1
EXHIBIT 4.12
COMPANY CONVERTIBLE NOTE ESCROW ACCOUNT AGREEMENT
This COMPANY CONVERTIBLE NOTE ESCROW ACCOUNT AGREEMENT (the
"Agreement"), dated as of May 31, 1996, among The Bank of New York, a New York
banking corporation, as escrow agent (in such capacity, the "Escrow Agent"), The
Bank of New York, a New York banking corporation, as trustee (in such capacity,
the "Convertible Note Trustee") under the Convertible Note Indenture (as defined
herein), The Bank of New York, a New York banking corporation, as trustee (in
such capacity, the "Senior Note Trustee") under the Senior Note Indenture (as
defined herein), and Petersburg Long Distance Inc., an Ontario corporation (the
"Company").
RECITALS
A. Pursuant to the Indenture, dated as of May 31, 1996 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Convertible Note Indenture"), among the Company, the corporations
acting as guarantors and named therein (the "Convertible Note Guarantors") and
the Convertible Note Trustee, the Company is issuing $26,500,000 aggregate
principal amount of its 9% Convertible Subordinated Notes due 2006 (the
"Convertible Notes").
B. Pursuant to the Indenture, dated as of May 31, 1996 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Senior Note Indenture"), among the Company, the corporations acting
as guarantors and named therein (the "Senior Note Guarantors"; the Senior Note
Guarantors and the Convertible Note Guarantors are collectively called the
"Guarantors"), and the Senior Note Trustee, the Company is issuing $123,000,000
aggregate principal amount at maturity of its 14% Senior Discount Notes due 2004
(the "Senior Notes").
C. As security for its obligations, among other things, under
the Convertible Notes and the Convertible Note Indenture and as security for its
obligations, among other things, under the Senior Notes and the Senior Note
Indenture, the Company is required to enter into a Company Convertible Note
Security and Pledge Agreement of even date herewith (the "Company Convertible
Note Security Agreement") with the Convertible Note Trustee, the collateral
agent named therein (the "Convertible Note Collateral Agent") and the Senior
Note Trustee, in which the Company is granting Liens on and a security interest
in all of the Preferred Stock of Technocom Limited, an Irish corporation and a
subsidiary of the Company, directly or indirectly owned by the Company (the
"Technocom Preferred Stock") and certain other collateral described therein (the
"Convertible Note Collateral").
2
D. Under the terms of the Convertible Note Indenture and the
Company Convertible Note Security Agreement, the Company is required to deposit
all dividends, distributions, payments and proceeds of the Convertible Note
Collateral consisting of cash or cash equivalents in a special, segregated and
irrevocable account in the name of and beneficially owned by the Company which
is pledged to, and to be under the sole dominion and control of, the Convertible
Note Trustee, acting for its benefit and the equal and ratable benefit of the
Holders of the Convertible Notes, and the Senior Note Trustee, acting for its
benefit and the equal and ratable benefit of the Holders of the Senior Notes,
(the "Company Convertible Note Escrow Account") pending the reinvestment of such
amounts in accordance with the Convertible Note Indenture.
E. As security for its obligations, among other things, under
the Senior Notes and the Senior Note Indenture and as security for its
obligations, among other things, under the Convertible Notes and the Convertible
Note Indenture, the Company is required to enter into a Company Senior Note
Security and Pledge Agreement, with the Senior Note Trustee, the collateral
agent named therein (the "Senior Note Collateral Agent") and the Convertible
Note Trustee in which the Company is granting liens on certain collateral
described therein (the "Senior Note Collateral").
F. The parties have entered into this Agreement in order to
set forth the conditions upon which, and the manner in which, funds will be
disbursed from the Company Convertible Note Escrow Account and released from the
security interest and Liens described above.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. Terms used herein and not defined herein
shall have the meanings as defined in the Convertible Note Indenture. In
addition to any other defined terms used herein, the following terms shall
constitute defined terms for purposes of this Agreement and shall have the
meanings set forth below:
"Affiliates" of any specified person means (i) any other
person which, directly or indirectly, is in control of, is controlled by or is
under common control with such specified person or (ii) any other person who is
a director or officer (A) of such specified person, (B) of any subsidiary of
such specified person or (C) of any person described in clause (i) above or
(iii) any person in which such person has, directly or indirectly, a 5% or
greater voting or economic interest or the power to control. For purposes of
this definition, control of a person means the power, directly or indirectly, to
direct or cause the direction of the management
-2-
3
or policies of such person whether through the ownership of voting securities or
by contract or otherwise and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applied" means that disbursed funds have been applied
pursuant to Section 3(a) or pursuant to Section 6(b) (iii).
"Available Funds" means (A) the sum of (i) all amounts
deposited in the Company Convertible Note Escrow Account from time to time and
(ii) interest earned or dividends paid on the funds in the Escrow Accounts
(including holdings of Eligible Cash Equivalents), less (B) the aggregate
disbursements previously made pursuant to this Agreement.
"Collateral" shall have the meaning given in Section 6(a)
hereof.
"Company Convertible Note Escrow Account" shall have the
meaning given in to Section 2(b).
"Convertible Note Trustee" shall include any successor trustee
appointed pursuant to the Convertible Note Indenture.
"Default" means a "Default" as defined in Section 1.1 of the
Convertible Note Indenture until the Convertible Notes are no longer outstanding
and the Convertible Note Indenture has been satisfied and discharged, in which
case a "Default" means a "Default" as defined in Section 1.1 of the Senior Note
Indenture if not then satisfied and discharged.
"Disbursement Request" means a notice sent by the Company to
the Escrow Agent requesting a disbursement of funds from any Escrow Account, in
substantially the form of Exhibit A hereto. Each Disbursement Request shall be
signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer or
any Vice President of the Company.
"Eligible Cash Equivalents" means (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof), (ii) time deposits,
certificates of deposit, or Eurodollar deposits of any commercial bank organized
in the United States having capital and surplus in excess of $500,000,000, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (ii) above, (iv) direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing, or
subject to tender at the option of the holder thereof within ninety
-3-
4
days after the date of acquisition thereof and, at the time of acquisition
having a rating of A or better from Standard & Poor's or A-2 or better from
Moody's, (v) commercial paper issued by the parent corporation of any commercial
bank organized in the United States having capital and surplus in excess of
$500,000,000 and commercial paper issued by non-bank issuers rated A-1 by
Standard & Poor's or P-1 by Moody's and in each case maturing within 270 days
after the date of acquisition, (vi) overnight bank deposits and bankers'
acceptances at any commercial bank organized in the United States having capital
and surplus in excess of $500,000,000, (vii) deposits available for withdrawal
on demand with a commercial bank organized in the United States having capital
and surplus in excess of $500,000,000 and (viii) investments in money market
funds substantially all of whose assets comprise securities of the types
described in clauses (i) through (vi).
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500,000,000 its
equivalent in foreign currency, whose debt is rated "A" (or higher) or the
equivalent rating according to Standard & Poor's or Moody's at the time as of
which any investment or rollover therein is made.
"Escrow Account Statement" shall have the meaning given
in Section 2(g).
"Escrow Agent" shall have the meaning set forth in the
preamble to this Agreement.
"Event of Default" means an "Event of Default" as defined in
Section 6.1 of the Convertible Note Indenture until the Convertible Notes are no
longer outstanding and the Convertible Note Indenture and the Convertible Note
Collateral Documents have been satisfied and discharged, in which case "Event of
Default" means an "Event of Default" as defined in Section 1.1 of the Senior
Note Indenture if not then satisfied and discharged.
"Interest Payment Date" means June 1 and December 1 of each
year, commencing on December 1, 1996, until the Convertible Notes are paid in
full.
"Issue Date" means June 12, 1996.
"Senior Note Trustee" shall include any successor Trustee
appointed pursuant to the Senior Note Indenture.
"Trustees" means, collectively, the Convertible Note
Trustee and the Senior Note Trustee.
2. Convertible Note Escrow Account; Escrow Agent.
(a) Appointment of Escrow Agent. The Company and the
-4-
5
Trustees hereby appoint the Escrow Agent, and the Escrow Agent hereby accepts
appointment, as escrow agent, under the terms and conditions of this Agreement.
(b) Establishment of Company Convertible Note Escrow Account.
Concurrent with the execution and delivery hereof, the Escrow Agent shall
establish and maintain in the name of the Company at The Bank of New York, a
special, segregated and irrevocable escrow account designated "Convertible Note
Escrow Account pledged by Petersburg Long Distance Inc. to The Bank of New York,
as Trustee" (the "Company Convertible Note Escrow Account"). All funds accepted
by the Escrow Agent pursuant to this Agreement shall be deposited in the name of
and beneficially owned by the Company and pledged to, and under the sole
dominion and control of, the Convertible Note Trustee, acting for its benefit
and the equal and ratable benefit of the Holders of the Convertible Notes, and
the Senior Note Trustee, acting for its benefit and the equal and ratable
benefit of the Holders of the Senior Notes. All such funds shall be held in the
Company Convertible Note Escrow Account until disbursed in accordance with the
terms hereof. The Company Convertible Note Escrow Account, the funds held
therein and any Eligible Cash Equivalents held by the Escrow Agent in which such
funds are invested shall be beneficially owned by the Company and pledged to and
under the sole dominion and control of the Convertible Note Trustee, acting for
its benefit and the equal and ratable benefit of the Holders of the Convertible
Notes, and of the Senior Note Trustee, acting for its benefit and the equal and
ratable benefit of the Holders of the Senior Notes.
(c) The Company shall provide notice to the Collateral Agent
and the Trustee of the source of any moneys deposited to the Company Convertible
Note Escrow Account by reference to the applicable provisions of the Convertible
Note Indenture, and shall keep an ongoing record of the amounts so deposited and
disbursed in accordance with this Escrow Agreement. The Company shall also
specify in writing from time to time what funds and/or Eligible Cash Equivalents
contained in the Company Senior Note Escrow Account and/or the Leasing Company
Escrow Accounts are designated to satisfy the requirements of Section 11.8(l) of
the Convertible Note Indenture and Section 11.4 of the Senior Note Indenture. It
shall be the Company's responsibility to satisfy the Collateral Agent as to the
accounting for the Escrow Account, with a view to ensuring that the amounts
required to be calculated for any disbursement are ascertainable.
(d) Escrow Agent Compensation. The Company shall pay to the
Escrow Agent such compensation for services to be performed by it under this
Agreement as the Company and the Escrow Agent may agree in writing from time to
time. The Escrow Agent shall be paid any compensation owed to it directly by the
Company and shall not disburse from the Company Convertible Note Escrow Account
any such amounts.
-5-
6
The Company shall reimburse the Escrow Agent upon request for
all reasonable expenses, disbursements, and advances incurred or made by the
Escrow Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel. The
Escrow Agent shall be paid any such expenses owed to it directly by the Company
and shall not disburse from the Company Convertible Note Escrow Account any such
amounts.
The provisions of this Section 2(d) shall survive termination
of this Agreement.
(e) Investment of Funds in the Company Convertible Note Escrow
Account. Pending investment thereof in accordance with the Convertible Note
Indenture (and the Senior Note Indenture, if the Convertible Notes are no longer
outstanding and the Convertible Note Indenture has been satisfied and
discharged), funds deposited in the Company Convertible Note Escrow Account
shall be invested and reinvested only upon the following terms and conditions:
(i) Acceptable Investments. All funds deposited or
held in the Company Convertible Note Escrow Account at any time shall
be invested, at the direction of the Company except during the
continuance of a Default or an Event of Default, and at the direction
of the Convertible Note Trustee, if any of the Convertible Notes are
outstanding, or the Senior Note Trustee, if the Convertible Notes are
no longer outstanding and the Convertible Note Indenture has been
satisfied and discharged, during the continuance of a Default or an
Event of Default, by the Escrow Agent in Eligible Cash Equivalents for
the Company in accordance with the Company's or the applicable
Trustee's written instructions, as applicable, from time to time to the
Escrow Agent; provided, however, that any such written instruction
shall specify the particular Investment to be made, shall contain the
certification referred to in Section 2(e)(ii), if required, and shall
be executed by any officer of the Company. All Eligible Cash
Equivalents shall be assigned to and held in the possession of, or, in
the case of Eligible Cash Equivalents maintained in book entry form
with the Federal Reserve Bank, transferred to a book entry account in
the name of, the Escrow Agent, as pledgee, with such guarantees as are
customary, except that Eligible Cash Equivalents maintained in book
entry form with the Federal Reserve Bank shall be transferred to a book
entry account in the name of the Escrow Agent at the Federal Reserve
Bank that includes only Eligible Cash Equivalents held by the Escrow
Agent for its customers and segregated by separate recordation in the
books and records of the Escrow Agent.
(ii) Security Interest in and Lien on Investments.
No investment of funds in the Company Convertible Note Escrow
Account shall be made unless the Company has certified to the
-6-
7
Escrow Agent and the Trustees that, upon such investment, each of the
Convertible Note Trustee and the Senior Note Trustee will have a first
priority perfected Lien and security interest for the benefit of the
Convertible Note Trustee and the equal and ratable benefit of the
Holders of the Convertible Notes and for the benefit of the Senior Note
Trustee and the equal and ratable benefit of the Holders of the Senior
Notes in the applicable Investment. A certificate as to a class of
investments need not be issued with respect to individual investments
in securities in that class if the certificate applicable to the class
remains accurate with respect to such individual investments, which
continued accuracy the Escrow Agent may conclusively assume. Promptly
after the Issue Date, and within 3 months after the anniversary of the
Issue Date, until the payment in full of the Convertible Notes in
accordance with the terms thereof and of the Convertible Note
Indenture, and all other Obligations then due and owing under the
Convertible Notes, the Convertible Note Indenture, this Agreement and
the other Convertible Note Collateral Documents, each of the Trustees
and the Escrow Agent shall receive an Opinion of Counsel, dated each
such date as applicable, which opinion shall meet the requirements of
Section 314(b) of the Trust Indenture Act of 1939, as amended (the
"TIA").
(iii) Interest and Dividends. All interest earned and
dividends paid on funds invested in Eligible Cash Equivalents shall be
deposited in the Company Convertible Note Escrow Account as additional
Collateral beneficially owned by the Company and pledged to the
Convertible Note Trustee, acting for its benefit and the equal and
ratable benefit of the Holders of the Convertible Notes, and to the
Senior Note Trustee, acting for its benefit and the equal and ratable
benefit of the Holders of the Senior Notes, and shall be reinvested in
accordance with the terms hereof.
(iv) Limitation on Escrow Agent's Responsibilities.
The Escrow Agent's sole responsibilities under this Section 2
shall be (A) to retain, or cause its agent in the State of New
York to retain, possession of certificated Eligible Cash
Equivalents (except, however, that the Escrow Agent may
surrender possession to the issuer of any such Eligible Cash
Equivalent for the purpose of effecting assignment, crediting
interest, or reinvesting such security or reducing such
security to cash) and to be the registered or designated owner
of Eligible Cash Equivalents which are not certificated, (B)
to follow the Company's or the applicable Trustee's written
instructions, as applicable, given in accordance with Section
2(e)(i), (C) to invest and reinvest funds pursuant to this
Section 2(e) and (D) to use reasonable efforts to reduce to
cash such Eligible Cash Equivalents as may be required to fund
any disbursement or payment in accordance with Section 3. In
-7-
8
connection with clause (i) above, the Escrow Agent will maintain, or
cause its agent in the State of New York to maintain, continuous
possession in the State of New York of certificated Eligible Cash
Equivalents and cash included in the Collateral and will cause
uncertificated Eligible Cash Equivalents to be registered in the
book-entry system of, and transferred to an account of the Escrow Agent
or a sub-agent of the Escrow Agent at, the Federal Reserve Bank of New
York. Except as provided in Section 6, the Escrow Agent shall have no
other responsibilities with respect to perfecting or maintaining the
perfection of both Trustees' Liens and security interest in the
Collateral and shall not be required to file any instrument, document
or notice in any public office at any time or times. In connection with
clause (D) above, the Escrow Agent shall not be required to reduce to
cash any Eligible Cash Equivalents to fund any disbursement or payment
in accordance with Section 3 in the absence of written instructions
signed by an officer of the Company specifying the particular
investment to liquidate unless a Default or Event of Default has
occurred and is continuing, in which case such written instructions
shall be signed by a Trust Officer of the Convertible Note Trustee or,
if no Convertible Notes are then outstanding and the Convertible Note
Indenture has been satisfied and discharged, of the Senior Note
Trustee. If no such written instructions are received, the Escrow Agent
shall liquidate those Eligible Cash Equivalents having the lowest
interest rate per annum, regardless of maturity, or if none such exist,
those having the nearest maturity. The Escrow Agent shall have no duty
to determine whether or not to file or record any document or
instrument in connection with this Agreement, but will follow the
instructions of the applicable Trustee.
(f) Substitution of Escrow Agent. The Escrow Agent may resign
by giving not less than 30 days' prior written notice to the Company and the
Trustees. Such resignation shall take effect upon the later to occur of (i)
delivery of all funds and Eligible Cash Equivalents maintained by the Escrow
Agent hereunder and copies of all books, records, plans and other documents in
the Escrow Agent's possession relating to such funds or Eligible Cash
Equivalents or this Agreement to a successor Escrow Agent mutually approved by
the Company and the Trustees (which approvals shall not be unreasonably withheld
or delayed) and (ii) the Company, the Trustees and such successor Escrow Agent
entering into this Agreement or any written successor agreement no less
favorable to the interests of the Holders of the Convertible Notes, the Holders
of the Senior Notes and the Trustees than this Agreement; and the Escrow Agent
shall thereupon be discharged of all obligations under this Agreement and shall
have no further duties, obligations or responsibilities in connection herewith,
except as set forth in Section 4. If a successor Escrow Agent has not been
appointed or has not accepted such appointment within 30 days after notice of
resignation is
-8-
9
given to the Company, the Escrow Agent may apply to a court of competent
jurisdiction for the appointment of a successor Escrow Agent.
(g) Escrow Account Statement. At least 30 days prior to each
Interest Payment Date, the Escrow Agent shall deliver to the Company and the
Trustees a statement setting forth with reasonable particularity the balance of
funds then in the Company Convertible Note Escrow Account and the manner in
which such funds are invested (the "Convertible Note Escrow Account Statement").
3. Disbursements.
(a) Disbursement Request; Disbursements. (i) At least two
Business Days prior to an Interest Payment Date, the Company and the Convertible
Note Trustee shall submit to the Escrow Agent a completed Disbursement Request
substantially in the form of Exhibit A hereto requesting funds from the Company
Convertible Note Escrow Account in an amount equal to the interest owed on the
Convertible Notes under the Convertible Note Indenture for payment of such
interest on such Interest Payment Date, unless the Company has disbursed and the
Convertible Note Trustee has received funds from the Company in such amount on
or before such date for such interest payment. Provided that any such
Disbursement Request is not rejected by it, the Escrow Agent, at least on (or if
the Convertible Note Trustee and the Escrow Agent are the same entity, two
Business Days after) receipt of such Disbursement Request, shall disburse the
funds requested in such Disbursement Request by wire or book-entry transfer of
immediately available funds to such Trustee. The Escrow Agent shall notify the
Convertible Note Trustee as soon as reasonably possible if any such Disbursement
Request is rejected and the reason(s) therefor.
(ii) In addition, the Company may submit a completed
Disbursement Request for a release of funds to the Company or a Leasing Company,
as applicable, from the Company Convertible Note Escrow Account, provided that
(i) the applicable conditions set forth in Section 11.4 of the Convertible Note
Indenture and Section 11.8 of the Senior Note Indenture until such time as the
Senior Notes are no longer outstanding and the Senior Note Indenture has been
satisfied and discharged have been satisfied for such release to the Company or
a Leasing Company, as applicable, (ii) the Company shall have delivered to the
Convertible Note Trustee the applicable Officers' Certificate required by such
Section 11.4 on or before such disbursement date and (iii) the Convertible Note
Trustee has executed the certification contained in the Disbursement Request.
Provided that any such Disbursement Request is not rejected by it, the Escrow
Agent at least two (2) Business Days after the receipt of such Disbursement
Request shall disburse the funds requested in such Disbursement Request by wire
or book-entry transfer of immediately available funds to the Company or a
Leasing Company, as applicable. The Escrow Agent shall notify the
-9-
10
Convertible Note Trustee and the Company as soon as reasonably possible if any
such Disbursement Request is rejected and the reason(s) therefor.
(iii) If an Event of Default under the Convertible Note Indenture has
occurred and is continuing, the Convertible Note Trustee shall be entitled
unilaterally to initiate withdrawals by executing a Disbursement Request which
will be substantially similar to the form of Exhibit A but which need only to be
executed by the Convertible Note Trustee.
(iv) If the Escrow Agent receives a written notice from the Convertible
Note Trustee, acknowledged by the Senior Note Trustee, that the Convertible
Notes have been paid in full and all other obligations then due and owing under
the Convertible Note Indenture, the guarantees of the Convertible Note
Guarantors contained therein and the other Convertible Note Collateral Documents
have been paid in full and the Convertible Note Indenture has been satisfied and
released and the Senior Notes remain outstanding and not paid in full, all funds
and Eligible Cash Equivalents then held in the Company Convertible Note Escrow
Account shall be withdrawn and transferred to the Senior Note Escrow Agent or
such other place as the Senior Note Trustee directs in such acknowledgement.
This disbursement shall be made whether or not an Event of Default (as defined
in the Senior Note Indenture) has occurred and is continuing.
(b) Conditions Precedent to Disbursement. Subject to Section 4
and any mandatory provisions of applicable law, the Escrow Agent shall make the
payments to be made pursuant to a completed Disbursement Request if (i) the
Company shall have submitted, in accordance with the provisions of Section 3(a)
herein, such Disbursement Request to the Escrow Agent substantially in the form
of Exhibit A with blanks appropriately filled in containing the signed
certification of the Convertible Note Trustee included in such form and (ii) the
Escrow Agent shall not have received any notice from the Convertible Note
Trustee that as a result of an Event of Default the Indebtedness represented by
the Convertible Notes has been accelerated and has become due and payable (in
which event the Escrow Agent shall apply all Available Funds as required by
Section 6(b)(iii)).
(c) No Distributions. Provided that no Event of Default has
occurred and is continuing, the Company shall initiate all requests for
withdrawals of funds from the Company Convertible Note Escrow Account by
executing a Disbursement Request and submitting such request to the Convertible
Note Trustee. However, the Company shall not be entitled to direct the Escrow
Agent to make distributions from the Company Convertible Note Escrow Account
except upon certification by the Convertible Note Trustee on a Disbursement
Request that the applicable conditions of the Convertible Note Indenture and the
Senior Note Indenture have been
-10-
11
satisfied, as provided in Section 3(a). The Convertible Note Trustee shall not,
except following an Event of Default, be entitled unilaterally to initiate
withdrawals.
(d) Deposits Irrevocable. Any deposits made into the Company
Convertible Note Escrow Account hereunder shall be irrevocable and the amount of
such deposits and any instrument or security held in the Company Convertible
Note Escrow Account hereunder and all interest thereon shall be held in trust by
the Escrow Agent and applied solely as provided herein.
4. Limitation of the Escrow Agent's Liability;
Responsibilities of the Escrow Agent. The Escrow Agent's responsibility and
liability under this Agreement shall be limited as follows: (i) the Escrow Agent
does not represent, warrant or guaranty to the Holders of the Convertible Notes
or the Holders of the Senior Notes from time to time the performance of the
Company; (ii) the Escrow Agent shall have no responsibility to the Company or
the Holders of the Convertible Notes, the Holders of the Senior Notes or the
Trustees from time to time as a consequence of performance or non-performance by
the Escrow Agent hereunder, except for any negligence or willful misconduct of
the Escrow Agent; (iii) the Company shall remain solely responsible for all
aspects of the Company's business and conduct; and (iv) the Escrow Agent is not
obligated to supervise, inspect or inform the Company or any third party of any
matter referred to above.
No implied covenants or obligations shall be inferred from
this Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by
the provisions of any agreement beyond the specific terms hereof. Specifically
and without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Eligible
Cash Equivalents held by it hereunder, including without limitation any
liability for any delay not resulting from negligence or willful misconduct in
such investment, reinvestment or liquidation, or for any loss of principal or
income incident to any such delay.
The Escrow Agent shall be entitled to rely upon any judicial
order or judgment, upon any written opinion of counsel or upon any
certification, instruction, notice, or other writing delivered to it by the
Company or either Trustee in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity of service thereof. The Escrow
Agent may act in reliance upon any instrument comporting with the provisions of
this Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
-11-
12
authorized to do so.
The Escrow Agent may act pursuant to the written advice of
counsel chosen by it with respect to any matter relating to this Agreement and
(subject to clause (ii) of the first paragraph of this Section 4) shall not be
liable for any action taken or omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party
as to selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this
Agreement with respect to any funds or property deposited hereunder, the Escrow
Agent shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such funds or property, and the Escrow Agent shall
not be or become liable for its failure or refusal to comply with conflicting
claims, demands or instructions. The Escrow Agent shall be entitled to refuse to
act until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in its
sole option to commence an interpleader action or seek other judicial relief or
orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder.
5. Indemnity. The Company shall indemnify, hold harmless and
defend the Escrow Agent and its directors, officers, agents, employees and
controlling persons, from and against any and all claims, actions, obligations,
liabilities and expenses, including defense costs, investigative fees and costs,
legal fees, and claims for damages, arising from the Escrow Agent's performance
under this Agreement, except to the extent that such liability, expense or claim
is directly attributable to the negligence or willful misconduct of any of the
foregoing persons. The provisions of this Section shall survive any termination,
satisfaction or discharge of this Agreement as well as the resignation or
removal of the Escrow Agent. The provisions of this paragraph 5 shall survive
the termination of this Agreement.
` -12-
13
6. Grant of Liens and Security Interest; Instructions
to Escrow Agent.
(a) The Company hereby irrevocably grants a first priority
security interest in and Lien on, and pledges, assigns and sets over to the
Convertible Note Trustee, acting for its benefit and the equal and ratable
benefit of the Holders of the Convertible Notes, and to the Senior Note Trustee,
acting for its benefit and the equal and ratable benefit of the Holders of the
Senior Notes, all of the Company's right, title and interest in the Company
Convertible Note Escrow Account, and all property now or hereafter placed or
deposited in, or delivered to the Escrow Agent for placement or deposit in, the
Company Convertible Note Escrow Account, including, without limitation, all
funds held therein, all Eligible Cash Equivalents held by (or otherwise
maintained in the name of) the Escrow Agent pursuant to Section 2, and all
proceeds thereof as well as all rights of the Company under this Agreement
(collectively, the "Collateral"), in order to secure all obligations and
indebtedness of the Company under the Convertible Notes and any other
obligation, now or hereafter arising, of every kind and nature, owed by the
Company or the Convertible Note Guarantors under the Convertible Note Indenture,
the related guarantees thereunder or the Convertible Note Collateral Documents
to the Holders of the Convertible Notes or to the Convertible Note Trustee and
all obligations and indebtedness of the Company or the Senior Note Guarantors
under the Senior Note Indenture, the related guarantees thereunder or the Senior
Note Collateral Documents to the Holders of the Senior Notes or the Senior Note
Trustee. The Escrow Agent hereby acknowledges the Trustees' security interest
and Lien as set forth above. The Company shall take all actions necessary on its
part to insure the continuance of a first priority security interest in and Lien
on the Collateral in favor of the Trustees in order to secure all such
obligations and indebtedness.
(b) The Company and the Trustees hereby irrevocably instruct
the Escrow Agent to, and the Escrow Agent shall, (i) (A) at all times maintain
sole dominion and control over funds and Eligible Cash Equivalents in the
Company Convertible Note Escrow Account, acting for the benefit of the Trustees
to the extent specifically required herein, (B) maintain, or cause its agent
within the State of New York to maintain, possession of all certificated
Eligible Cash Equivalents purchased hereunder that are physically possessed by
the Escrow Agent in order for the Trustees to enjoy a continuous perfected first
priority security interest therein under the law of the State of New York (the
Company hereby agreeing that in the event any certificated Eligible Cash
Equivalents are in the possession of the Company or a third party, the Company
shall use its best efforts to deliver all such certificates to the Escrow
Agent), (C) take all steps specified by the Company pursuant to paragraph (a)
above to cause the Trustees to enjoy a continuous perfected first priority
security interest and Liens under the New York Uniform Commercial Code and any
-13-
14
applicable law of the State of New York in all Eligible Cash Equivalents
purchased hereunder that are not certificated and (D) maintain the Collateral
free and clear of all Liens, security interests, safekeeping or other charges,
demands and claims against the Escrow Agent of any nature now or hereafter
existing in favor of anyone other than the Trustees; (ii) promptly notify the
Trustees if the Escrow Agent receives written notice that any Person other than
the Trustees has or claims to have a Lien on or security interest in any portion
of the Collateral and (iii) in addition to disbursing amounts held in escrow
pursuant to any Disbursement Requests given to it by the Trustees pursuant to
Section 3(a)(iv), upon receipt of written notice from the Convertible Note
Trustee of the acceleration of the maturity of the Convertible Notes, and
direction from the Convertible Note Trustee to disburse all Available Funds to
the Convertible Note Trustee, as promptly as practicable disburse all funds held
in the Company Convertible Note Escrow Account to the Convertible Note Trustee
and transfer title to all Eligible Cash Equivalents held by the Escrow Agent
hereunder to the Convertible Note Trustee. The Escrow Agent shall not have any
right to receive compensation from either Trustee and is without any authority
to obligate either Trustee or to compromise or pledge its security interest and
Lien hereunder. Accordingly, the Escrow Agent is hereby directed to cooperate
with the Trustees in the exercise of their respective rights in the Collateral
provided for herein.
(c) Any money and Eligible Cash Equivalents collected by the
Convertible Note Trustee pursuant to Section 6(b)(iii) shall be applied as
provided in Section 6.9 of the Convertible Note Indenture.
(d) Upon demand, the Company will execute and deliver to
either Trustee such instruments and documents as such Trustee may reasonably
deem necessary or advisable to confirm or perfect the rights of the Trustees
under this Agreement and the Trustees' interest in the Collateral. The Trustees
shall be entitled to take all necessary action to preserve and protect the
security interest created hereby as a Lien and encumbrance upon the Collateral.
(e) The Company hereby appoints each Trustee as its
attorney-in-fact with full power of substitution, exercisable upon the
occurrence and during the continuance of a Default or Event of Default, to do
any act which the Company is obligated hereto to do, and each Trustee may, but
shall not be obligated to, exercise such rights as the Company might exercise
with respect to the Collateral and take any action in the Company's name to
protect the Trustees' Liens and security interest hereunder. In addition to the
rights provided under Section 6(b)(iii) hereof, upon an Event of Default as
defined in the Convertible Note Indenture and for so long as such Event of
Default continues, the Convertible Note Trustee may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all
-14-
15
the rights and remedies of a secured party under the New York Uniform Commercial
Code or other applicable law, and the Convertible Note Trustee may also upon
obtaining possession of the Collateral as set forth herein, without notice to
the Company except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any exchange, broker's
board or at any of the Convertible Note Trustee's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Convertible Note Trustee may deem commercially reasonable. The Company
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale.
The Company agrees that, to the extent notice of sale shall be required by law,
at least ten (10) days' notice to the Company of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Convertible Note Trustee shall not be
obligated to make any sale regardless of notice of sale having been given. The
Convertible Note Trustee may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Convertible Note Trustee shall give to the Senior Note Trustee
copies of notices sent to the Company, as well as any other notices required by
applicable law to be given to a Lienholder. If the Convertible Notes are no
longer outstanding and the Convertible Note Indenture has been satisfied and
discharged, the foregoing rights and remedies may be exercised by the Senior
Note Trustee.
7. Termination. This Agreement shall terminate automatically
ten (10) days following disbursement of all funds remaining in the Company
Convertible Note Escrow Account (including Eligible Cash Equivalents) and the
payment in full of the Convertible Notes and all other Obligations then due and
owing under the Convertible Note Indenture, the guarantees thereunder and the
Convertible Note Collateral Documents, unless sooner terminated by agreement of
the parties hereto (in accordance with the terms hereof, not in violation of the
Convertible Note Indenture; the Convertible Note Trustee may not agree to
terminate this Agreement unless it has received the consent of 100% of the
Holders of all of the Convertible Notes outstanding and the Senior Note Trustee
may not agree to terminate this Agreement unless it has received the consent of
100% of the Holders of all of the Senior Notes outstanding); provided, however,
that the obligations of the Company under Section 2(c) and Section 5 (and any
existing claims thereunder) shall survive termination of this Agreement or the
resignation of the Escrow Agent; provided, further, however, that until such
tenth day, the Company will cause this Agreement (or any permitted successor
agreement) to remain in effect and will cause there to be an Escrow Agent
(including any permitted successor thereto) acting hereunder (or under any such
permitted successor agreement).
-15-
16
8. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach
of this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties
hereto, and the rights and duties of any party hereunder shall not be assignable
except with the prior written consent of the other parties. Notwithstanding the
foregoing, this Agreement shall inure to and be binding upon the parties and
their successors and permitted assigns. Nothing herein shall restrict the Escrow
Agent from performing its duties through a sub-agent.
(d) Benefit. The parties hereto and their successors and
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof; provided, however, that the Holders of the Convertible Notes
and their permitted assigns and the Holders of the Senior Notes and their
permitted assigns shall be entitled to the benefits hereof and to enforce this
Agreement.
(e) Time. Time is of the essence with respect to each
provision of this Agreement.
(f) Entire Agreement; Amendments. This Agreement, the
Convertible Note Indenture and the Senior Note Indenture contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede any and all prior agreements, understandings and commitments, whether
oral or written. This Agreement may be amended only in accordance with Article
IX of the Convertible Note Indenture and Article IX of the Senior Note Indenture
and further by a writing signed by a duly authorized representative of each
party hereto.
(g) Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three Business Days
following the day
-16-
17
sent, when sent by United States certified mail, postage and certification fee
prepaid, return receipt requested, addressed as set forth below; (c) when
transmitted by telecopy with verbal confirmation of receipt by the telecopy
operator to the telecopy number set forth below; or (d) one business day
following the day timely delivered to a next-day air courier addressed as set
forth below:
To Escrow Agent:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇ or 5917
To each Trustee:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇ or 5917
To the Company:
Petersburg Long Distance Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Chairman
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section .
(h) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for
-17-
18
convenience only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
(j) Choice of Law; Waiver of Jury Trial. The existence,
validity, construction, operation and effect of any and all terms and provisions
of this Agreement shall be determined in accordance with and governed by the
laws of the State of New York, without regard to principles of conflicts of law.
The parties to this Agreement hereby agree that jurisdiction over such parties
and over the subject matter of any action or proceeding arising under this
Agreement may be exercised by a competent Court of the State of New York, or by
a United States Court, sitting in New York City. The Company hereby submits to
the personal jurisdiction of such courts, hereby waives personal service of
process upon it and hereby waives, to the extent permitted by applicable law,
the right to a trial by jury in any action or proceeding with the Escrow Agent.
All actions and proceedings brought by the Company against the Escrow Agent
relating to or arising from, directly or indirectly, this Agreement shall be
litigated only in courts within the State of New York. The Company waives any
objection that it may have to the location of the court in which the Escrow
Agent 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.
(k) Authority of the Company; Valid and Binding Agreement. The
Company hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered on its behalf and constitutes the legal,
valid and binding obligation of the Company. The execution, delivery and
performance of this Agreement by the Company does not violate any applicable law
or regulation to which the Company is subject and does not require the consent
of any governmental or other regulatory body to which the Company is subject,
except for such consents and approvals as have been obtained and are in full
force and effect.
(l) Authority of the Escrow Agent and the Trustees; Valid and
Binding Agreement. Each of the Escrow Agent and the Trustees hereby represents
and warrants that this Agreement has been duly authorized, executed and
delivered on its behalf and constitutes its legal, valid and binding obligation.
(m) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Company (i)
acknowledges that it has, by separate written instrument, irrevocably designated
and appointed CT Corporation System, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or
any successor), as its authorized agent upon which process may be served in any
suit or proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in the State of New York, or brought
under federal or state securities laws, and acknowledges that CT Corporation
System has accepted such
-18-
19
designation, (ii) submits to the jurisdiction of any such court in any such suit
or proceeding, and (iii) agrees that service of process upon CT Corporation
System (or any successor) and written notice of said service to the Company
(mailed or delivered to Messrs. ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: E. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.) shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such destination and appointment of
CT Corporation System (or any successor) in full force and effect so long as any
of the Convertible Notes shall be outstanding.
To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement, to the extent permitted by law.
-19-
20
IN WITNESS WHEREOF, the parties have executed and delivered
this Company Convertible Note Escrow Account Agreement as of the day first above
written.
ESCROW AGENT: THE BANK OF NEW YORK,
as Escrow Agent
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Assistant Treasurer
CONVERTIBLE NOTE TRUSTEE: THE BANK OF NEW YORK,
as Convertible Note Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Assistant Treasurer
SENIOR NOTE TRUSTEE: THE BANK OF NEW YORK,
as Senior Note Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Assistant Treasurer
COMPANY: PETERSBURG LONG DISTANCE INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Chairman
21
EXHIBIT A
Form of Disbursement Request
[Letterhead of the Company]
[Date]
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Floor ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Re: Disbursement Request No.
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Company Convertible Note Escrow Account
Agreement, dated as of May 31, 1996 (the "Company Convertible Note Escrow
Agreement") among you (the "Escrow Agent"), The Bank of New York as Convertible
Note Trustee, The Bank of New York as Senior Note Trustee and Petersburg Long
Distance Inc., an Ontario corporation (the "Company"). Capitalized terms used
herein shall have the meaning given in the Company Convertible Note Escrow
Agreement.
This letter constitutes a Payment Notice and Disbursement
Request under the Company Convertible Note Escrow Agreement.
The undersigned hereby notifies you that the Company has
requested, and has satisfied the conditions contained in Section 11.4 of the
Convertible Note Indenture for, the release of $______, from the Company
Convertible Note Escrow Account which was deposited on as a
result of [specify source of deposit, e.g., asset sale of specific type of
asset] for Net Cash Proceeds of $ which amount will be invested or used
as follows: .
In connection with the requested disbursement, the undersigned
hereby notifies you that:
1. The Convertible Notes have [not], as a result of an
Event of Default (as defined in the Convertible Note Indenture), been
accelerated and become due and payable.
2. An Opinion of Counsel as required by the Convertible
Note Indenture is delivered herewith.
-21-
22
3. The Collateral Documents have been delivered to the
Trustee.
4. [add wire instructions].
The Escrow Agent is entitled to rely on the foregoing in
disbursing funds relating to this Disbursement Request.
-22-
23
PETERSBURG LONG DISTANCE INC.
By:_________________________
Name:
Title:
The Convertible Note Trustee hereby certifies to the Escrow
Agent that it has received the applicable Officers' Certificate described in
Section 11.4 of the Convertible Note Indenture for the release of the funds to
be disbursed pursuant to the foregoing Disbursement Request.
THE BANK OF NEW YORK, as
Convertible Note Trustee
By: _______________________
Name:
Title:
The Senior Note Trustee hereby certifies to the Escrow Agent
that it has received the applicable Officers' Certificate described in Section
11.8 of the Senior Note Indenture for the release of the funds to the disbursed
pursuant to the foregoing Disbursement Request.
THE BANK OF NEW YORK, as
Convertible Note Trustee
By: _______________________
Name:
Title: