISBURSEMENTS. The Trustee shall hold the Collateral
and release the same, or a portion thereof, only as follows:
(a) If the Trustee receives, prior to 11:59 p.m. New York City time
on the Termination Date, an Officer's Certificate from each Issuer (or its
general partner) and IWL and the Opinion of Counsel, the Trustee shall
disburse the Collateral to, or at the written direction of, the Issuers by
wire transfer or other method agreed to by the Issuers and the Trustee. If
such Officer's Certificate and Opinion is received prior to 9:00 a.m. New
York City time on a Business Day then such disbursement shall be made by
the close of business on the date the Trustee receives such Officer's
Certificates and Opinion of Counsel; provided, however, that if the
Officer's Certificates and the Opinion of Counsel are received by the
Trustee (i) on a day other than a Business Day or (ii) after 9:00 a.m. New
York City time on such date, then, in either instance, the Trustee shall
disburse the Collateral by the close of business on the next Business Day.
(b) (i) If the conditions in Section 7(a) are not satisfied by 11:59
p.m. New York City time on the Termination Date (or, in the event the
Trustee receives certificates signed by the President or any Vice President
of each Issuer (or its general partner) and IWL stating that the Officer's
Certificates and Opinion of Counsel will not be delivered to the Trustee by
the Termination Date, on the date the Trustee receives such certificates),
if the conditions required for release of Collateral as provided in clause
(a) above have not been satisfied, the Issuers shall within thirty (30)
days of either such event make the offer to purchase the Notes as provided
by, and in accordance with Section 10.21 of the Indenture and the Trustee
shall use the Collateral held in the Cash Collateral Account and Collateral
Investments Account to satisfy the Issuers' and IWL's repurchase
obligations under Section 10.21 of the Indenture. If any Collateral
remains after the payment for all Notes tendered pursuant to such offer to
purchase, such Collateral shall be disbursed to Telecommunications.
(c) Nothing contained in Section 1, Section 5, Section 6, this
Section 7 or any other provision of this Agreement shall (i) afford the
Issuers any right to issue entitlement orders with respect to any security
entitlement to any of the Collateral
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Investments or any securities account in which any such security
entitlement may be carried, or otherwise afford the Issuers control of any
such security entitlement or (ii) otherwise give rise to any rights of the
Issuers with respect to any of the Collateral Investments, any security
entitlement thereto or any securities account in which any such security
entitlement may be carried, other than the Issuers' beneficial interest
under this Agreement in collateral pledged to and subject to the exclusive
dominion and control (consistent with this Agreement) of the Trustee in its
capacity as such (and not as a securities intermediary). The Issuers
acknowledge, confirm and agree that the Trustee holds a security
entitlement to the Collateral Investments solely as trustee for the Holders
of the Notes and not as a securities intermediary or financial
intermediary.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Issuers and IWL
hereby, on a joint and several basis, represent and warrant that:
(a) The representations and warranties contained in the Purchase
Agreement are true and correct in all material respects as of the date
hereof and are hereby incorporated into this Agreement by this reference.
(b) The execution and delivery by the Issuers and IWL of, and the
performance by the Issuers and IWL of their respective obligations under,
this Agreement will not contravene any provision of applicable law or the
Articles of Incorporation or bylaws (or equivalent organizational
documents) of any of the Issuers or IWL or any material agreement or other
material instrument binding upon the Issuers or IWL or any of their
respective subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Issuers or
any of their respective subsidiaries, or result in the creation or
imposition of any lien on any assets of the Issuers or IWL or any of their
respective subsidiaries, except for the security interests granted under
this Agreement; no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required (i) for the
performance by the Issuers or IWL of their obligations under this
Agreement, (ii) for the pledge by the Issuers of the Collateral pursuant to
this Agreement or (iii) except for any such consents, approvals,
authorizations or orders required to be obtained by the Trustee (or the
Holders) for reasons other than the consummation of this transaction, for
the exercise by the Trustee of the rights provided for in this Agreement or
the remedies in respect of the Collateral pursuant to this Agreement.
(c) The Issuers are the beneficial owners of the Collateral, free and
clear of any lien or claims of any person or entity (except for the
security interests granted under this Agreement). No security interest
covering the Issuers' interest in the
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Collateral currently exists which has not been released other than the
security interests granted pursuant to this Agreement.
(d) This Agreement has been duly authorized, validly executed and
delivered by each of the Issuers and IWL and constitutes a valid and
binding agreement of each of the Issuers and IWL, enforceable against each
of them in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(e) Upon the filing of financing statements, if any, required by the
U.C.C. in the appropriate offices in the State of New York and the State
of Texas, and the delivery to the Trustee of the Collateral, in accordance
with this Agreement, the pledge of and grant of a security interest in the
Collateral securing the payment of the Obligations for the benefit of the
Trustee and the Holders of the Notes will constitute a first priority
perfected security interest in such Collateral, enforceable as such against
all creditors of the Issuers (and any persons purporting to purchase any of
the Collateral from the Issuers), other than as permitted by the Indenture.
(f) The pledge of the Collateral pursuant to this Agreement is not
prohibited by law or governmental regulation (including, without
limitation, Regulations T, U and X of the Board of Governors of the Federal
Reserve System) applicable to the Issuers.
(g) No Event of Default exists.
SECTION 9. FURTHER ASSURANCES. The Issuers will, promptly upon
request by the Trustee (which request the Trustee may submit at the direction of
the Holders of a majority in principal amount of the Notes then outstanding),
execute and deliver or cause to be executed and delivered, or use their
reasonable best efforts to procure, all assignments, instruments and other
documents, deliver any instruments to the Trustee and take any other actions
that are necessary or desirable to perfect, continue the perfection of, or
protect the first priority of the Trustee's security interest in and to the
Collateral, to protect the Collateral against the rights, claims or interests of
third persons (other than any such rights, claims or interests created by or
arising through the Trustee) or to effect the purposes of this Agreement. The
Issuers also hereby authorize the Trustee to file any financing or continuation
statements in the United States with respect to the Collateral without the
signature of the Issuers (to the extent permitted by applicable law). The
Issuers will promptly pay all reasonable costs incurred in connection with any
of the
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foregoing within 15 days of receipt of an invoice therefor. The Issuers also
agree, whether or not requested by the Trustee, to take all actions that are
necessary to perfect or continue the perfection of, or to protect the first
priority of, the Trustee's security interest in and to the Collateral, including
the filing of all necessary financing and continuation statements, and to
protect the Collateral against the rights, claims or interests of third persons
(other than any such rights, claims or interests created by or arising through
the Trustee).
SECTION 10. COVENANTS. The Issuers and IWL covenant and agree with
the Trustee and the Holders of the Notes that from and after the date of this
Agreement until the earlier of (x) the receipt of the items referred to in
Section 7(a) hereof or (y) the completion of the offer to purchase the Notes
contemplated by Section 10.21 of the Indenture:
(a) that (i) they will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, any
of the Collateral or their beneficial interest therein, and (ii) they will
not create or permit to exist any lien upon or other adverse interest in or
with respect to the Collateral (except for the security interests granted
under this Agreement); and
(b) that they will not (i) enter into any agreement or understanding
that restricts or inhibits or purports to restrict or inhibit the Trustee's
rights or remedies hereunder, including, without limitation, the Trustee's
right to sell or otherwise dispose of the Collateral or (ii) fail to pay or
discharge any tax, assessment or levy of any nature with respect to its
beneficial interest in the Collateral not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment
with respect to such beneficial interest.
SECTION 11. POWER OF ATTORNEY. In addition to all of the powers
granted to the Trustee pursuant to the Indenture, each of the Issuers hereby
appoints and constitutes the Trustee as such Issuer's attorney-in-fact (with
full power of substitution) to exercise to the fullest extent permitted by law
all of the following powers upon and at any time after the occurrence and during
the continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any liens under Section 6 hereof; and
(d) paying or discharging taxes or liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Trustee in its sole reasonable discretion, and such
payments made by the Trustee to become part of the Obligations of the Issuers to
the Trustee, due and payable immediately upon demand. The Trustee's authority
under this Section 11 shall include, without limitation, the authority to
endorse and negotiate any checks or other instruments representing proceeds of
Collateral, execute and give receipt for any certificate of
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ownership or any document constituting Collateral, transfer title to any item of
Collateral, sign any Issuer's name on all financing statements (to the extent
permitted by applicable law) or any other documents deemed necessary or
appropriate by the Trustee to preserve, protect or perfect the security interest
in the Collateral and to file the same, prepare, file and sign any Issuer's name
on any notice of lien, and to take any other actions arising from or incident to
the powers granted to the Trustee in this Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Issuers.
SECTION 12. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights
and powers granted to the Trustee hereunder are being granted in order to
establish, preserve and protect the security interest of the Trustee and the
Holders of the Notes in and to the Collateral granted hereby and shall not be
interpreted to and shall not impose any duties on the Trustee in connection
therewith other than those expressly provided herein or imposed under applicable
law. Except as provided by applicable law or by the Indenture, the Trustee
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Trustee accords similar property
held by the Trustee for its own account, it being understood that the Trustee
shall not have any responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities or other matters relative
to any Collateral, whether or not the Trustee has or is deemed to have knowledge
of such matters, (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral or (c) investing or reinvesting any of
the Collateral.
SECTION 13. INDEMNITY. The Issuers and IWL shall, on a joint and
several basis, indemnify, hold harmless and defend the Trustee and its
directors, officers, agents and employees, from and against any and all claims,
actions, obligations, liabilities and expenses, including reasonable defense
costs, reasonable investigative fees and costs, and reasonable legal fees and
damages arising from the Trustee's performance under this Agreement, except to
the extent that such claim, action, obligation, liability or expense is directly
attributable to the bad faith, gross negligence or wilful misconduct of such
indemnified person.
SECTION 14. REMEDIES UPON EVENT OF DEFAULT. If any Event of
Default under the Indenture or default hereunder (any such Event of Default or
default being referred to in this Agreement as an "Event of Default") shall have
occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Agreement or the Indenture, all
of the rights and remedies with respect to the Collateral of a secured
party under the U.C.C. in effect in the State of New York at that time.
In addition, with respect to any Collateral that
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shall then be in or shall thereafter come into the possession or custody of
the Trustee, the Trustee may and, at the direction of the Holders of a
majority in principal amount of the Notes then outstanding, shall, sell or
cause the same to be sold at any broker's board or at public or private
sale, in one or more sales or lots, at such price or prices as the Trustee
may deem best, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all Collateral so
sold shall thereafter hold the same absolutely, free from any claim,
encumbrance or right of any kind whatsoever created by or through the
Issuers. Unless any of the Collateral threatens, in the reasonable
judgment of the Trustee, to decline speedily in value or is or becomes of a
type sold on a recognized market, the Trustee will give the Issuers and IWL
reasonable notice of the time and place of any public sale thereof, or of
the time after which any private sale or other intended disposition is to
be made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of banks, insurance companies, commercial
finance companies, or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially reasonable.
Any requirements of reasonable notice shall be met if such notice is mailed
to the Issuers and IWL as provided in Section 17.1 hereof at least ten (10)
days before the time of the sale or disposition. The Trustee or any Holder
of Notes may, in its own name or in the name of a designee or nominee, buy
any of the Collateral at any public sale and, if permitted by applicable
law, at any private sale. All expenses (including court costs and
reasonable attorneys' fees, expenses and disbursements) of, or incident to,
the enforcement of any of the provisions hereof shall be recoverable from
the proceeds of the sale or other disposition of the Collateral.
(b) The Issuers and IWL further agree to use their reasonable best
efforts to do or cause to be done all such other acts as may be necessary
to make such sale or sales of all or any portion of the Collateral pursuant
to this Section 14 valid and binding and in compliance with any and all
other applicable requirements of law. The Issuers and IWL further agree
that a breach of any of the covenants contained in this Section 14 will
cause irreparable injury to the Trustee and the Holders of the Notes, that
the Trustee and the Holders of the Notes have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 14 shall be specifically enforceable against the
Issuers and IWL, and the Issuers and IWL hereby waive and agree not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred.
SECTION 15. FEES AND EXPENSES. The Issuers and IWL will upon
demand pay to the Trustee the reasonable fees of the Trustee for its services
hereunder and the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the
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Trustee, that the Trustee may incur in connection with (a) the review,
negotiation and administration of this Agreement which is hereby agreed to be
$1,500, (b) the custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (c) the exercise or enforcement
of any of the rights of the Trustee and the Holders of the Notes hereunder or
(d) the failure by the Issuers or IWL to perform or observe any of the
provisions hereof.
SECTION 16. SECURITY INTEREST ABSOLUTE. All rights of the Trustee
and the Holders of the Notes and security interests hereunder, and all
obligations of the Issuers and IWL hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any liens
on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge of,
the Issuers in respect of the Obligations or of this Agreement.
SECTION 17. MISCELLANEOUS PROVISIONS.
17.1. NOTICES. Any notice or communication shall be sufficiently
given if in writing and delivered in person or mailed by first class mail,
commercial courier service or facsimile communication, addressed as follows:
To the Issuers:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
CapRock Communications Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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To IWL:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
IWL Communications, Incorporated
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To the Trustee:
PNC Bank, National Association
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as the specified entity most recently may have
designated in writing in accordance with this section to the others.
17.2. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Agreement may not be used to interpret another pledge, security or debt
agreement of the Issuers, IWL or any of their respective subsidiaries. No such
pledge, security or debt agreement (other than the Indenture) may be used to
interpret this Agreement.
17.3. SEVERABILITY. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
17.4. HEADINGS. The headings in this Agreement have been inserted
for convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.
17.5. COUNTERPART ORIGINALS. This Agreement may be signed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement.
17.6. BENEFITS OF AGREEMENT. Nothing in this Agreement, express
or implied, shall give to any person, other than the parties hereto and their
successors hereunder, and
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the Holders of the Notes, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
17.7. AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver
of any provision of this Agreement and any consent to any departure by the
Issuers from any provision of this Agreement shall be effective only if made or
duly given in compliance with all of the terms and provisions of the Indenture,
and neither the Trustee nor any Holder of Notes shall be deemed, by any act,
delay, indulgence, omission or otherwise, to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. Consistent with the
foregoing, this Agreement may be amended, its provisions may be waived and
departures from its provisions may be consented to by action of the Issuers, IWL
and the Trustee and (if applicable) the Holders of the Notes, all as provided in
the Indenture. Failure of the Trustee, or any Holder of Notes to exercise, or
delay in exercising, any right, power or privilege hereunder shall not preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder of Notes would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
17.8. INTERPRETATION OF AGREEMENT. To the extent a term or
provision of this Agreement conflicts with the Indenture, the Indenture shall
control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Agreement shall not be relevant to determine the meaning of this Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
17.9. CONTINUING SECURITY INTEREST; TERMINATION. (a) This
Agreement shall create a continuing security interest in and to the Collateral
and shall, except as otherwise provided in the Indenture or in this Agreement,
remain in full force and effect until the payment in full in cash of the
Obligations. This Agreement shall be binding upon the Issuers, their
transferees, successors and assigns, and shall inure, together with the rights
and remedies of the Trustee hereunder, to the benefit of the Trustee, the
Holders of the Notes and their respective successors, transferees and assigns.
(b) This Agreement and the security interest granted herein shall
terminate upon the disbursement of the Collateral in accordance with Section 7
hereof.
17.10. SURVIVAL PROVISIONS. All representations, warranties and
covenants of the Issuers contained herein shall survive the execution and
delivery of this Agreement,
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and shall terminate only upon the termination of this Agreement. The
obligations of the Issuers under Sections 13 and 15 hereof shall survive the
termination of this Agreement.
17.11. WAIVERS. The Issuers and IWL waive presentment and demand
for payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Issuers might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12. AUTHORITY OF THE TRUSTEE. (a) The Trustee shall have and be
entitled to exercise all powers hereunder that are specifically granted to the
Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Agreement or the Indenture, neither the Trustee nor any director, officer,
employee, attorney or agent of the Trustee shall be liable to the Issuers or IWL
or any other person for any action taken or omitted to be taken by the Trustee,
in its capacity as Trustee, hereunder, except for its own bad faith, gross
negligence or willful misconduct, and the Trustee shall not be responsible for
the validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. The Trustee shall
have no duty to cause any financing statement or continuation statement to be
filed in respect of the Collateral.
(b) The Issuers and IWL acknowledge that the rights and
responsibilities of the Trustee under this Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Trustee and the
Holders of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Trustee and the Issuers, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so to
act or refrain from acting, and the Issuers and IWL shall not be obligated or
entitled to make any inquiry respecting such authority.
17.13. FINAL EXPRESSION. This Agreement, together with the
Indenture and any other agreement executed in connection herewith, is intended
by the parties as a final expression of this Agreement and is intended as a
complete and exclusive statement of the terms and conditions thereof.
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17.14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
WAIVER OF DAMAGES. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THE
ISSUERS, IWL, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING
THE FOREGOING: THE MATTERS IDENTIFIED IN 31 C.F.R. (Section)(Section) 357.10
AND 357.11 (AS IN EFFECT ON THE DATE OF THIS AGREEMENT) SHALL BE GOVERNED SOLELY
BY THE LAWS SPECIFIED THEREIN.
(b) THE ISSUERS AND IWL AGREE THAT THE TRUSTEE SHALL, IN ITS CAPACITY
AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE ISSUERS, IWL
OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH
(AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE ISSUERS, IWL OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE ISSUERS AND IWL AGREE THAT THEY WILL NOT ASSERT ANY
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE
TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR
ASSERTED. THE ISSUERS AND IWL WAIVE ANY OBJECTION THAT THEY MAY HAVE TO THE
LOCATION OF THE COURT IN THE CITY OF NEW YORK ONCE THE TRUSTEE HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(c) THE ISSUERS AND IWL AGREE THAT NEITHER ANY HOLDER OF NOTES NOR
(EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE INDENTURE) THE TRUSTEE IN
ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE ISSUERS OR IWL (WHETHER
ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE ISSUERS OR
IWL IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED
17
TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
18
IN WITNESS WHEREOF, the Issuers, IWL and the Trustee have each caused
this Agreement to be duly executed and delivered as of the date first above
written.
CAPROCK COMMUNICATIONS CORP.
By:
------------------------------
Name:
Title:
CAPROCK TELECOMMUNICATIONS CORP.
By:
------------------------------
Name:
Title:
CAPROCK FIBER NETWORK, LTD.
By: CapRock Systems, Inc., general
partner
By:
------------------------------
Name:
Title:
IWL COMMUNICATIONS, INCORPORATED
By:
------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
------------------------------
Name:
Title: