CONTROL AGREEMENT
This Control Agreement (this "Agreement") is made this 22nd day of
August, 2001, by and among FIRST UNION NATIONAL BANK, a national banking
association, in its capacity as the issuer of two standby letters of credit (the
"Letters of Credit") under the Letter of Credit Agreements, as defined below,
and not in its capacity as Custodian, as defined below (the "Bank"), UDC, INC.,
a New Jersey corporation (the "Debtor"), and FIRST UNION NATIONAL BANK, a
national banking association, in its capacity as a custodian, and not in its
capacity as Bank ("Custodian").
BACKGROUND
A. Debtor has opened Account No. [XXXX] with Custodian with an initial
deposit of cash, instruments, financial assets, investment property and
securities with an initial value of no less than Fifteen Million Dollars
($15,000,000) (the "Account") pursuant to the terms of an agreement, a copy of
which is attached hereto as Exhibit A (the "Account Agreement"). To the extent
that there is a conflict between this Agreement and the Account Agreement, this
Agreement shall control.
B. Debtor has executed and delivered Bank two completed copies of the
Bank's Application and Agreement for Irrevocable Standby Letter of Credit,
copies of which are attached hereto as Exhibit B (the "Letter of Credit
Agreements"), pursuant to which Bank will, upon the satisfaction of certain
conditions, issue the Letters of Credit for the account of Debtor. Debtor's
obligations under the Letter of Credit Agreements are to be secured by a pledge
of Debtor's interest and grant of a security interest in all assets in the
Account pursuant to the terms of a Pledge Agreement by and between Bank and
Debtor dated of even date herewith (the "Pledge Agreement").
C. The parties hereto are entering into this Agreement to perfect the
security interest of the Bank in the Collateral (as defined below), and to
provide for the control of the Account, as required pursuant to the Letter of
Credit Agreements.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
AGREEMENT
Section 1. Priority of Lien.
(1) Custodian (i) acknowledges that it has received a copy
of the Letter of Credit Agreements, (ii) acknowledges and recognizes the
security interest in the Account and the assets contained therein (including
without limitation any credit balance, cash and/or cash equivalent instruments,
investment property and financial assets) or credited thereto from time to time
together with all proceeds (including cash and non-cash proceeds, investment
property, all rights of Debtor thereto, any rollovers, substitutions or
instruments issued in exchange therefor and all documents relative thereto
(together with the Account, collectively, the "Collateral") granted thereby by
the Debtor to the Bank, and (iii) has marked its records to reflect the security
interest of the Bank in the Account.
(2) Custodian represents and confirms that it has not
previously taken, or granted, a security interest in the Account or any of the
Collateral, and Custodian has not been notified of any other security interest
in or encumbrance on the Account or any of the Collateral.
(3) Custodian hereby waives and releases all liens, claims,
encumbrances and rights of setoff it may have against the Account or any of the
Collateral and agrees that, except for the payment of its normal and customary
fees and commissions pursuant to the Account Agreement, it will not assert any
such lien, claim, encumbrance or right of setoff against the Account or any of
the Collateral.
Section 2. Control. Custodian hereby agrees that it will comply with
entitlement orders or any other instructions respecting the Account originated
by the Bank, without requiring further consent by the Debtor. Custodian will not
disburse any principal amount from the Account other than in accordance with the
Bank's written direction. Until the Bank notifies the Custodian that the Bank is
exercising exclusive control over the Account (a "Notice of Exclusive
Control"), and except as otherwise provided herein, Custodian shall comply with
investment instructions and entitlement orders with respect to interest and
earnings on the Account originated by the Debtor with respect to the Collateral
and shall make trades of financial assets or other Collateral held in the
Account pursuant to such instructions, so long as the Collateral consists solely
of Permitted Investments (as defined below). Upon Custodian's receipt of a
Notice of Exclusive Control, Custodian will immediately cease complying with
orders or instructions originated by the Debtor concerning the Account.
Section 3. Investments; Interest and Dividends. Pursuant to the terms
of Section 2, Debtor shall, upon the effectiveness of this Agreement, instruct
the Custodian to purchase Permitted Investments (and only Permitted
Investments), to be allocated among various Permitted Investments at the
discretion of the Debtor, for deposit in the Account. Prior to the occurrence of
an Event of Default (as defined in the Pledge Agreement), Custodian shall comply
with Debtor's instructions regarding the distribution of interest payments and
cash dividends earned on the securities in the Account. Upon the occurrence and
during the continuance of an Event of Default, Custodian shall retain all
interest payments and cash dividends earned on the securities in the Account as
Collateral. "Permitted Investments" means (i) investments in certificates of
deposit issued by the Bank maturing within one (1) year from the date of
acquisition thereof, but no later than the expiration date of the Letters of
Credit; and (ii) money market funds sponsored by the Bank or an affiliate of
the Bank.
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Section 4. Additional Undertakings of Custodian. Custodian hereby
agrees with the Bank and the Debtor that until otherwise notified by the Bank in
writing, Custodian: (a) will send Account statements or other statements
regarding the Collateral, no less frequently than on a monthly basis, to the
Bank, at the address for the Bank provided beneath the signature of Bank at the
end of this Agreement or as otherwise provided by Bank in writing, (b) will act
as agent and bailee for the Bank, under Bank's sole direction, for the purposes
stated herein and in the Pledge Agreement, (c) will not take any action which
would adversely affect Bank's interest in the Collateral, including without
limitation making loans to the Debtor, taking, or granting, a security interest
in the Account or any of the foregoing Collateral or (except as set forth in
Section 5 below) setting off against any of it, without prior written consent
from the Bank, and (d) will not acknowledge or otherwise accept instructions to
exert any control over or to identify, by book entry or other means, any
assignment or grant of a security interest in the Account or any of the
Collateral to any person or entity other than the Bank, and shall promptly
notify Bank if any person or entity asserts a lien, encumbrance or adverse claim
against the Account or any of the Collateral.
Section 5. Custodian's Expenses. All expenses incurred by Custodian, in
the ordinary course of its administration of the Account, will be Debtor's sole
responsibility but may be repaid from the Account until such time as the Bank
provides a Notice of Exclusive Control to the Custodian, and after delivery of
such Notice of Exclusive Control, Custodian's expenses will not be repaid from
the Account until all of the Debtor's obligations to the Bank have been
indefeasibly repaid in full.
Section 6. Responsibility of Custodian. Custodian shall have no
responsibility or liability to Bank for making investments or trades of
financial assets or any other Collateral in the Account at the instruction of
Debtor, or its authorized representatives, or complying with entitlement orders
concerning the Account or any Collateral from Debtor, which are received by
Custodian before Custodian receives a Notice of Exclusive Control, so long as
all such investments, trades and entitlement orders concern only Permitted
Investments. Custodian shall have no responsibility or liability to Debtor for
complying with a Notice of Exclusive Control or complying with entitlement
orders concerning the Account originated by the Bank after the Custodian's
receipt of a Notice of Exclusive Control. Custodian shall have no duty to
investigate or make any determination as to the validity of or reasons for its
receipt of a Notice of Exclusive Control. Neither this Agreement nor either of
the Letter of Credit Agreements creates any obligation or duty of Custodian
other than those expressly set forth herein.
Section 7. Tax Reporting. All items of income, gain, expense and loss
recognized in the Account shall be reported to the Internal Revenue Service and
all state and local taxing authorities under the name and taxpayer
identification number of Debtor as required under foreign, federal, state and
local law.
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Section 8. Termination. The rights and powers granted herein to Bank
have been granted in order to perfect its security interest in the Account and
any other Collateral, are powers coupled with an interest and will neither be
affected by the bankruptcy of Debtor nor by the lapse of time. The obligations
of Custodian under Sections 2, 3 and 4 above shall continue in effect until the
security interest of the Bank in the Account and any other Collateral has been
terminated pursuant to the terms of the Letter of Credit Agreements and Pledge
Agreement, and Bank has notified Custodian of such termination in writing. Upon
receipt of such notice, the obligations of Custodian under Sections 2, 3 and 4
above with respect to the operation and maintenance of the Account and any other
Collateral shall terminate, Bank shall have no further right to originate
entitlement orders concerning the Account or any other Collateral, and Custodian
shall take such steps as Debtor may request to vest full ownership and control
of the Account and any other Collateral in Debtor, including, but not limited
to, removing the name of Bank from the Account or transferring all of the
financial assets and credit balances, or any other Collateral in the Account, to
another securities account in the name of Debtor or its designee. Bank shall
promptly notify Debtor and Custodian of Bank's termination of its security
interest in the Account and any other Collateral.
Section 9. Integration. This Agreement, the schedules and exhibits
hereto and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties with respect to the
subject matter hereof and supersede and discharge all prior agreements (written
or oral) and negotiations and all contemporaneous oral agreements concerning
such subject matter and negotiations. There are no oral conditions precedent to
the effectiveness of this Agreement.
Section 10. Amendments. No amendment, modification or termination of
this Agreement or waiver of any right hereunder shall be binding on any party
hereto unless it is in writing and is signed by the party to be affected
thereby.
Section 11. Severability. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement, or
the application of such terms or provisions to persons or circumstances, other
than those to which it is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
Section 12. Successors. The terms of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
Section 13. Rules of Construction. In this Agreement, words in the
singular number include the plural, and in the plural include the singular,
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates words of the neuter gender may refer to any gender and the
word "or" is disjunctive but not exclusive. The captions and section numbers
appearing in this Agreement are inserted only as a matter of convenience. They
do not define, limit or describe the scope or intent of the provisions of this
Agreement.
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Section 14. Notices. Any notice, request or other communication
required or permitted to be given under this Agreement shall be in writing and
deemed to have been properly given: (a) when delivered in person; or (b) when
sent by telecopy or other electronic means and electronic confirmation of
receipt is received during normal business hours or, if after business hours, on
the next business day; or (c) if sent by recognized overnight courier, on the
next business day; or (d) if sent by certified or registered United States mail,
return receipt requested, postage prepaid, addressed to the party at the address
set forth below such party's signature at the end of this Agreement, on the
third day after being sent. Any party may change its address for notices in the
manner set forth above.
Section 15. Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing and delivering one or
more counterparts.
Section 16. Choice of Law. The parties hereto agree that certain
material events, occurrences and transactions relating to this Agreement bear a
reasonable relationship to the Commonwealth of Pennsylvania. The validity,
terms, performance and enforcement of this Agreement, including for purposes of
the perfection and priority of the security interest in the Collateral, shall be
governed by those laws of the Commonwealth of Pennsylvania, without reference to
conflicts of law or choice of law provisions.
Section 17. Jury Trial. THE BANK, THE DEBTOR AND THE CUSTODIAN EACH
HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO
ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
SUCH RIGHTS AND OBLIGATIONS.
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IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement on the date first set forth above.
Custodian:
FIRST UNION NATIONAL BANK, in its capacity
as Custodian and not in its capacity as Bank
By: /s/ Blake Payne
---------------
Name: Blake Payne
Title: Vice President
123 South Broad Street
Philadelphia, PA 19109
Attn: Blake Payne, Vice President
Telephone No.: (215) 786-7611
Facsimile No.: (267) 321-7854
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[EXECUTIONS CONTINUED]
Debtor:
UDC, INC.
By: /s/ Sidney Rosenblatt
-----------------------
Name: Sidney Rosenblatt
Title: CFO
375 Phillips Boulevard
Ewing, New Jersey 08618
Attn: Sidney Rosenblatt, CFO
Telephone No.: (609) 671-9280
Facsimile No.: (609) 671-0995
Bank:
FIRST UNION NATIONAL BANK, in its capacity
as Bank and not in its capacity as Custodian
By: /s/ Robert J. Fries
---------------------
Name: Robert J. Fries
Title: Vice President
123 South Broad Street
Philadelphia, PA 19109
Attn: Robert J. Fries, Vice President
Telephone No.: (215) 985-7383
Facsimile No.: (215) 985-7405
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