Exhibit 99.1
ESCROW AGREEMENT
ESCROW AGREEMENT (this "ESCROW AGREEMENT"), dated as of July 2, 2003,
by and among Richemont Finance S.A., a societe anonyme organized under the laws
of the Grand Duchy of Luxembourg ("RICHEMONT"), Chelsey Direct, LLC, a Delaware
limited liability company ("CHELSEY"), and JPMorgan Chase Bank, a New York
corporation as escrow agent (the "ESCROW AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Richemont and Chelsey have entered into a Purchase and Sale
Agreement, dated as of May 19, 2003 (the "PURCHASE AGREEMENT"), which provides
for the purchase by Chelsey of the Shares (as defined in the Purchase
Agreement), subject to the terns and conditions set forth in the Purchase
Agreement;
WHEREAS, pursuant to the third paragraph of that certain Side Letter,
dated as of May 19, 2003, by and between Richemont and Chelsey (the "SIDE
LETTER"), Chelsey is obligated to obtain an irrevocable letter of credit ("LC")
in the amount of US$10 million to secure Chelsey's obligations pursuant to the
Purchase Agreement (the "OBLIGATIONS") within 20 days of the Closing;
WHEREAS, Richemont and Chelsey agree that in lieu of obtaining the LC,
Chelsey will deliver US$10 million (the "ESCROW AMOUNT") to the Escrow Agent to
be held by the Escrow Agent in an interest-bearing account as security for the
Obligations; and
WHEREAS, all capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Purchase Agreement unless otherwise
specified.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and undertakings set forth herein, the parties hereto agree as follows:
1. Appointment of Escrow Agent. Richemont and Chelsey hereby appoint
the Escrow Agent as escrow agent hereunder, and the Escrow Agent hereby accepts
such appointment, subject to the terns and conditions contained herein.
2. Deposit of Funds into Escrow Account. Concurrently with the
execution of this Escrow Agreement, Chelsey has deposited with the Escrow Agent
the Escrow Amount all of which fiends shall be held by the Escrow Agent in an
interest-bearing escrow account (the "ESCROW ACCOUNT") at the Escrow Agent (the
Escrow Amount, excluding any interest or other income earned thereon, for the
purposes set forth herein, the "ESCROW FUND") and distributed in accordance with
the terns hereof. The Escrow Agent hereby acknowledges receipt of the Escrow
Amount. The Escrow Fund and any interest or other income earned thereon will be
invested as provided in Section 4 of this Escrow Agreement.
3. Liabilities, etc. Covered. The Escrow Agent shall hold the Escrow Fund
in accordance with the terms of this Escrow Agreement. The Obligations of
Chelsey shall be secured by the Escrow Fund. The parties acknowledge and agree
that the Escrow Fund shall be a source for satisfying such obligations, but
shall not be the sole source of satisfaction of such obligations, which
obligations are full-recourse obligations of Chelsey as provided in the Purchase
Agreement.
4. Investment of Funds.
(a) The Escrow Agent shall invest and reinvest the funds deposited in
the Escrow Account in the Trust Account with the JPMorgan Chase Bank at a rate
of 30 day LIBOR minus 35 bps.
(b) All interest or other income received from the investment and
reinvestment of the Escrow Fund as provided in Section 4 shall be held by the
Escrow Agent and invested in accordance with this Section 4 and distributed to
Chelsey upon the request of Chelsey, but such request may not be made more than
once per quarter.
5. Procedures for Disbursement of Escrow Fund. The Escrow Agent shall be
authorized to make disbursements of the Escrow Fund from the Escrow Account in
accordance with the following provisions, or as provided in Section 6 hereof,
but not otherwise:
(a) If a certificate executed by Richemont is delivered to the Escrow
Agent and Chelsey (the "DISTRIBUTION NOTICE") which instructs the Escrow Agent
to distribute all or a specified portion of the Escrow Fund in a particular
manner to any person or persons in order to satisfy Obligations of Chelsey under
the Purchase Agreement which Distribution Notice shall set forth in reasonable
detail the Obligation, all or such portion of the Escrow Fund shall be so
distributed by the Escrow Agent 10 days after delivery of the Distribution
Notice, unless prior to the end of such 10-day period Chelsey shall have
delivered to the Escrow Agent and Richemont a certificate stating that it
disputes all or part of the Distribution Notice and sets forth in reasonable
detail the reason for such dispute. During such 10-day period, Chelsey shall be
entitled to request and receive reasonable evidence from Richemont of the
Obligations described in the Distribution Notice. At the end of the 10-day
period, the Escrow Agent shall make disbursements from the Escrow Fund for any
portion of the Distribution Notice as to which Chelsey has not delivered a
notice of dispute.
(b) If a Certificate executed by Richemont and Chelsey is delivered to
the Escrow Agent which instructs the Escrow Agent to distribute all or a
specified portion of the Escrow Fund (an "AGREEMENT NOTICE") in a particular
manner to any person or persons, all or such portion of the Escrow Fund shall be
so distributed by the Escrow Agent.
(c) Notwithstanding anything to the contrary in this Section 5 hereof,
in the event any court order, judgment, decree, attachment or levy (an "ORDER")
is issued with respect to all or any portion of the Escrow Fund, the Escrow
Agent shall provide written notice (the "ORDER NOTICE") to the parties hereto of
the Order and shall comply therewith and provide written notice to the parties
hereto unless compliance therewith is stayed by court order.
(d) Except as set forth in Section 5(a) above, all payments hereunder
shall be made within five business days of the Escrow Agent's receipt of a
Distribution Notice or Agreement Notice or
within five business days of Chelsey's receipt of the Order Notice, as the case
may be, and shall be made by wire transfer of immediately available funds to
such bank account or accounts designated in writing to the Escrow Agent by (i)
Chelsey in the case of payments to Chelsey made pursuant to a Distribution
Notice, Agreement Notice or Order; or (ii) Richemont in the case of payments to
Richemont or any other Indemnified Party made pursuant to a Distribution Notice,
Agreement Notice or Order.
6. Disbursement of Escrow Fund to Chelsey. On May 20, 2008 (or the next
business day in the event that such anniversary is a Saturday, Sunday or banking
holiday) (the "RELEASE DATE"), the Escrow Agent shall disburse to Chelsey the
remaining amount of the Escrow Fund then outstanding; PROVIDED, HOWEVER, that if
any Distribution Notice, Agreement Notice or any Order, as the case may be, is
received by the Escrow Agent prior to May 20, 2008, the Escrow Agent shall first
make the disbursement required by such Distribution Notice, Agreement Notice or
Order, as the case may be, and then shall make the disbursement pursuant to this
Section 6; PROVIDED, FURTHER, that if prior to May 20, 2008 the Support Period
(as defined in the Side Letter) has been extended in accordance with the terms
of the Side Letter and written notice of such extension shall have been
delivered to the Escrow Agent by Richemont or Chelsey, the Release Date shall be
deferred indefinitely until a certificate executed by Richemont and Chelsey is
delivered to the Escrow Agent notifying the Escrow Agent of the end of the
Support Period. This Section 6 shall be subject in all respects to Section 9
hereof.
(a) In the event fund transfer instructions are given (other than in
writing at the time of the execution of the Agreement), whether in writing, by
telecopier or otherwise the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
the call-back schedule attached hereto, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in writing
actually received and acknowledged by the Escrow Agent. If the Escrow Agent is
unable to contact any of the authorized representatives identified in the
Call-Back Schedule, the Escrow Agent is hereby authorized to seek confirmation
of such instructions by telephone call-back to any one or more of your executive
officers, ("EXECUTIVE OFFICERS"), which shall include the titles of Manager,
President or Chief Financial Officer, as the Escrow Agent may select. Such
"EXECUTIVE OFFICER" shall deliver to the Escrow Agent a fully executed
Incumbency Certificate, and the Escrow Agent may rely upon the confirmation of
anyone purporting to be any such officer. The Escrow Agent and the beneficiary's
bank in any funds transfer may rely solely upon any account numbers or similar
identifying numbers provided by Richemont or Chelsey to identify (i) the
beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank. The
Escrow Agent may apply any of escrowed funds for any payment order it executes
using any such identifying number, even when its use may result in a person
other than the beneficiary being paid, or the transfer of funds to a bank other
than the beneficiary's bank or an intermediary bank designated. The parties to
this Agreement acknowledge that such security procedure is commercially
reasonable.
7. Escrow Agent's Duties and Fees.
(a) Duties Limited. The Escrow Agent undertakes to perform only such
duties as are expressly set
forth herein. Except as provided herein, the Escrow Agent shall not be subject
to, or have any liability or responsibility under, nor be obligated to
recognize, any other agreements or directions or instructions of any of the
parties hereto or any other person in carrying out its duties hereunder. The
Escrow Agent may, but shall be under no duty to, institute or defend any legal
proceeding which relates to this Escrow Agreement.
(b) Reliance. The Escrow Agent may rely upon, and shall be protected
in acting or refraining from acting upon, any written notice, instructions or
requests furnished to it pursuant to the terms and provisions of this Escrow
Agreement and believed by it to be genuine and to have been signed or presented
by the proper party or parties in a timely fashion. The Escrow Agent shall also
be protected in refraining from acting upon any such notice, instructions or
requests furnished to it and believed by it not to be genuine or timely
furnished.
(c) Good Faith. Chelsey hereby agrees to indemnify the Escrow Agent
and its officers, directors and employees for, and hold the Escrow Agent and
such persons harmless against, any claims, losses, liabilities, judgments, costs
and expenses (including, without limitation, reasonable attorneys' fees) of any
kind incurred by the Escrow Agent without willful misconduct, recklessness,
gross negligence or bad faith on its part, arising out of or in connection with
this Escrow Agreement and the performance of its duties hereunder, including any
litigation arising from this Escrow Agreement or involving the subject matter
hereof (other than any claim made against the Escrow Agent by Richemont or
Chelsey). Anything in this agreement to the contrary notwithstanding, in no
event shall the Escrow Agent be liable for special, indirect or consequential
damage of any kind whatsoever (including but not limited to lost profits), even
if the Escrow Agent has been advised of the likelihood for such loss or damage
and regardless of the form of action. The Escrow Agent shall not be responsible
or liable for any act or failure to act hereunder except in the case of its
willful misconduct, recklessness, gross negligence or bad faith. This Section
7(c) will survive termination of this Escrow Agreement.
(d) Successor Escrow Agents. The Escrow Agent may resign and be
discharged from its duties or obligations hereunder by giving notice in writing
of such resignation to Richemont and Chelsey not less than 60 calendar days
prior to the effective date thereof, specifying the date upon which such
resignation shall take effect. In addition, Richemont and Chelsey, acting
jointly, shall have the right to terminate the appointment of the Escrow Agent
by giving it notice in writing of such termination, specifying the date upon
which such termination shall take effect. In the event of the resignation or
termination of the Escrow Agent, Richemont and Chelsey shall appoint a successor
before the effective date thereof and shall give written notice to the Escrow
Agent then serving of such appointment and if the parties hereto shall fail to
name a successor escrow agent before the effective date thereof, the Escrow
Agent may apply to a court of competent jurisdiction for the appointment of a
successor escrow agent. Upon demand of the successor Escrow Agent, and payment
by Chelsey of the Escrow Agent's fees and expenses, all funds and property in
the Escrow Account shall be turned over promptly to such successor Escrow Agent
who shall thereupon be bound by all of the provisions hereof.
(e) Fees. The Escrow Agent shall be paid a fee in accordance with the
schedule set forth on Exhibit I attached hereto, and shall be reimbursed for any
reasonable and documented out-of-
pocket expenses reasonably incurred by it in carrying out its duties hereunder.
Chelsey shall be responsible for the payment of such fees and expenses.
(f) Additional Documents. Richemont and Chelsey agree to execute and
deliver to the Escrow Agent such additional documents as it may reasonably
request to evidence termination of this Escrow Agreement and evidence their
consent to the distribution of funds from the Escrow Account.
8. Taxes.
(a) All interest or other income earned on any funds held by the
Escrow Agent in the Escrow Account shall be considered the currently reportable
income, for federal income tax purposes, of Chelsey. The Escrow Agent annually
shall file information returns with the United States Internal Revenue Service
and payee statement with Chelsey, documenting such interest or other income
payments. Chelsey shall provide the Escrow Agent all forms and information
necessary to complete such information returns and payee statements.
(b) Each party agrees to provide the Escrow Agent with a certified tax
identification number by signing and returning a W-9 or W-8 to the Escrow Agent
within 10 days from the date hereof. Chelsey understands that, in the event such
tax identification numbers are not certified to the Escrow Agent, the Internal
Revenue Code may require withholding of a portion of any interest or other
income earned on the investment of the Escrow Fund.
(c) Should the Escrow Agent become liable for the payment of taxes,
including withholding taxes, relating to income derived from any funds held by
it in the Escrow Account or any payment made hereunder, the Escrow Agent may pay
such taxes from the Escrow Fund.
9. Dispute Resolution. Subject to Section 5 above, in the event that
Richemont receives notice or becomes aware of any loss, liability, claim,
damage, or expense of an Indemnified Party involving a third party claim which,
in Richemont's good faith belief, may result in a claim against Chelsey pursuant
to the Obligations set forth in Section 5 of the Purchase Agreement (a "CLAIM"),
Richemont shall be entitled to give notice to such effect to Chelsey and the
Escrow Agent. Subject to Section 5 above, the Escrow Agent, upon receipt of
written notice which notice shall specify Richemont `s reasonable estimate of
the maximum amount of the potential Claim ("RICHEMONT'S ESTIMATED AMOUNT"), is
authorized and directed to retain in its possession without liability to any
persons or party, Richemont's Estimated Amount of the Escrow Fund (or, if
Richemont `s Estimated Amount would require setting aside an amount of the
Escrow Fund that exceeds the full amount of the Escrow Fund remaining in escrow,
the entire Escrow Fund so remaining) until such Claim shall have been settled
either by the mutual agreement of the parties involved or by an Order.
10. Consent to Jurisdiction and Service. The parties consent and submit
to the jurisdiction of the courts of the State of Delaware and of any federal
court located in the State of Delaware in connection with any actions or
proceeding brought against the parties hereto by the Escrow Agent arising out of
or in relation to this Escrow Agreement. In any such action or proceeding the
parties hereto hereby absolutely and irrevocably waive personal service of any
summons, complaint, declaration or other process and agree that service thereof
may be
made by certified or registered first class mail directed to the parties hereto
at the addresses set forth below.
11. Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be given in writing and shall be
(a) personally delivered, (b) sent by overnight courier or by registered mail,
postage prepaid, or (c) sent by telephonic facsimile transmission, with receipt
confirmed. All such communications shall be addressed as follows:
If to Richemont:
Richemont Finance S.A.
35 Boulevard Prince Henri
L 1724 Luxembourg
Fax: 011-4141-711-7138
Attention: Alan Grieve
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Fax: (212) 735-2000
Attention: Morris J. Kramer
If to Chelsey:
Chelsey Direct LLC 712 Fifth Avenue
45th Floor
New York, NY 10019
Fax: (212) 909-9450
Attention: William B. Wachtel
with a copy to:
Wachtel & Masyr, LLP
110 East 59 Street
New York, NY 10022
Fax: (212) 909-9450
If to the Escrow Agent
JP Morgan Chase Bank
4 New York Plaza, 15th Floor
NY, NY 10004
Attn: Linda Ramos-McCollum
Fax: 212.623.6380/6168
or to such other addresses as any such party shall deliver to the other parties
in writing.
12. Termination. This Escrow Agreement may be terminated at any time by
and upon the receipt of, and compliance by the Escrow Agent with, a written
notice of termination executed by
each of Chelsey and Richemont directing the distribution of all property then
held by the Escrow Agent under and pursuant to this Escrow Agreement. This
Escrow Agreement shall automatically terminate if and when all of the Escrow
Fund (and all the securities in which any of the Escrow Fund shall have been
invested) shall have been distributed by the Escrow Agent in accordance with the
terms of this Escrow Agreement.
13. Miscellaneous.
(a) Benefit of Parties. This Escrow Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
legal representatives, successors and assigns. Any corporation or association
into which the Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its corporate trust business
and assets as a whole or substantially as a whole, or any corporation or
association resulting from any such conversion, sale, merger, consolidation or
transfer to which it is a party, shall be and become successor Escrow Agent
hereunder and vested with all the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
Except as otherwise provided herein, no assignment or attempted assignment of
this Escrow Agreement or any interest hereunder shall be effective without the
written consent of Richemont, Chelsey and the Escrow Agent. Except as otherwise
expressly set forth herein and for the Indemnified Parties who are the
beneficiaries of Section 5 of the Purchase Agreement, no person shall be, or be
deemed to be, a third party beneficiary of this Escrow Agreement. Any assignment
of rights or delegation of duties tinder this Escrow Agreement by a party hereto
without the prior written consent of the other parties hereto, if such consent
is required hereby, shall be void.
(b) Governing Law. THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO CHOICE OF LAW PRINCIPLES.
(c) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS ESCROW AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS ESCROW AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
ESCROW AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (iii) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS ESCROW AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS SET FORTH HEREIN.
(d) Attorneys' Fees. Should any litigation or arbitration be commenced
(including any proceedings
in a bankruptcy court) between the parties hereto or their representatives
concerning any provision of this Escrow Agreement or the rights and duties of
any person or entity hereunder (including any litigation or arbitration relating
to the Obligations set forth in the Purchase Agreement), the party or parties
prevailing in such proceeding shall be entitled, in addition to such other
relief as may be granted, to the reasonable attorneys' fees and court costs
incurred by reason of such litigation or arbitration.
(e) Severability. If any provision of this Escrow Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Escrow Agreement, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
(f) Counterparts. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be considered to be one agreement.
(g) Amendments; Waivers. This Escrow Agreement may be amended, waived,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. The waiver by any party hereto of a breach of any provision of
this Escrow Agreement shall not operate or be construed as a waiver of any
subsequent breach.
(h) Entire Agreement. This Escrow Agreement contains all of the terms
agreed upon between the parties with respect to the subject matter hereof.
(i) Force Majeure. In the event that any party to this Agreement is
unable to perform its obligations under the terms of this Agreement because of
acts of God, strikes, equipment or transmission failure or damage reasonably
beyond its control, or other cause reasonably beyond its control, such party
shall not be liable for damages to the other parties for any unforeseeable
damages resulting from such failure to perform otherwise from such causes.
Performance under this Agreement shall resume when the affected party is able to
perform substantially that party's duties.
IN WITNESS WHEREOF, each of Chelsey, Richemont and the Escrow Agent has
signed or caused this Escrow Agreement to be signed by its duly authorized
representative as of the date first above written.
CHELSEY DIRECT, LLC
By: /s/ William B. Wachtel
---------------------
Name: William B. Wachtel
Title: Manager
RICHEMONT FINANCE, S.A.
By: /s/ Morris J. Kramer
-------------------
Name: Morris J. Kramer
Title: Attorney-in-Fact
THE ESCROW AGENT:
JPMorgan Chase Bank as Escrow Agent
By: /S/ Rola Tseng
---------------------------------
Name: Rola Tseng
Title: Assistant Vice President