ESCROW AGREEMENT
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THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
the 9th day of April, 1998, by and among THE UNION LABOR LIFE INSURANCE
COMPANY, a Maryland corporation ("Investor"), JD AMERICAN WORKWEAR, INC., a
Delaware corporation (the "Company") and MARINE MIDLAND BANK, N.A. (the "Escrow
Agent"). For purposes of this Agreement, all capitalized terms shall have the
meanings ascribed to such terms in the Securities Purchase Agreement (defined
below) unless otherwise defined herein.
RECITALS
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A. Concurrently with entering into this Agreement, Investor and the
Company have entered into that certain Securities Purchase Agreement of even
date herewith (the "Securities Purchase Agreement") pursuant to which Investor
is agreeing to purchase 2,500 shares of the Company's Series B Cumulative
Convertible Preferred Stock, $.001 par value per share (the "Preferred Stock"),
and a detached ten-year Stock Purchase Warrant (the "Warrant") to purchase
799,000 shares of the Common Stock.
B. Pursuant to Section 7.4(b) of the Securities Purchase Agreement,
the Company is obligated to, among other things, as soon as available, and in
any event by May 29, 1998, deliver financial statements prepared on a
consolidated basis (together with consolidating statements in support thereof)
consisting of a balance sheet of the Company, as of the end of such fiscal
year, together with statements of income, stockholders' equity and cash flow
for such fiscal year, all in reasonable detail, and duly certified by an
opinion unqualified as to scope of a firm of independent certified public
accountants, which firm is one of the four or five largest national accounting
firms (the "Financial Statements").
C. Pursuant to Sections 3 and 6.1(m) of the Securities Purchase
Agreement, the Company is obligated to deposit the Escrow Amount with the
Escrow Agent to be held in escrow and either paid to Investor or returned to
the Company depending upon whether the conditions specified in Section 7.20 of
the Securities Purchase Agreement have been satisfied.
D. The execution and delivery of this Agreement and deposit of the
Escrow Amount with the Escrow Agent are conditions precedent to the obligations
of Investor to consummate the transactions contemplated in the Securities
Purchase Agreement.
NOW THEREFORE, in consideration of the covenants and agreements contained
in this Agreement, and intending to be legally bound, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
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SECTION 1.01 Definitions. Unless otherwise expressly defined in this
Agreement or the context otherwise requires, the capitalized terms appearing in
this Agreement shall have the meanings ascribed to them in the Securities
Purchase Agreement.
ARTICLE II
ESCROW
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SECTION 2.01 Escrow. The Company hereby delivers to the Escrow Agent
the sum of One million five hundred eighty five thousand five hundred
fifty-eight and 03/100 dollars ($1,585,558.03) (the "Escrow Amount"), the
receipt of which the Escrow Agent hereby acknowledges. The Escrow Amount shall
be deposited in an account established at the Escrow Agent for receipt of such
amount (the "Escrow Account") and shall be held in such Escrow Account and
distributed in accordance with the terms and provisions of this Agreement.
SECTION 2.02 Investment of Escrow Amount. The Escrow Amount shall be
held and invested or reinvested by the Escrow Agent at the written or oral
request of the Company in any of the following securities:
(a) obligations issued or guaranteed by the United States of
America or any person controlled or supervised by and acting as an
instrumentality of the United States pursuant to authority granted by Congress;
and
(b) certificates of deposit of banks or trust companies,
including those of the Escrow Agent, organized under the laws of the United
States of America.
Such investments shall be made subject to any orders of the Company with
respect thereto, provided that investments of monies in the Escrow Account
shall in any event mature or be redeemable or be subject to liquidation by sale
or otherwise at the option of the Escrow Agent at such time as may be necessary
to make timely disbursements from said Escrow Account. Subject to any such
orders with respect thereto, or in the absence of any orders from the Company,
the Escrow Agent may from time to time sell such investments and reinvest the
proceeds therefrom in other investments of the type described in this Section
maturing or redeemable as aforesaid. Any such investments may be purchased from
the Escrow Agent or any affiliate of the Escrow Agent. The Escrow Account shall
be credited with all proceeds of sale and income from such investments (which
income is herein called "Escrow Income").
SECTION 2.03 Term of Escrow Account. Subject to claims against the
Escrow Account as hereinafter provided, the term of the Escrow Account shall
commence on the date hereof and terminate at 5:00 p.m. Eastern Time on June 30,
1998 (the "Expiration Date").
SECTION 2.04 Claim Against Escrow Account.
(a) If the Company has failed to deliver the Financial Statements
to the Investor by May 29, 1998, the Investor shall give written notice to the
Company and the Escrow Agent of such failure to deliver the Financial
Statements. The Escrow Agent shall, without further instructions, immediately
pay to investor, out of the Escrow Account, the Escrow Amount and to the
Company, the Escrow Income.
(b) If within thirty (30) days of Investor's receipt of the
Financial Statements, Investor claims either (x) that the Financial Statements
are not in conformity with the requirements of Section 7.4(b) of the Securities
Purchase Agreement, or (y) in Investor's reasonable judgment the financial
condition, results of operations and cash flows of the Company reflected in the
Financial Statements are not in material conformity with the information
previously furnished to Investor with respect to these financial matters
(either a "Claim"), then Investor shall give written notice of the Claim (the
"Claim Notice") to the Company and the Escrow Agent, stating in general terms
the reason for its position; provided, however, that in no event shall Investor
be entitled to make the claim against the Escrow Amount after the Expiration
Date. If the Company objects to the Claim, it shall give written notice of such
objection (the "Objection Notice") to the Investor and the Escrow Agent within
ten (10) days after the date of receipt of the Claim Notice, and shall state in
general terms the basis for such objection. If no Objection Notice is given to
the Escrow Agent and Investor within such ten (10) day period, the Escrow Agent
shall, without further instructions, promptly pay to the Investor, out of the
Escrow Account, the Escrow Amount and to the Company the Escrow Income.
(c) If the Company provides timely notice of objection to the
Claim, Investor and the Company shall attempt to resolve the dispute and, if
they are able to do so, shall give written notice to the Escrow Agent of the
resolution of the dispute and the amount of the Escrow Amount, if any, to be
paid to the Investor. Upon receipt of such notice, the Escrow Agent shall,
without further instructions, pay to the Investor, out of the Escrow Account,
such amount of the Escrow Amount set forth in the notice and to the Company the
balance of the Escrow Amount, if any, and the Escrow Income.
(d) If Investor and the Company are unable informally to resolve
a disputed claim pursuant to Section 2.04(c) above within twenty (20) days
after the date the Company's Objection Notice is given, the dispute shall be
settled by arbitration in accordance with Section 2.05 hereof. Any decision or
award of the arbitrators shall be final and conclusive on the parties to this
Agreement, their respective affiliates, and there shall be no appeal therefrom
other than as expressly set forth herein.
SECTION 2.05 Arbitration.
(a) Mandatory Arbitration. Any controversy, dispute or claim
arising out of or in connection with this Agreement which is not resolved by
negotiation, shall be resolved by arbitration in accordance with the provisions
of this Section 2.05. Except as otherwise expressly provided in this Agreement,
neither the Company nor the Investor shall initiate or prosecute any lawsuit or
administrative action in any way related to the Claim or the Company's
objection thereto. The Company and the Investor agree that the validity of any
provision of this Section 2.05 shall also be subject to arbitration.
(b) Arbitration Procedures.
(1) Sponsoring Organization and Location of Arbitration.
The arbitration will be held in Washington, D.C. under the auspices of the
American Arbitration Association ("AAA"). The Company and the Investor agree
that except as provided in this Agreement, the arbitration shall be in
accordance with the then-current arbitration procedures of the AAA. The
arbitration shall be conducted by a panel of three arbitrators two of whom
shall be retired judges or attorneys licensed to practice law in Washington,
D.C. and one of whom shall be a practicing certified public accountant who is
an audit partner at any of the five largest national accounting firms (other
than Coopers & Xxxxxxx) (the "Arbitrators").
(2) Selection of Arbitrators. The Arbitrators shall be
selected as follows. The Company, on the one hand, and the Investor, on the
other, shall select an arbitrator from a list of arbitrators provided by the
AAA, and meeting the criteria set forth above. The two arbitrators so selected
shall select a third arbitrator who also meets the above criteria. If the two
named arbitrators are unable to agree upon the third arbitrator or fail to
designate such arbitrator within thirty (30) days from the day the matter is
submitted to arbitration, then, on application of either the Company or the
Investor, the third arbitrator shall be designated by the AAA.
(3) Law Applicable. The Arbitrators shall apply the
substantive law (and the law of remedies, if applicable) of the State of New
York. The Arbitrators are without jurisdiction to apply any different
substantive law or different law of remedies. The Company and the Investor
agree that the Arbitrators shall have the authority and power to render awards
for equitable relief.
(4) Discovery and Procedure. The Company and the Investor
each shall have the right to take the deposition of four individuals and any
expert witness designated by the other party. The Company and the Investor each
also shall have the right to make requests for production of documents to the
other. The subpoena right specified below shall be applicable to discovery
pursuant to this paragraph. Additional discovery may be had only where the
arbitrator selected pursuant to this Agreement so orders, upon a showing of
reasonable and substantial need. At least thirty (30) days before the
arbitration, the Company and the Investor must exchange lists of witnesses,
including any expert, and copies of all exhibits intended to be used at the
arbitration. The Company and the Investor shall have the right to subpoena
witnesses and documents for the arbitration. The Arbitrators shall have
jurisdiction to hear and rule on pre-hearing disputes and are authorized to
hold pre-hearing conferences by telephone or in person, as the Arbitrators deem
necessary. The Arbitrators shall have the authority to entertain a motion to
dismiss and/or a motion for summary judgment by either the Company or the
Investor and shall apply the standards governing such motions under the Federal
Rules of Civil Procedure. Either the Company or the Investor at its expense,
may arrange for and pay the cost of a court reporter to provide a stenographic
record of proceedings. Either the Company or the Investor upon request at the
close of hearing, shall be given leave to file a post-hearing brief. The time
for filing such a brief shall be set by the Arbitrators.
(5) Arbitration Award and Opinion. The decision of any two
(2) Arbitrators shall constitute a final decision and award hereunder. The
Arbitrators shall render an award and opinion outlining in reasonable detail
the findings of fact and conclusions of law upon which the award is based.
(c) Rights to Reconsideration. Either the Company or the Investor
shall have the right, within twenty (20) days of issuance of the Arbitrators'
proposed opinion, to file with the Arbitrators a motion to reconsider
(accompanied by a supporting brief), and the other party shall have twenty (20)
days from the date of the motion to respond. The Arbitrators thereupon shall
reconsider the issues raised by the motion and, promptly, either confirm or
change the decision, which (except as provided by this Agreement) shall then be
final and conclusive upon the Company and the Investor. The costs of such a
motion for reconsideration and written opinion of the Arbitrators shall be
borne by the party prevailing on the motion, unless the Arbitrators order
otherwise.
(d) Finality of Arbitrators' Award. The Arbitrators, and not any
federal, state, or local court or agency, shall have exclusive authority to
resolve any dispute relating to the Claim. The arbitration shall be final and
binding upon the Company and the Investor.
(e) Arbitration Fees and Costs. The Company and the Investor
shall equally share the fees and costs of the Arbitrators. Each party to the
arbitration will deposit funds or post other appropriate security for its share
of the Arbitrators' fees and costs, in an amount and manner determined by the
Arbitrators, ten (10) days before the first day of hearing.
(f) Disbursement of Escrow Amount Upon Final Resolution. After
the Arbitrators' rendering of an award and opinion and the explanation or
resolution of any rights to reconsideration pursuant to the terms hereof, the
Company or the Investor shall deliver to the Escrow Agent notice of the
Arbitrators' award and opinion (together with a copy of such award and
opinion). Upon receipt of such notice, the Escrow Agent shall, without further
instructions, pay to the Investor, out of the Escrow Account, such amount of
the Escrow Amount set forth in the notice and to the Company, the balance of
the Escrow Amount, if any, and the Escrow Income.
SECTION 2.06 No Limitation on Liability of the Company. Notwithstanding
any provision to the contrary contained in this Agreement, Investor and the
Company expressly acknowledge and agree that Investor's rights against the
Company, and the obligations and liabilities of the Company to Investor, under
the Securities Purchase Agreement are not, and shall not be, limited to claims
against the Escrow Amount.
SECTION 2.07 Escrow Agent.
(a) The duties of the Escrow Agent hereunder shall be entirely
administrative and not discretionary. The Escrow Agent shall be obligated to
act only as specifically set forth in this Agreement and in written
instructions received by it pursuant hereto. The Escrow Agent is hereby
authorized to comply with any orders, judgments or decrees of any court and
shall not be liable as a result of its compliance with the same.
(b) As to any legal questions arising in connection with the
administration of this Agreement, the Escrow Agent may rely absolutely upon the
opinions given to it by its counsel and shall be free of liability for acting
in reliance on such opinions.
(c) The Escrow Agent may rely absolutely upon the genuineness and
authorization of the signature and purported signature of any party upon any
instruction, notice, release, receipt or other document delivered to it
pursuant to this Agreement.
(d) The Escrow Agent may, as a condition to the disbursement of
monies as provided herein, require from the payee or recipient a receipt
therefor and, upon final payment, a release of the Escrow Agent from any
liability arising out of its execution or performance of this Agreement, such
release to be in a form satisfactory to the Escrow Agent.
(e) The Escrow Agent shall be entitled to refrain from taking any
action contemplated by this Agreement in the event it becomes aware of any
dispute between Investor and the Company (other than a dispute subject to the
provisions of Section 2.04 of this Agreement) as to any material facts or as to
the happening of any event precedent to such action.
(f) The Company agrees to pay to the Escrow Agent, as
compensation for its services hereunder, a fee equal to $2,000, plus reasonable
out-of-pocket expenses.
SECTION 2.08 Indemnity.
(a) Investor and the Company agree to and hereby do waive any
suit, claim, demand or cause of action of any kind which they may have or may
assert against the Escrow Agent arising out of or relating to the execution or
performance by the Escrow Agent of this Agreement, unless such suit, claim,
demand or cause of action is based upon the willful or reckless misconduct or
gross negligence or bad faith of the Escrow Agent. They further agree to
indemnify the Escrow Agent against and from any and all claims, demands, costs,
liabilities and expenses, including reasonable counsel fees, which may be
asserted against it or to which it may be exposed or which it may incur by
reason of its execution or performance of this Agreement. Investor and the
Company hereby agree that any obligations to indemnify the Escrow Agent arising
under this Section 2.08 shall be shared equally between the Investor, on the
one hand, and the Company on the other. Such agreement to indemnify shall
survive the termination of this Agreement until extinguished by any applicable
statute of limitations.
(b) In case any litigation is brought against the Escrow Agent in
respect of which indemnity may be sought hereunder, the Escrow Agent shall give
prompt notice of that litigation to the parties hereto, and the parties upon
receipt of that notice shall have the obligation and the right to assume the
defense of such litigation, provided that failure of the Escrow Agent to give
that notice shall not relieve the parties hereto from any of their obligations
under this Section unless that failure prejudices the defense of such
litigation by said parties. At its own expense, the Escrow Agent may employ
separate counsel and participate in the defense. The parties hereto shall not
be liable for any settlement without their respective consents.
SECTION 2.09 Acknowledgment by the Escrow Agent. By execution and
delivery of this Agreement, the Escrow Agent acknowledges that the terms and
provisions of this Agreement are acceptable and it agrees to carry out the
provisions of this Agreement on its part.
SECTION 2.10 Resignation or Removal of Escrow Agent; Successors.
(a) The Escrow Agent may resign as such following the giving of
thirty (30) days' prior written notice to the other parties hereto. Similarly,
the Escrow Agent may be removed and replaced following the giving of thirty
(30) days' prior written notice to the Escrow Agent by Investor and the
Company. In either event, the duties of the Escrow Agent shall terminate thirty
(30) days after the date of such notice (or as of such earlier date as may be
mutually agreeable); and the Escrow Agent shall then deliver the balance of the
Escrow Account then in its possession to a successor Escrow Agent as shall be
appointed by the other parties hereto as evidenced by a written notice filed
with the Escrow Agent.
(b) If for any reason any successor bank or escrow company is
unwilling to serve as successor Escrow Agent and if the other parties hereto
are unable to agree upon a successor or shall have failed to appoint a
successor prior to the expiration of thirty (30) days following the date of the
notice of resignation or removal, the then acting Escrow Agent may petition any
court of competent jurisdiction for the appointment of a successor Escrow Agent
or other appropriate relief; and any such resulting appointment shall be
binding upon all of the parties hereto.
(c) Every successor appointed hereunder shall execute,
acknowledge and deliver to its predecessor and also to Investor and the
Company, an instrument in writing accepting such appointment hereunder, and
thereupon such successor, without any further act, shall become fully vested
with all the duties, responsibilities and obligations of its predecessor; but
such predecessor shall, nevertheless, on the written request of its successor
or any of the parties hereto, execute and deliver an instrument or instruments
transferring to such successor all the rights of such predecessor hereunder,
and shall duly assign, transfer and deliver all securities held by it pursuant
to this Agreement to its successor. Should any instrument be required by any
successor for more fully vesting in such successor the duties, responsibilities
and obligations hereby vested or intended to be vested in the predecessor, any
and all such instruments in writing shall, on the request of any of the other
parties hereto, be executed, acknowledged and delivered by the predecessor.
(d) Upon acknowledgment by any successor Escrow Agent of the
receipt of the then remaining balance of the Escrow Account, the then acting
Escrow Agent shall be fully released and relieved of all duties,
responsibilities and obligations under this Agreement.
SECTION 2.11 Acknowledgment by the Company. The Company acknowledges
that in no event shall any resolution of the Claim or payment of any portion of
the Escrow Amount to Investor require the return, revocation, or recission of
any of the Preferred Stock or the Warrant.
ARTICLE III
MISCELLANEOUS
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SECTION 3.01 Assignment; Successors and Assigns; Third Parties. Except
as otherwise provided herein, no party to this Agreement shall convey, assign
or otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the Investor and of the Company;
provided, that, without such consent, Investor may collaterally assign its
rights hereunder to any lending institutions providing financing for the
transactions contemplated hereby, so long as Investor provides notice to the
Stockholders of such assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Subject to the immediately preceding sentence, this
Agreement is not intended to benefit, and shall not run to the benefit of or be
enforceable by, any other person or entity other than the parties hereto and
their permitted successors and assigns.
SECTION 3.02 Entire Agreement. This Agreement contains the entire
agreement (including representations, warranties and covenants) among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements, negotiations, discussions, arrangements or
understandings with respect thereto.
SECTION 3.03 Waiver; Remedies. No delay on the part of any party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver by such party of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.
SECTION 3.04 Severability. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein, is determined by a court to
be invalid or unenforceable, such determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if such invalid or unenforceable portion were not contained
therein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
SECTION 3.05 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to the Escrow Agent:
Marine Midland Bank, N.A.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Corporate Trust Administration
Telecopier: (000) 000-0000
if to the Company:
Xx. Xxxxx X. De Baene
President and Chief Executive Officer
JD American Workwear, Inc.
00 Xxx Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Telecopier: (000) 000-0000
with a copy to
Xxxxxx X. XxXxxxx, Esq.
Xxxx Xxxxx Xxxx & XxXxxx LLP
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
if to Investor to:
Union Labor Life Insurance Company
000 Xxxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xx. Xxxxxxx X. Xxxxx, Senior Vice President
Telecopier: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
or to such other address or telecopier number as such party may specify for the
purpose by notice to the other party or parties to this Agreement, as the case
may be. Any notice, request, consent or other communication hereunder shall be
deemed to have been given and received on the day on which it is delivered (by
any means including personal delivery, overnight air courier, United States
mail) or telecopied (or, if such day is not a business day or if the notice,
request, consent or communication is not telecopied during business hours of
the intended recipient, at the place of receipt, on the next following business
day).
SECTION 3.06 Amendments. This Agreement may be modified or amended only
by a written agreement signed by Investor and the Company (but not the Escrow
Agent); provided, however, that any amendment to Article II hereof shall
require the written consent of the Escrow Agent.
SECTION 3.07 Expenses. Except as otherwise provided for herein or the
Securities Purchase Agreement, each party shall be responsible for its own
costs and expenses with respect to matters involving this Agreement.
SECTION 3.08 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws (and not the law of
conflicts) of the State of New York.
SECTION 3.09 Execution Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
SECTION 3.10 Captions. The captions and headings in this Agreement
shall be solely for convenience of reference and shall in no way define, limit
or describe the scope or intent of any provisions or sections of this
Agreement.
SECTION 3.11 Gender. Words of the masculine gender include the feminine
and the neuter, and when the context so requires, words of the neuter gender
may refer to any gender.
SECTION 3.12 Authorship. This Agreement shall not be construed for or
against any party by reason of the authorship or claimed authorship of any
provision of this Agreement or by reason of the status of the respective
parties.
SECTION 3.13 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, with
the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same agreement.
SECTION 3.14 Entire Agreement. This Agreement, the Securities Purchase
Agreement and any agreement, document or instrument referred to herein or
therein, constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof, and supersede all other prior
agreements or undertakings with respect thereto, both written and oral.
[SIGNATURE PAGE TO ESCROW AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the day and year first above written.
JD AMERICAN WORKWEAR, INC.
By: /s/ XXXXX X. XXXXXXX
Xxxxx X. XxXxxxx, President and Chief
Executive Officer
THE UNION LABOR LIFE INSURANCE COMPANY
By: /s/ XXXXXXX X. XXXXXXXX
Name: Xxxxxxx X. Xxxxxxxx
Vice President--Investments
MARINE MIDLAND BANK, N.A.
By: /s/ XXXXXX XXXXXX
Name: Xxxxxx Xxxxxx
Title: Vice President-Corporate Trust
