ESCROW AGREEMENT
This Escrow Agreement is entered into as of June 9 1997 by and among IBJ
SCHRODER BANK & TRUST COMPANY, a banking corporation organized under the laws of
the State of New York in its capacity as escrow agent (together with its
successors and assigns, the "Escrow Agent"), IBJ SCHRODER BANK & TRUST COMPANY,
a banking corporation organized under the laws of the State of New York in its
capacity as trustee under the Indenture (as hereinafter defined) (together with
its successors and assigns,, the "Trustee"), and UNITED REFINING COMPANY, a
Pennsylvania corporation (the "Company").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement the Company
and the Trustee, among others, are entering into a certain Trust Indenture (as
amended from time to time, the "Indenture") dated as of the date hereof;
WHEREAS, pursuant to the Indenture the Company is obligated to deposit with
the Escrow Agent an aggregate of $48.1 million (the "Escrow Deposit") of the net
proceeds from the sale of the Company's 10-3/4% Series A Senior Notes due 2007
("Notes") which sale is being consummated on the date hereof;
WHEREAS, the Escrow Deposit together with all interest and earnings thereon
shall be held by the Escrow Agent subject to the terms and conditions of this
Agreement and the Indenture.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. All capitalized terms used and not defined herein shall have the
meanings ascribed to them in the Indenture. Such definitions apply to both the
singular and plural forms, unless expressly stated otherwise.
2. The Escrow Agent is hereby appointed and shall have all the rights,
powers, duties and obligations hereinafter provided, and the Escrow Agent
accepts such appointment on the terms and subject to the conditions set forth
herein.
3. Concurrently with the execution and delivery of this Agreement, (a) the
Escrow Agent shall establish the Collateral Account at its office located at One
State Street, New York, New York and (b) Company shall cause to be deposited
with the Escrow Agent, in escrow, the Escrow Deposit. The Escrow Deposit shall
be held and disbursed by Escrow Agent as hereinafter set forth. The Escrow
Deposit less any amounts distributed by the
Escrow Agent in accordance with this Agreement (other than interest and earnings
on the Escrow Deposit) is hereinafter referred to as the "Escrow Funds." Any
interest and earnings on the Escrow Deposit shall be distributed by the Escrow
Agent to the Company from time to time upon the written request of the Company.
4. Subject to the provisions of Section 7 hereof, the Escrow Agent agrees
to accept the Company's deposit of the Escrow Deposit. The Escrow Agent agrees
to invest and, if applicable, reinvest the Escrow Deposit together with all
interest and earnings thereon which have not been distributed to the Company, in
cash and Cash Equivalents (as instructed by the Company in writing).
5. (a) The Company hereby irrevocably grants a first priority security
interest in and pledges, assigns and sets over to the Trustee for its benefit
and for the benefit of the Holders all of the Company's right, title and
interest in the Collateral Account, and all property now or hereafter placed or
deposited in, or delivered to the Escrow Agent for placement or deposit in, the
Collateral Account, including, without limitation, all funds held therein, all
Cash Equivalents held by (or otherwise maintained in the name of) the Escrow
Agent pursuant to Section 4, 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 Notes and any
other obligation, now or hereafter arising, of every kind and nature, owed by
the Company under the Indenture to the Holders or to the Trustee. The Escrow
Agent hereby acknowledges the Trustee's security interest 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 the Collateral in favor of
the Trustee in order to secure all such obligations and indebtedness.
(b) The Company and the Trustee hereby irrevocably instruct the Escrow
Agent to, and the Escrow Agent shall (i) (A) subject to the Company's
instructions regarding investment of the Escrow Funds, maintain sole dominion
and control over funds and Cash Equivalents in the Collateral Account for the
benefit of the Trustee and the Holders to the extent specifically required
herein, (B) maintain, or cause its agent within the State of New York to
maintain, possession of all certificated Cash Equivalents purchased hereunder
that are physically possessed by the Escrow Agent in order for the Trustee 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 Cash Equivalents are in the possession of the Company or a third
party, the Company shall hold such certificates in trust for the Escrow Agent
and promptly deliver all such certificates to the Escrow Agent) and (C) 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 Trustee, for
the benefit of the Trustee and the Holders; (ii) promptly notify the Trustee if
the Escrow Agent receives written notice that any person other than the Trustee,
for the benefit of the holders of the Notes, has a lien or security interest
upon any portion of the Collateral (other than any claim which the Escrow Agent
may have against the Collateral Account for unpaid fees and expenses); and (iii)
in addition to disbursing amounts held in escrow pursuant to Section 6, upon
receipt of a disbursement request from the Trustee notifying the Escrow Agent
that there has been an acceleration of the maturity of the Notes, and directing
the Escrow Agent to disburse all funds held in the Collateral Account to the
Trustee and transfer title to all Cash Equivalents held by the Escrow Agent
hereunder to the Trustee. The lien and security interest provided for by this
Section 5 shall automatically terminate and cease as to, and shall not extend or
apply to, and the Trustee shall have no security interest in, any funds
disbursed by the Escrow Agent to the Company pursuant to this Agreement.
(c) Upon demand, the Company will execute and deliver to the Trustee such
instruments and documents as the Trustee may reasonably deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee 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.
(d) The Company hereby appoints the Trustee as its attorney-in-fact with
full power of substitution to do any act which the Company is obligated to do
hereunder, and the Trustee may 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 Trustee's security interest hereunder. In addition to the
rights provided under Section 5(b)(iii) hereof, upon an Event of Default (as
defined in the Indenture) and for so long as such Event of Default continues,
the Trustee may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party under the Uniform Commercial Code or
other applicable law of the State of New York, and the 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
at public or private sale, at any exchange, broker's board or at any of the
Trustee's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the 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, 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 Trustee shall not be
obligated to make any sale regardless of notice of sale having been given. The
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.
(e) Pursuant to Section 4.22 of the Indenture, if the Capital Improvement
Plan is abandoned by the Company or not completed by August 31, 1999, the
Company will make a Special Offer. The Company will deliver to the Trustee
written notice indicating that a Special Offer will be consummated. Upon receipt
of the Securities tendered pursuant to the Special Offer, the Company will
deliver such Securities to the Trustee and notice to the Trustee setting forth
the exact amount of Escrow Funds needed to be released to consummate the Special
Offer and the Escrow Agent shall release to the Trustee such Escrow Funds on the
date the Escrow Agent receives such notification and shall have received verbal
confirmation of one of the officers listed on Schedule A hereto by 11:00 a.m.,
otherwise such release shall be made on the following Business Day. If $34.8
million exceeds the sum of (a) the amount of Escrow Funds released or to be
released to consummate the Special Offer plus (b) the amount of Escrow Funds
previously disbursed by the Escrow Agent pursuant to requests made by the
Company for disbursements attributable to the Capital Improvements Plan (the
amount of such excess is referred to as the "Excess"), then the Company may
deliver to the Escrow Agent an Officer's Certificate to such effect and a
written request to the Escrow Agent to disburse to the Company the Excess. The
Escrow Agent shall release to the Company the Excess on the date the Escrow
Agent receives the request of the Company pursuant to the preceding sentence,
provided that such request is received by the Escrow Agent by 11:00 a.m.,
otherwise such release shall be made on the following Business Day.
6. (a) The Escrow Agent agrees to disburse the Escrow Funds from time to
time upon request by the Company if the Company delivers along with its written
request to the Escrow Agent for disbursement, (i) an Officer's Certificate
setting forth the amount of Escrow Funds to be disbursed, the account to which
such Escrow Funds should be disbursed and the amounts of such funds attributable
to the Capital Improvements Plan and to fund Other Capital Expenditures, and
certifying that (A) the monies to be disbursed are to be applied to pay costs
and expenses of the Capital Improvements Plan or to fund Other Capital
Expenditures and (B) including the amounts to be disbursed in connection with
the applicable request, no amounts in the aggregate in excess of $13.3 million
have been used by the Company to fund Other Capital Expenditures and (ii) a
certificate signed by-the Secretary or Assistant Secretary of the Company (a
"Secretary's Certificate,,) which sets forth and authenticates a resolution that
has been adopted by a majority vote of Independent Directors of the Company
which states that the monies to be disbursed are to be applied to
pay costs and expenses of the Capital Improvement Plan or to fund Other Capital
Expenditures and authorizes the disbursement of such monies. The Escrow Agent
shall not disburse in the aggregate in excess of $13.3 million to fund Other
Capital Expenditures. In performing its duties pursuant to the preceding
sentence, the Escrow Agent may rely solely on the Officers, Certificate referred
to in Section 6(a)(i)(b).
(b) The Escrow Funds shall be released on the date the Escrow Agent
receives the request of the Company pursuant to clause (a) above, provided that
such request and any other required documentation as required under Section 6(a)
above is received by the Escrow Agent and the Escrow Agent shall have received
verbal confirmation of one of the officers listed on Schedule A hereto by 11:00
a.m., otherwise such release shall be made on the following Business Day. The
Escrow Funds shall be delivered to an account specified by the Company in its
request.
(c) The Escrow Funds shall be delivered to an account specified by the
Company in its request pursuant to the last sentence of Section 5(e), Section
6(a) and Section 6(b).
7. It is understood and agreed that the duties of the Escrow Agent are
purely ministerial in nature. It is further agreed that:
(a) the Escrow Agent shall not be responsible for the performance of the
(i) Company under this Escrow Agreement or any,other agreement or (ii)
if the Escrow Agent and the Trustee are not the same person, the
performance of the Trustee under this Escrow Agreement or any other
agreement;
(b) the Escrow Agent may conclusively rely and shall be protected in
acting upon any document, instrument, certificate, instruction or
signature believed by it to be genuine and may assume and shall be
protected in assuming that any person purporting to give any notice or
instructions in accordance with this Escrow Agreement or in connection
with any action to which this Escrow Agreement relates has been duly
authorized to do SO. The Escrow Agent shall not be obligated to make
any inquiry as to the authority, capacity, existence or identity of
any person purporting to have executed any such document or instrument
or purporting to have made any such signature or purporting to give
any such notice or instructions;
(c) in the event any party to this Escrow Agreement instructs the Escrow
Agent to disburse Escrow Funds to any party other than the Company or
the Trustee,
(i) the Escrow Agent shall disburse such Escrow Funds by mailing a
check to such party at the address set forth in the instruction; or
(ii) if the Escrow Agent is instructed to transfer Escrow Funds to any
bank for the account of any other party, the Escrow Agent may (but
shall have no obligation to) refuse to comply unless the Escrow Agent
can verify to its satisfaction that. the instruction is authentic and
correct or the party issuing the instruction has previously agreed to
other appropriate security procedures relating thereto;
(d) the Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and shall not be bound in any way by any
agreement between the Company and any other person, firm or entity
(whether or not the Escrow Agent has knowledge thereof);
(e) the Escrow Agent shall not be liable for any action taken by it in
good faith and believed by it to be authorized or within the rights or
powers conferred upon it by this Escrow Agreement, and may consult
with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel; and
(f) the Escrow Agent shall not assume any responsibility or liability for
the completeness, correctness or accuracy of any transactions between
the Company and any other person, firm or entity.
8. The Company agrees to indemnify the Escrow Agent, its directors,
officers, agents and employees and any person who "controls" the Escrow Agent
within the meaning of Section 15 of the Securities Act of 1933, as amended
(collectively, the "Indemnified Parties") against, and hold them harmless from,
any and all loss, liability, cost, damage and expense, including, without
limitation, costs of investigation and reasonable counsel fees and expenses,
which any of the Indemnified Parties may suffer or incur by reason of any
action, claim or proceeding brought against any of the Indemnified Parties,
arising out of or relating in any way to this Escrow Agreement or any
transaction to which this Escrow Agreement relates (including, without
limitation, any action, claim or proceeding arising from any investment of the
Escrow Funds made by the Escrow Agent in accordance with the written
instructions of the Company), other than any action, claim or proceeding
resulting from the gross negligence or willful misconduct of such Indemnified
Party. The provisions of this paragraph shall survive the
termination of this Escrow Agreement.
9. This Escrow Agreement shall terminate, and the Escrow Agent shall
disburse to the Company all Escrow Funds and interest and earnings thereon then
held in escrow, upon the written instruction to the Escrow Agent by the Company
and the Trustee that all principal and interest on the Notes has been paid and
none of the Notes remain outstanding.
10. Except as provided in Section 9, this Escrow Agreement may be altered,
amended or terminated only with the written consent of the Company, the Escrow
Agent and the Trustee. Should the Company attempt to change this Escrow
Agreement in a manner which in the Escrow Agent's sole opinion, is
impermissible, the Escrow Agent may resign as Escrow Agent upon two weeks'
written notice to the Company and, if the Escrow Agent and the Trustee are not
the same entity, the Trustee; otherwise, notwithstanding any provision hereof to
the contrary, it may resign as Escrow Agent at any time upon 60 days, written
notice to the Company and, if the Escrow Agent and the Trustee are not the same
entity, the Trustee. In the case of the Escrow Agent's resignation, its only
duty shall be to hold and dispose of the Escrow Funds and interest and earnings
thereon in accordance with the-original provisions of this Escrow Agreement
until a successor Escrow Agent shall be appointed by the Company and the Trustee
and a written notice of the name and address of such successor escrow agent
shall be given to the Escrow Agent by the Company, whereupon the Escrow Agent's
only duty shall be to turn over, in accordance with the written instructions of
the Company, to the successor escrow agent, the Escrow Funds and interest and
earnings thereon. In the event that a successor escrow agent shall not have been
appointed and the Escrow Agent shall not have turned over to the successor
escrow agent the Escrow Funds and interest and earnings thereon within the time
periods specified above, after the Escrow Agent's written notice of resignation,
the Escrow Agent may deposit the Escrow Funds and interest and earnings thereon
with the Clerk of the United States District Court for the Southern District of
New York or with the clerk or registry of any other court of competent
jurisdiction, at which time the Escrow Agent's duties hereunder shall terminate.
11. The Escrow Agent shall receive a fee of $3,500 per year (payable in
advance) as well as reasonable expenses incurred in connection with the
performance of this Escrow Agreement, including, but hot limited to, reasonable
counsel fees in connection with the administration, interpretation and
enforcement of this Agreement; provided, however, that the Escrow Agent shall
- ----------------- not receive an acceptance fee or any other fee in connection
with the negotiation and acceptance of this Escrow Agreement or reimbursement of
any of its expenses in connection with such negotiation and acceptance,
including, but not limited to, counsel fees and, provided, further, that if
after the first anniversary of ----------------- the date of this Escrow
Agreement, the Escrow Agent resigns as
Escrow Agent hereunder for any reason or this Escrow Agreement is terminated for
any reason, the Escrow Agent shall refund to the Company a portion of its annual
fee determined by multiplying the annual fee times a fraction, the numerator of
which is the difference between (a) 365 and (b) as of the effective date of such
resignation or termination, the number of days elapsed since the most recent
anniversary of the date of this Agreement (or the date of this Agreement in case
of a resignation or termination during the first year) and the denominator is
365.
12. This Escrow Agreement shall be construed in accordance with and
governed by the laws of the State of New York without giving effect to the
principles of conflicts of laws and shall be binding upon the parties hereto and
their respective successors and permitted assigns. This Agreement shall not be
assignable by any party without the written consent of the other parties hereto.
13. All notices, requests, demands and other communications to be given in
connection with this Escrow Agreement shall be in writing, and shall be
sufficiently given if made by hand delivery, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
If to the Escrow Agent or Trustee:
IBJ Schroder Bank & Trust Company
One State Street Plaza - llth Floor
New York, NY 10004
Attention: Corporate Trust Department
Facsimile No.: (212) 858-2952
Telephone No.: (212) 858-2815
If to the Company:
United Refining Company
15 Bradley Street
Warren, Pennsylvania 16365
Attention: President
Facsimile No.: (814) 723-4371
Telephone No.: (814) 726-4655
So long as the Escrow Agent and Trustee shall be the same entity, (a) any notice
given to it in one capacity shall be deemed given to it in its other capacity as
well and (b) notwithstanding anything to the contrary contained herein, the
Trustee shall not be required to give written notice of any matter to the Escrow
Agent and the Escrow Agent may, but shall not be required to, give written
notice of any matter to the Trustee. Each of the Company, the Trustee and the
Escrow Agent by written notice to each other such person may designate
additional or different addresses for notices to such person. Any notice or
communication to the Company, the Trustee
and the Escrow Agent shall be deemed to have been given or made as of the date
so delivered if personally delivered; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change or address shall
not be deemed to have been given until actually received by the addressee).
14. If any provision of this Escrow Agreement or the application thereof to
any person or circumstance shall be determined to be invalid or unenforceable,
the remaining provisions of this Escrow Agreement or the application of such
provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
15. This Escrow Agreement may be executed in several counterparts or by
separate instruments, and all of such counterparts or instruments shall
constitute one agreement binding on all the parties hereto.
16. All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the context may require.
17. This Escrow Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings (written or oral) of the parties in
connection herewith.
IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as
of the day and year first above written.
IBJ SCHRODER BANK & TRUST COMPANY,
as Escrow Agent
By: /s/ Luis Perez
----------------------
Name: Luis Perez
Title: Asst. Vice President
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/ Luis Perez
----------------------
Name: Luis Perez
Title: Asst. Vice President
UNITED REFINING COMPANY
By: /s/ Myron L. Turfitt
----------------------
Name: Myron L. Turfitt
Title: President
SCHEDULE A
Upon receipt of Disbursement Instructions from the Company directing the Escrow
Agent to disburse amounts from the Escrow Funds, the Escrow Agent will confirm
the instructions set forth in such notice with one of the authorized individual
(s) listed below at an authorized telephone number appearing opposite such
individual's name:
Authorized Individual(s) Authorized Telephone
of the Company: Number(s):
Myron Turfitt 814-726-4655
James Murphy 814-726-4674