EXHIBIT B
to
SCHEDULE 13D
ESCROW AGREEMENT
Escrow Agreement dated as of July 10, 1998 by and among xXXxX*s Inc., a
Delaware corporation of the State of Delaware ("Parent"), American Retail
Enterprises, L.P., a New York limited partnership, as agent (the "Company"), and
The Chase Manhattan Bank, a New York State chartered bank ("Escrow Agent").
WITNESSETH
WHEREAS, pursuant to an Asset Purchase Agreement dated as of June 1, 1998
(the "Purchase Agreement") by and among Parent, Screeem! Inc., a Delaware
corporation ("Screeem"), the Company and certain affiliates of the Company (the
"Company Affiliates"), there is required to be deposited in escrow certain
securities to be held by the Escrow Agent subject to the terms and conditions
set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Parent and the Company do hereby appoint and designate the Escrow Agent as
escrow agent for the purposes set forth herein, and the Escrow Agent does hereby
accept such appointment under the terms and conditions set forth herein.
1. Certain Definitions.
"Escrow Termination Date" means the 18 month anniversary of this
Agreement.
"Parent Common Stock" means the common stock, par value $.01 per
share, of Parent.
"Trademark License Agreement" means the trademark license agreement
dated as of the date hereof by and among the Parent, Screeem, the Company and
certain affiliates of the Company.
"Transfer Agent" means the transfer agent for the Parent Common
Stock.
"Transitional Services Agreement" means the transitional services
agreement dated as of the date hereof by and among the Parent, Screeem and the
Company.
2. Deposit of Escrowed Shares. Simultaneous with the execution of this
Escrow Agreement, Parent is depositing with the Escrow Agent, and Escrow Agent
hereby acknowledges receipt of, a certificate representing 171,074 shares of
Parent Common Stock issued to the Company pursuant to Section 3.1(c) of the
Purchase Agreement (the "Initial Escrowed Shares"), accompanied by five fully
executed stock powers duly endorsed in blank and medallion guaranteed. The
Initial Escrowed Shares, together with any shares of Parent Common Stock issued
as a result of any stock dividend or stock split with respect to such shares and
such other shares of Parent Common Stock as may, from time to time, be deposited
with the Escrow Agent in accordance with the Purchase Agreement, are hereinafter
referred to as the "Escrowed Shares." The Escrow Agent shall hold, subject to
the terms and conditions hereof, the Escrowed Shares, provided, however, that it
is understood and agreed that (a) any cash dividends or distributions on the
Escrowed Shares shall be payable to the Company and shall not be held by the
Escrow Agent and (b) the Company shall retain any voting rights associated with
the Escrowed Shares.
3. Delivery of Escrowed Shares. The Escrow Agent shall not have the right
to liquidate any investments held (including, without limitation, the Escrowed
Shares), in order to provide funds necessary
to make required payments under this Escrow Agreement other than payments
payable to the Escrow Agent (but shall only have the right to liquidate the
investments to the extent payments payable to the Escrow Agent are not made when
due and provided, further, the Escrow Agent shall have given the Company and the
Parent 10 days advance notice of its intent to so liquidate such investments and
the Parent and the Company have not paid the amounts payable to the Escrow
Agent). Rather, the Escrow Agent shall deliver the appropriate number of
Escrowed Shares (as determined pursuant to paragraph 4(a) or 5 hereof) to the
party entitled to them in accordance with the terms of this Agreement. Once the
appropriate number of Escrowed Shares has been determined as provided in this
Agreement, the Escrow Agent shall (if the Escrow Agent does not hold one or more
certificates in the exact amount equal to that number of Escrowed Shares)
deliver one or more certificates for the Escrowed Shares to the Transfer Agent
with instructions to: (i) issue a certificate (in the name of the party entitled
to such shares) for the appropriate amount of Escrowed Shares, (ii) issue a
certificate (in the name of the Company) for the balance of the Escrowed Shares
so delivered and (iii) return all such newly-issued certificates to the Escrow
Agent. The Parent shall, and, subject to provision of documents or instruments
reasonably requested by the transfer agent of the Company to facilitate the
foregoing, shall cause the Transfer Agent to, comply with such instructions.
4. Claims Against Escrowed Shares.
(a) Notice of Claim by Parent. Parent may, at any time until the
Escrowed Shares shall have been delivered as hereinafter provided in Section 6,
submit requests for disbursements of Escrowed Shares by making a claim
("Parent's Claim") stated to be on the basis of (1) the indemnity provided to
the Parent by the Company and the Company Affiliates pursuant to the Purchase
Agreement, (2) the purchase price adjustment provisions of the Purchase
Agreement, (3) the Transitional Services Agreement or (4) the Trademark License
Agreement by giving written notice of such claim to the Escrow Agent and the
Company, certifying to the Escrow Agent (i) that the claim is being asserted
pursuant to this Section 4, (ii) that a copy of the notice has been delivered to
the Company and its counsel as set forth in Section 14 hereof and the date of
receipt of such notice by the Company and its counsel, (iii) stating the nature,
basis and amount of the claim and the pertinent details thereof, including, with
respect to any claims asserted by a third party, the date by which any answer or
other response must be served and (iv) the number of Escrowed Shares asserted to
be payable to Parent as a result of the claim. Upon the giving of such notice,
the disposition of such claim or claims shall be governed as follows: (A) unless
within 30 days following receipt by the Escrow Agent (or if later, 30 days after
receipt by the Company and its counsel of such notice) of Parent's notice the
Company provides written notice to Parent and the Escrow Agent that the Company
disputes such claim, which notice shall set forth the nature and basis of such
dispute, the claim will be paid by Escrow Agent in accordance with Section 4(b)
hereof; or (B) if within 30 days following receipt by the Escrow Agent of
Parent's notice (or if later, 30 days after receipt by the Company and its
counsel of such notice) the Company provides written notice to Parent and the
Escrow Agent that the Company disputes such claims, such dispute will be settled
pursuant to Section 5 hereof.
(b) Delivery. Any payment of a claim by Escrow Agent pursuant to
Section 4(a) or Section 5 of this Agreement shall be made in the form of
delivery of Escrowed Shares to Parent and shall be made only in whole shares, it
being understood that the amount payable shall be rounded down to the nearest
whole share.
5. Settlement of Disputes. If the Company notifies Parent and the Escrow
Agent in accordance with Section 4(a) hereof that Company objects to the payment
of a claim made by Parent against the Escrowed Shares, any determination as to
whether the claim is valid, and the amount paid on the claim and any
reimbursable expenses applicable thereto, shall be conclusively determined by
the mutual consent of the Company and Parent (evidenced by a certificate signed
by the Company and Parent) or as set forth in a final order, decree or judgment
of a court of competent jurisdiction in the United States of America, the time
of appeal having expired and no appeal having been perfected (a "Final Order").
Notice
of any such determination shall forthwith be given to the Escrow Agent in the
form of (i) a certificate signed by Parent and the Company or (ii) a certificate
of either the Parent or the company with a certified copy of a Final Order
attached, and if such determination, as evidenced by such notice, shall allow
the claim in whole or in part, the Escrow Agent shall, within ten (10) business
days after receipt of such notice (or in the case of (ii), ten days after the
Escrow Agent has given notice to the party which did not submit the certificate
if such party has not within such 10-day period given the Escrow Agent and the
party submitting the certificate written notice of objection), deliver to the
appropriate party the number of Escrowed Shares specified in the certificate.
6. Disposition and Termination.
(a) If, at the Escrow Termination Date, no Parent's Claims are
pending, within two (2) business days after the Escrow Termination Date, the
Escrow Agent shall deliver to the Company the Escrowed Shares remaining in the
Escrow Agent's possession.
(b) If, at the Escrow Termination Date, any Parent's Claims are
pending, within two (2) business days after the Escrow Termination Date, the
Escrow Agent shall deliver to the Company the Escrowed Shares remaining in the
Escrow Agent's possession less that number of Escrowed Shares that would be
required to be paid by Escrow Agent pursuant to Section 4(b) if any pending
Parent's Claims were to become payable claims (such shares being hereinafter
referred to as "Reserved Shares").
(c) Within two (2) business days after resolution of each Parent's
Claim that was pending as of the Escrow Termination Date, the Escrow Agent shall
deliver the Reserved Shares remaining in the Escrow Agent's possession in
connection with such claim upon, and pursuant to, (i) the joint written
instructions of Parent and Company or (ii) a Final Order.
(d) Upon delivery by the Escrow Agent of all Escrowed Shares, this
Escrow Agreement shall terminate, subject to the provisions of Section 12
hereunder, which Section shall survive such termination.
7. The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein.
8. The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall be under no
duty to inquire into or investigate the validity, accuracy or content of any
such document. The Escrow Agent shall have no duty to solicit any payments which
may be due it hereunder.
9. The Escrow Agent shall not be liable for any action taken or omitted by
it in good faith except to the extent a court of competent jurisdiction
determines that the Escrow Agent's willful misconduct or gross negligence caused
or contributed to the Parent or the Company. In the administration of the escrow
account hereunder, the Escrow Agent may execute any of its powers and perform
its duties hereunder directly or through agents or attorneys and may consult
with counsel, accountants and other skilled persons to be selected and retained
by it, but the Escrow Agent shall nevertheless remain responsible for the
performance by such persons. The Escrow Agent shall not be liable for anything
done, suffered or omitted in good faith by it in accordance with the advice or
opinion of any such counsel, accountants or other skilled persons.
10. The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing of such resignation specifying
a date when such resignation shall take effect. The Escrow Agent shall have the
right to withhold an amount equal to the amount due and owing to the
Escrow Agent, plus any costs and expenses the Escrow Agent shall reasonably
believe may be incurred by the Escrow Agent in connection with the termination
of the Escrow Agreement.
11. Parent and Company hereby agree to each (i) pay the Escrow Agent upon
execution of this Agreement one-half of the compensation for the services to be
rendered hereunder, as described in Schedule I attached hereto, and (ii) pay or
reimburse the Escrow Agent upon request for one-half all expenses, disbursement
and advances, including reasonable attorney's fees, incurred or made by it in
connection with the performance, modification and termination of this Agreement.
12. Parent and Company hereby agree to jointly and severally indemnify the
Escrow Agent for, and to hold it harmless against any loss, liability or expense
arising out of or in connection with this Agreement and carrying out its duties
hereunder, including the costs and expenses of defending itself against any
claim of liability, except in those cases where the Escrow Agent has been guilty
of gross negligence or willful misconduct. Anything in this agreement to the
contrary notwithstanding, in no event shall the Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind
whatsoever,(including but not limited to lost profits), even if the Escrow Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action. As between Parent, on the one hand, and the Company, on the
other, all amounts to be paid pursuant to this Section 12 shall be split 50/50.
13. The duties and responsibilities of the Escrow Agent hereunder shall be
determined solely by the express provisions of this Escrow Agreement, and no
other or further duties or responsibilities shall be implied. The Escrow Agent
shall not have any liability under, nor duty to inquire into the terms and
provisions of any agreement or instructions, other than outlined in the
Agreement.
14. All notices and communications hereunder shall be in writing and shall
be deemed to be duly given if sent by registered mail, return receipt requested,
or by hand delivery or courier in each case to the following address:
(a) The Chase Manhattan Bank
Corporate Trust Group
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Escrow Administration, 15th Floor
(b) If to Parent to:
xXXxX*s Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
(c) If to Company to:
American Retail Enterprises, L.P.
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxx Xxxxx & Xxxx
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
or at such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested. Any such notice
or communication given in the manner specified in this Section shall be deemed
to have been given as of the date so received, as evidenced by a receipt of
delivery provided by the United States Postal Service, hand deliverer or
courier, as the case may be.
15. This instrument contains the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof. The provisions of this
Escrow Agreement may be waived, altered, amended or supplemented, in whole or in
part, only by a writing signed by all of the parties hereto.
16. Neither this Escrow Agreement nor any right or interest hereunder may
be assigned in whole or in part by any party without the prior consent of the
other parties; provided, however, that Parent may assign its rights (but shall
not be released from its obligations) under this Agreement to one or more
affiliates of Parent without the consent of the other parties hereto. All the
terms and provisions of this Agreement shall be binding on, and shall inure to
the benefit of, the respective legal successors and permitted assigns of the
parties.
17. This Escrow Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
18. The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or joint written
instructions given by the parties hereto.
19. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions, claims or demands from any
party hereto which, in its opinions, conflict with any of the provisions of this
Agreement, it shall be entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow until it shall be
directed otherwise in writing by all of the other parties hereto or by a final
order or judgment of a court of competent jurisdiction.
20. Any corporation into which the Escrow Agent in its individual capacity
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the Escrow Agent in its
individual capacity shall be a party, or any corporation to which substantially
all the corporate trust business of the Escrow Agent in its individual capacity
may be transferred, shall be the Escrow Agent under this Escrow Agreement
without further act.
21. If any term, condition or provision of this Agreement shall be
declared, to any extent, invalid or unenforceable, the remainder of the
Agreement, other than the term, condition or provision held invalid or
unenforceable, shall not be affected thereby and shall be considered in full
force and effect and shall be valid and be enforced to the fullest extent
permitted by law.
22. The captions set forth in this Agreement are used solely for
convenience or reference and shall not control or affect the meaning or
interpretation of any of the provisions.
23. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and any action brought hereunder shall be
brought in the federal courts or courts of the State of New York, in each case
located in the County of New York. Each party hereto irrevocably waives any
objection on the grounds of venue, forum non-conveniens or any similar grounds
and irrevocably consents to service of process by mail or in any other manner
permitted by applicable law in connection with this Agreement and consents to
the jurisdiction of said courts.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO ESCROW AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the date and year first above written.
xXXxX*s INC.
By: /s/ Xxxx Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx
Senior Vice President -
Development & Legal Affairs
AMERICAN RETAIL ENTERPRISES, L.P.
By: LANDMARK PANTS CORP.
its general partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx Xxxxxx
Vice President
By: /s/ Xxxx Xxxxxxxx
------------------------------
Xxxx Xxxxxxxx
Vice President
By: THE PANTS SET, INC.
its general partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx Xxxxxx
President
By: /s/ Xxxx Xxxxxxxx
------------------------------
Xxxx Xxxxxxxx
Vice President
THE CHASE MANHATTAN BANK, as
Escrow Agent
By: /s/ Xxxxxxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxxxxxx Xxxxxx
Title: Assistant Vice President
SCHEDULE 1
12.5 basis points of the highest value of collateral held on deposit per annum
or any part thereof without proration for partial years, subject to a minimum of
$5,000 per annum (which shall be split 50/50 by (a) the Parent and the Company
on the one hand and (b) Chase Manhattan Bank's Middle Market division on the
other hand) or any part thereof without proration for partial years. For
purposes of this Schedule I, the value of the collateral shall be measured on
the date of this Escrow Agreement and again on each anniversary of the date
hereof using an average of the closing sales price on the ten trading days
preceding such measurement date.
