POST-CLOSING ESCROW AGREEMENT
THIS POST-CLOSING ESCROW AGREEMENT, dated as of August 5, 1997
("Agreement"), is by and among Westgate Fabrics, Inc. ("Purchaser"), Xxxxx
Fabrics, Inc. ("Seller") and Xxxxxx and Xxxxxxx, L.L.P. ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Seller and Purchaser are parties to that certain Asset
Purchase Agreement, dated July 17, 1997 (as amended by Amendment No. 1, thereto,
the "Purchase Agreement") (capitalized terms not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement); and
WHEREAS, the Seller agreed in the Purchase Agreement that the
indemnification obligations of the Seller thereunder shall be secured in the
manner set forth in this Agreement; and
WHEREAS, as contemplated by the Purchase Agreement, Purchaser has deposited
the sum of $150,000 (together with any interest earned thereon, the "Escrow
Funds") on the Closing Date in an escrow account with the Escrow Agent;
In consideration of the mutual covenants and agreements contained herein
and certain other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto covenant and agree as
follows:
1. Appointment of Escrow Agent and Deposit of Escrow Funds. The Purchaser
and the Seller hereby appoint and designate the Escrow Agent as the Escrow Agent
hereunder, and the Escrow Agent hereby accepts such appointment and agrees to
serve hereunder for the purposes and on the terms set forth herein. The Escrow
Agent shall receive, hold and deliver the Escrow Funds, as provided for herein.
The Escrow Funds shall be invested in money market and similar liquid
investments, as directed by Seller.
2. Disbursement of the Escrow Funds.
(a) Unless and to the extent that subparagraphs (b) or (c) below shall
apply, the Escrow Agent shall hold the Escrow Funds until the later of (i) the
90th day after the Closing or (ii) 10 days after finalization of the Closing
Balance Sheet (the "Termination Date"), and shall thereafter deliver all Escrow
Funds held by the Escrow Agent on such Termination Date to the Seller.
(b) In the event that, after finalization of the Closing Balance Sheet in
accordance with Section 2.4 of the Purchase Agreement, the Closing Date Value is
less than $2.5 million, Purchaser shall then be entitled to receive from the
Escrow Agent the dollar amount of Escrow Funds as is equal to the dollar amount
of the shortfall between the Closing Date Value and $2.5 million.
(c) If, at any time prior to the Termination Date, Purchaser has given the
Escrow Agent a notice (the "Purchaser Notice") that it is entitled to receive
Escrow Funds as a result of the indemnification obligations of the Seller
arising under the Purchase Agreement, the Escrow Agent shall give a copy of the
Purchaser Notice to the Seller. If the Escrow Agent does not receive a written
objection from the Seller to the Purchaser Notice prior to the 10th day
following the date the Purchaser Notice is deemed delivered to the Seller, the
Escrow Agent shall disburse to the Purchaser the amount of Escrow Funds
described in the Purchaser Notice. If the Escrow Agent timely receives a copy of
a written objection from the Seller to the Purchaser Notice, then the provisions
of Section 4 hereof shall apply.
(d) On the date which is 60 days after the Closing Date, the Escrow Agent
shall deliver to Purchaser an amount equal to the sum of $10,000. Such amount
shall be taken from the Escrow Funds unless the Escrow Agent has received notice
by such date from the Seller and the Purchaser that the Tax Liens (as defined in
that certain Amendment No. 1 to the Purchase Agreement), has been released.
Payment of Escrow Funds to Purchaser under this section 4(d) does not foreclose
or otherwise impair or affect Purchaser's right to seek indemnification or other
recourse available to Purchaser under the Purchase Agreement or otherwise with
respect to any damage incurred by Purchaser, arising from the Tax Liens.
3. Escrow Agent Duties. Without in any way limiting any other provision of
this Agreement, it is expressly understood and agreed that the Escrow Agent
shall be under no duty or obligation to give any notice, or to do or to omit the
doing of any action with respect to the Escrow Funds. The Escrow Agent shall not
be liable for any error in judgment or any act or steps taken or permitted to be
taken in good faith, or for any mistake of law or fact, or for anything it may
do or refrain from doing in connection herewith, except for its own willful
misconduct or gross negligence. The Escrow Agent shall not be required in any
way to determine the validity or sufficiency, whether in form or substance, of
any instrument, document, certificate, statement or notice referred to in this
Agreement or contemplated hereby, or the identity or authority of the persons
executing the same, and it shall be sufficient if any writing purporting to be
such instrument, document, certificate, statement or notice is delivered to the
Escrow Agent and purports to be correct in form and signed or otherwise executed
by the party or parties required to sign or execute the same under this
Agreement.
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4. Right of Interpleader. Should any controversy arise between or among the
Purchaser and the Seller, or any other person, firm or entity, with respect to
this Agreement or the Escrow Funds, or the Escrow Agent should be in doubt as to
what action to take, the Escrow Agent shall have the right to (i) withhold
delivery of the Escrow Funds until the controversy is resolved, the conflicting
demands are withdrawn or the doubt is resolved, or (ii) institute a xxxx of
interpleader in a court of applicable jurisdiction to determine the rights of
the parties hereto. Should a xxxx of interpleader be instituted, or should the
Escrow Agent be threatened with litigation or become involved in litigation in
any manner whatsoever on account of this Agreement or the Escrow Funds, then as
between themselves and the Escrow Agent, Purchaser and the Seller, jointly and
severally, hereby bind and obligate themselves, their successors, heirs,
executors and assigns to pay the Escrow Agent its reasonable attorney's fees and
any and all other disbursements, expenses, losses, costs and damages of the
Escrow Agent in connection with or resulting from such threatened or actual
litigation.
5. Indemnity. Purchaser and Seller, jointly and severally, agree to
indemnify the Escrow Agent against and hold the Escrow Agent harmless from any
and all losses, costs (other than general servicing of the account), damages,
expenses, claims and attorney's fees suffered or incurred by the Escrow Agent as
a result of, in connection with or arising from or out of the acts or omissions
of the Escrow Agent in performance of or pursuant to this Agreement, except such
acts or omissions as may result from the Escrow Agent's willful misconduct or
gross negligence. Except for a claim for indemnification pursuant to this
Section 5, if applicable, the Escrow Agent shall not deduct any charges from the
Escrow Funds for serving as Escrow Agent.
6. Resignation. The Escrow Agent may resign upon 10 days' prior written
notice to Purchaser and the Seller, and, upon joint instructions from Purchaser
and the Seller, shall deliver the Escrow Funds to any designated substitute
Escrow Agent selected by Purchaser and the Seller. If Purchaser and the Seller
fail to designate a substitute Escrow Agent within 10 days, the Escrow Agent
may, at its sole discretion and its sole option, institute a xxxx of
interpleader as contemplated by Section 4 hereof.
7. Termination. Upon delivery of all of the Escrow Funds as provided in
Section 2 or upon the institution of a xxxx of interpleader as provided in
Section 4 hereof, this Agreement shall terminate except for the provisions of
Section 5.
8. Notices. Any notice or communication must be in writing and given in the
manner set forth in the Purchase Agreement. For the purpose of notice, the
addresses of Purchaser and the Seller shall be as set forth in the Purchase
Agreement, and the address of the Escrow Agent shall be as set forth opposite
its name on the
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signature page hereto. Any party may change its address for notice by written
notice given to the other parties.
9. Choice of Laws; Cumulative Rights. This Agreement shall be construed
under the laws of the State of Texas. All of the Escrow Agent's rights hereunder
are cumulative of any other rights it may have by law or otherwise.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
11. Entire Agreement. This Agreement and any other documents executed or
delivered pursuant to this Agreement, contain the complete agreement among the
parties with respect to the transactions contemplated hereby and supersede all
prior agreements and understandings, whether oral or written, among the parties
with respect to such transactions.
12. Binding Effect. This Agreement and the rights, interests and
obligations hereunder shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors and assigns.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WESTGATE FABRICS, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Its: Chief Executive Officer
XXXXX FABRICS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Its: Vice President
ESCROW AGENT:
Xxxxxx & Xxxxxxx, L.L.P.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
Address: 000 X. Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
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