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Exhibit 10.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") dated November 25, 1997 by and
among Young America Corporation, a Minnesota corporation (the "Company"), Jay F.
Ecklund, an individual resident of Florida, the John F. Ecklund 1995 Irrevocable
Trust, the Sheldon McKensie Ecklund 1995 Irrevocable Trust, the John F. Ecklund
1997 Irrevocable Trust, the Sheldon McKensie Ecklund 1997 Irrevocable Trust, and
the Jay F. Ecklund 1997 Irrevocable Annuity Trust (collectively, "Selling
Stockholders") and Norwest Bank Minnesota, National Association, a national
banking association principally located in Minneapolis, Minnesota ("Escrow
Agent").
RECITALS
WHEREAS, the Selling Stockholders have agreed to redeem certain of their
shares of the Company pursuant to the terms of that certain Recapitalization
Agreement dated November 25, 1997 (the "Recapitalization Agreement"); and
WHEREAS, Article 14 of the Recapitalization Agreement provides that the
Selling Shareholders will indemnify the Company, subject to the limitations
contained therein, against any and all Damages (as that term is defined in the
Recapitalization Agreement) of the Company resulting from a breach of any
representation, warranty or covenant made by the Selling Stockholders in the
Recapitalization Agreement; and
WHEREAS, pursuant to Section 4.1 of the Recapitalization Agreement, the
Company shall deposit Six Million Dollars ($6,000,000) into the escrow created
by this Escrow Agreement, which, together with any interest accrued in
accordance with the provisions of Section 6, shall be referred to as the "Escrow
Funds" and shall be a fund against which claims for indemnification by the
Company pursuant to Article 14 of the Recapitalization Agreement shall first be
made; and
WHEREAS, this Escrow Agreement, together with the Recapitalization
Agreement, shall govern the terms upon which the Escrow Agent may distribute the
Escrow Funds to the Company and the Selling Stockholders.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
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1. Appointment of Escrow Agent. The Escrow Agent is hereby appointed
escrow agent in accordance with the instructions set forth herein. The Escrow
Agent hereby acknowledges receipt of the Six Million Dollar ($6,000,000) escrow
deposit referred to above.
2. Claim Certificates. The Company, from time to time on or prior to May
21, 1999, may make a claim to some or all of the Escrow Funds (a "Claim") by
delivering to the Escrow Agent a certificate (a "Claim Certificate") signed by
the president or a vice president of the Company stating:
(a) That the Company is entitled to be indemnified under Article 14
of the Recapitalization Agreement;
(b) The reasons therefor, set forth in reasonable detail;
(c) The amount of the Claim by the Company, provided that where the
amount of the Claim is not a liquidated sum, the amount of the Claim shall be
the amount reasonably estimated by the Company; and
(d) That the Company has delivered a copy of such Claim Certificate
to the Selling Stockholders and their legal counsel and the date on which such
copy was delivered.
Whenever a Claim Certificate is delivered to the Escrow Agent, the Escrow Agent
shall thereupon promptly deliver a copy to each of the Selling Stockholders and
their legal counsel.
3. Disputed Claims. The Selling Stockholders, through the Sellers
Stockholders' Representative, may dispute any Claim in whole or in part
(hereinafter a "Disputed Claim"), by delivering to the Escrow Agent a notice (an
"Objection Notice") within twenty (20) days of receipt of the Claim Certificate
stating:
(a) That the Selling Stockholders dispute or object to such Claim;
(b) The reasons for such objection or dispute, set forth in
reasonable detail;
(c) That the Selling Stockholders have delivered a copy of the
Objection Notice to the Company and its legal counsel and the date on which such
copy was delivered; and
(d) The portion of the Claim set forth in the Claim Certificate, if
any, to which there is no dispute or objection, including the dollar amount of
such portion of the Claim (hereinafter, an "Undisputed Claim").
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Whenever there shall be delivered to the Escrow Agent an Objection Notice, the
Escrow Agent shall thereupon promptly deliver a copy to the Company and its
legal counsel.
4. Payment of Claims.
(a) If Escrow Agent receives from the Selling Stockholders'
Representative an Objection Notice which consents or agrees to all or part of a
Claim, the Escrow Agent shall thereupon promptly pay to the Company from the
Escrow Funds an amount equal to the aggregate amount of such Claim as specified
in such notice from the Selling Stockholders' Representative.
(b) If the Escrow Funds are not sufficient to pay in full any
amounts payable to the Company under the preceding Section 4.1, the Escrow Agent
shall pay to the Company such amount from the Escrow Funds as is available and
this escrow shall terminate.
5. Distribution of Escrow Funds. Escrow Agent shall not make any
distribution of Escrow Funds with respect to any Claim made by the Company
hereunder until:
(a) it receives the written consent or agreement from the Selling
Stockholders' Representative with respect to such distribution; or
(b) there is a Final Decision with respect to a Disputed Claim.
"Final Decision" means a final decision, order, judgment or decree of an
arbitrator or court (in accordance with Section 15.14 of the Recapitalization
Agreement) having jurisdiction which is either not subject to appeal or as to
which notice of appeal has not been timely filed or served.
6. Investment of Escrow Funds. The Escrow Funds shall be credited by
Escrow Agent and recorded in an escrow account. Escrow Agent shall be permitted,
and is hereby authorized to deposit, transfer, hold and invest all funds
received in this escrow, including principal and interest, in any one or more of
the investments set forth in Exhibit A during the period of this escrow in
accordance with such instructions and directions as may from time to time be
provided to the Escrow Agent in writing and signed by the Selling Stockholders'
Representative. In the event no instructions are given to Escrow Agent by the
Selling Stockholders' Representative as provided in the preceding sentence,
Escrow Agent shall hold and invest all funds received in this escrow, including
principal and interest, in the Norwest Advantage U.S. Government Funds, as such
investment fund may be renamed from time to time. Any interest received by
Escrow Agent with respect to the Escrow Funds, including reinvested interest,
shall become part of the Escrow Funds; provided, however, that such interest
shall be for the sole and exclusive benefit of the Company to the extent that
such
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interest is earned or accrued with respect to any amount which
(a) represents an Undisputed Claim under the provisions hereof (calculated from
the date specified in the applicable Claim Certificate as the date on which the
claim set forth therein arose) or (b) represents a Claim by the Company
sustained by a Final Decision (calculated from the date specified in such Final
Decision).
7. Security Interests in Escrow Fund. It is the intent of the Company and
the Selling Stockholders that each of their respective interests in the Escrow
Fund is merely a contingent right to payment from the Escrow Fund, and that
neither a voluntary or involuntary case under any applicable bankruptcy,
insolvency or similar law nor the appointment of a receiver, trustee, custodian
or similar official in respect of the Company or any Selling Stockholder (any of
which is referred to herein as a "Bankruptcy Event") shall increase its
respective interest in the Escrow Fund or affect, modify, convert or otherwise
change the contingent nature of its respective right to payment from the Escrow
Fund in accordance with the terms of this Escrow Agreement. Accordingly, in
order to assure the foregoing result even if it is determined by a court of
competent jurisdiction (whether or not in connection with a Bankruptcy Event)
that the Company or any Selling Stockholder has an interest in the Escrow Fund
that is greater than a contingent right of payment from the Escrow Fund payable
only in accordance with the provisions of Sections 4 and 5 hereof, the parties
agree as follows:
(a) The Company hereby grants (effective as of the date hereof) the
Selling Stockholders a first priority security interest in, and hereby pledges
and assigns to the Selling Stockholders, all of its right, title and interest in
the Escrow Fund to secure the Selling Stockholders' rights and the Company's
obligations hereunder. The Escrow Agent hereby agrees to act as bailee and
possessory agent on behalf of the Selling Stockholders in respect of the Selling
Stockholders' security interest in the Company's rights to the Escrow Fund. The
Escrow Agent shall, upon receipt of indemnification satisfactory to it from the
Selling Stockholders for its fees and expenses incurred in connection with
taking such actions, take all actions as may be reasonably requested in writing
of it by the Selling Stockholders' Representative to further perfect or maintain
the security interest created by the Company hereunder in the Escrow Fund. Such
security interest shall automatically be released with respect to any funds
properly distributed from the Escrow Fund pursuant to the terms of this
Agreement; and
(b) each Selling Stockholder hereby grants (effective as of the date
hereof) the Company a first priority security interest in, and hereby pledges
and assigns to the Company, all of his, or its right, title and interest in the
Escrow Fund to secure the Company's rights in such Selling Stockholder's
obligations hereunder. The Escrow Agent hereby agrees to act as bailee and
possessory agent on behalf of the Company in respect of the Company's security
interest in such Selling Stockholder's rights to the Escrow Fund. The Escrow
Agent shall, upon receipt of indemnification satisfactory to it from the Company
for its fees and expenses incurred in connection with taking such
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actions, take all actions as may be reasonably requested in writing of it by the
Company to further perfect or maintain the security interest created by such
Selling Stockholder hereunder in the Escrow Fund. Such security interest shall
automatically be released with respect to any funds properly distributed from
the Escrow Fund pursuant to the terms of this Agreement.
The parties hereto agree and acknowledge that the establishment and maintenance
of the Escrow Fund hereunder is intended to constitute possession of the Escrow
Fund for the purposes of perfecting the security interests therein created by
this Section 7.
8. Notices. All notices (including Objection Notices), certificates
(including Claim Certificates), payment, and distributions required or permitted
to be given or delivered hereunder shall be deemed to have been properly given
or delivered to the following addresses, if delivered in person, or, if mailed,
on the second business day following the date when mailed by registered or
certified mail, postage prepaid and addressed as follows:
If to Company: Young America Corporation
c/o BT Capital Partners, Inc.
Attn: Robert Marakovits
130 Liberty Street
New York, NY 10006
(212) 250-8085
With a copy to: O'Sullivan, Graev & Karabell, LLP
Attn: John M. Scott, Esq.
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
(212) 408-2485
If to Selling Jay F. Ecklund
Stockholders: Pier 66 Resort & Marina
2301 Southeast 17th Street
Ft. Lauderdale, FL 33316
Attn: Starlight B-32
(305) 767-8998
John F. Ecklund 1995 Irrevocable Trust
c/o Dorsey & Whitney LLP
Attn: William J. Berens, Esq., Trustee
220 South Sixth Street
Minneapolis, MN 55402
(612) 340-2621
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Sheldon McKensie Ecklund 1995 Irrevocable Trust
c/o Dorsey & Whitney LLP
Attn: William J. Berens, Esq., Trustee
220 South Sixth Street
Minneapolis, MN 55402
(612) 340-2621
John F. Ecklund 1997 Irrevocable Trust
c/o Dorsey & Whitney LLP
Attn: William J. Berens, Esq., Trustee
220 South Sixth Street
Minneapolis, MN 55402
(612) 340-2621
Sheldon McKensie Ecklund 1997 Irrevocable Trust
c/o Dorsey & Whitney LLP
Attn: William J. Berens, Esq., Trustee
220 South Sixth Street
Minneapolis, MN 55402
(612) 340-2621
Jay F. Ecklund 1997 Irrevocable Annuity Trust
c/o Dorsey & Whitney LLP
Attn: William J. Berens, Esq., Trustee
220 South Sixth Street
Minneapolis, MN 55402
(612) 340-2621
With a copy to: Dorsey & Whitney LLP
Attn: Michael J. McDonnell, Esq.
220 South Sixth Street
Minneapolis, MN 55402
(612) 340-2808
If to Escrow Agent: Norwest Bank Minnesota, N.A.
Corporate Trust Department
Attn: Michelle Healy
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0069
(612) 667-2245
or to such other address as a party shall designate by written notice to all
other parties to this Escrow Agreement.
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9. Reliance. Escrow Agent may act upon any instrument or other writing
believed by it in good faith to be genuine and to be signed or presented by the
proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the provisions hereof, except for
its own willful default or gross negligence. The Company and the Selling
Stockholders shall, jointly and severally, indemnify and save harmless the
Escrow Agent for all losses, costs, and expenses which may be incurred by it
without negligence or bad faith on the part of the Escrow Agent, arising out of
or in connection with its entering into this Escrow Agreement and carrying out
its duties hereunder.
10. Termination of Escrow. Unless earlier terminated pursuant to Section
4.2, on May 24, 1999, all of the Escrow Funds held by the Escrow Agent pursuant
to the terms of this Escrow Agreement, less an amount equal to one-hundred fifty
percent (150%) of the Disputed Claims amount, shall be paid by Escrow Agent to
the Selling Stockholders; provided, said payment shall be made on a prorated
basis directly to the following or their respective heirs, personal
representatives, successors or assigns, as the case may be:
Percentage Amount
-----------------
Jay F. Ecklund: 68.089%
John F. Ecklund 1995 Irrevocable Trust: 3.773%
Sheldon McKensie Ecklund 1995 Irrevocable Trust: 3.773%
John F. Ecklund 1997 Irrevocable Trust: 0.461%
Sheldon McKensie Ecklund 1997 Irrevocable Trust: 0.461%
Jay F. Ecklund 1997 Irrevocable Annuity Trust: 3.941%
Charles D. Weil: 15%
Frederick H. Stinchfield: 2.375%
David Ferguson: 2.125%
Upon settlement of all Disputed Claims, this escrow shall terminate, and all
remaining Escrow Funds held by the Escrow Agent shall be paid by the Escrow
Agent on a prorated basis directly to the aforementioned or their respective
heirs, personal representatives, successors or assigns, as the case may be, in
accordance with such settlement. For the purposes of this Section 10, the
address for payments, if any, to be made to Charles D. Weil, Frederick H.
Stinchfield and David Ferguson shall be care of the Company.
11. Fees and Expenses. The Escrow Agent shall be entitled to compensation
for its services as stated in the fee schedule attached hereto as Exhibit A,
which compensation shall be paid one-half by the Selling Stockholders and
one-half by the Company. The fee agreed upon for the services rendered hereunder
is intended as full compensation for the Escrow Agent's services as contemplated
by this Escrow Agreement; provided, however, that in the event that the
conditions for the disbursement of funds under this Escrow Agreement are not
fulfilled, or the Escrow
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Agent renders any material service not contemplated in this Escrow Agreement or
there is any assignment of interest in the subject matter of this Escrow
Agreement, or any material modification hereof, or if any material controversy
arises hereunder, or the Escrow Agent is made a party to any litigation
pertaining to this Escrow Agreement, or the subject matter hereof, then the
Escrow Agent shall be reasonably compensated for such extraordinary services and
reimbursed for all costs and expenses, including reasonable attorneys' fees,
occasioned by any delay, controversy, litigation or event, and the same shall be
recoverable one-half from the Selling Stockholders and one-half from the
Company.
12. Indemnification of Escrow Agent. The Company and the Selling
Stockholders both jointly and severally hereby indemnify and holds harmless the
Escrow Agent from and against, any and all loss, liability, cost, damage and
expense, including, without limitation, reasonable counsel fees, which the
Escrow Agent may suffer or incur by reason of any action, claim or proceeding
brought against the Escrow Agent arising out of or relating in any way to this
Escrow Agreement or any transaction to which this Escrow Agreement relates
unless such action, claim or proceeding is the result of the willful misconduct
or gross negligence of the Escrow Agent. The Escrow Agent may consult counsel in
respect of any question arising under this Escrow Agreement and the Escrow Agent
shall not be liable for any action taken or omitted in good faith upon advice of
such counsel.
13. Acceptance of Appointment . Norwest Bank Minnesota, National
Association hereby agrees to act as the Escrow Agent under this Escrow
Agreement. The Escrow Agent shall have no duty to enforce any provision hereof
requiring performance by any other party hereunder.
14. Counterparts. This Escrow Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
15. Resignation. The Escrow Agent may resign upon 30-days advance written
notice to the parties. If a successor escrow agent is not appointed by the
mutual agreement of the Company and the Selling Stockholders within the 30-day
period following such notice, the Escrow Agent may petition any court of
competent jurisdiction to name a successor escrow agent. Notwithstanding any
language to the contrary, until such time as a successor escrow agent is
appointed by mutual agreement of the Company and the Selling Stockholders or
named by a court of competent jurisdiction pursuant to this Section 14, the
Escrow Agent shall continue to serve as escrow agent under this Escrow
Agreement.
16. Governing Law. This Escrow Agreement shall be construed, performed,
and enforced in accordance with, and governed by, the internal laws of the State
of New York, without giving effect to the principles of conflict of laws
thereof. Each party hereby consents to the personal jurisdiction and venue of
any (a) Minnesota state court
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or United States District Court of Minnesota venued in Hennepin County,
Minnesota, or (b) New York state court or United States District Court for the
Southern District of New York venued in Manhattan.
17. Amendments. This Escrow Agreement may be amended to modified, and any
of the terms, covenants, representations, warranties, or conditions hereof may
be waived, only by a written instrument executed by the parties, or in the case
of a waiver, by the party waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term, covenant, representation, or
warranty contained in this Escrow Agreement, in any one or more instances, shall
not be deemed to be nor construed as further or continuing waiver of any such
conditions, or of the breach of any other provision, term, covenant,
representation, or warranty of this Escrow Agreement.
18. Section Headings. The section headings in this Escrow Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Escrow Agreement.
19. Tax Reporting. For federal and state income tax purposes, all interest
earned on the Escrow Funds shall be considered the currently reportable income
of the party who receives the distribution with respect thereto. In the case
such interest shall be considered currently reportable income of the Selling
Stockholders, said interest amounts shall be allocated pro rata to those persons
and trusts and in those amounts as described in Section 10. The Escrow Agent
annually shall file all information returns with the Internal Revenue Service
and other governmental authorities documenting such interest income. The tax
identification numbers of the parties are as follows:
The Company: Tax ID 41-0983697
BT Capital Partners: Tax ID 13-2725387
Jay F. Ecklund: SSN ###-##-####
Sheldon M. Ecklund 1995 Irrevocable Trust: Tax ID # 41-6399468
John F. Ecklund 1995 Irrevocable Trust: Tax ID # 41-6399467
Sheldon M. Ecklund 1997 Irrevocable Trust: Tax ID # 41-6432727
John F. Ecklund 1997 Irrevocable Trust: Tax ID # 41-6432726
Jay F Ecklund 1997 Irrevocable Annuity Trust: Tax ID # 41-6432728
Charles D. Weil: SSN ###-##-####
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Frederick H. Stinchfield: SSN ###-##-####
David Ferguson: SSN ###-##-####
20. Severability. In the event that any part of this Escrow Agreement is
declared by any court or other judicial or administrative body to be null, void,
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Escrow Agreement shall remain
in full force and effect.
21. Action By Selling Stockholders. Each of the Selling Stockholders
hereby agrees that the Selling Stockholders, as a group, shall deal with the
Company and all other third parties in connection with all matters arising under
this Escrow Agreement in accordance with the decision of the Selling Stockholder
or Selling Stockholders who hold a majority of the percentage interests of the
Redeemed Stock set forth on Schedule 2.4 of the Recapitalization Agreement
("Majority Stockholder(s)"). Such Majority Stockholder(s) shall be designated
the "Selling Stockholders' Representative" under this Escrow Agreement and shall
have the power to act on behalf of all of the Selling Stockholders for all
purposes under this Escrow Agreement, including its indemnification procedures,
and the Company and such third parties, respectively, shall be entitled to rely
upon, and shall be fully protected in relying upon, the power and authority of
the Selling Stockholders' Representative to act on behalf of the Selling
Stockholders.
22. Third Party Beneficiaries. Charles D. Weil, Frederick H. Stinchfield
and David Ferguson are intended third party beneficiaries of this Agreement for
the purposes of Sections 10 and 19.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be signed the day and year first above written.
BT CAPITAL PARTNERS, INC.
By
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----------------------------
Its
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YOUNG AMERICA CORPORATION
By /s/ Charles D. Weil
----------------------------
----------------------------
Its President
----------------------------
/s/ Jay F. Ecklund
------------------------------
JAY F. ECKLUND
JOHN F. ECKLUND 1995
IRREVOCABLE TRUST
By /s/ William J. Berens
----------------------------
William J. Berens, as Trustee of the
Trust and not individually
By /s/ Charles M. Thompson
----------------------------
Charles M. Thompson, as Trustee
of the Trust and not individually
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SHELDON MCKENSIE ECKLUND
1995 IRREVOCABLE TRUST
By /s/ William J. Berens
----------------------------
William J. Berens, as Trustee of the
Trust and not individually
By /s/ Charles M. Thompson
----------------------------
Charles M. Thompson, as Trustee
of the Trust and not individually
JOHN F. ECKLUND 1997
IRREVOCABLE TRUST
By /s/ William J. Berens
----------------------------
William J. Berens, as Trustee of the
Trust and not individually
By /s/ Charles M. Thompson
----------------------------
Charles M. Thompson, as Trustee
of the Trust and not individually
SHELDON MCKENSIE ECKLUND
1997 IRREVOCABLE TRUST
By /s/ William J. Berens
----------------------------
William J. Berens, as Trustee of the
Trust and not individually
By /s/ Charles M. Thompson
----------------------------
Charles M. Thompson, as Trustee
of the Trust and not individually
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JAY F. ECKLUND 1997
IRREVOCABLE ANNUITY TRUST
By /s/ William J. Berens
----------------------------
William J. Berens, as Trustee of the
Trust and not individually
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Curtis D. Schwegman
----------------------------
CURTIS D. SCHWEGMAN
----------------------------
Its Assistant Vice President
----------------------------