EXHIBIT 10.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of May 9, 2005, by
and among Paid, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), Xxxxxx Xxxxxx ("Seller"), and Olde Monmouth Stock
Transfer Co., Inc., as escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company, formerly known as Sales Online Direct, Inc., and
Seller are parties to an Agreement and Plan of Merger ("Merger Agreement") dated
October 23, 2001, whereby Rotman Collectibles, Inc., a Massachusetts corporation
engaged in the movie poster business ("Target"), was merged with and into a
subsidiary of the Company. As consideration for such merger, Seller received a
6% Convertible Promissory Note equal to One Million Dollars ($1,000,000) (the
"Note"). The principal and interest due under the Note was convertible into
shares of common stock of the Company. Seller has converted the entire amount
due under the Note into shares of Common Stock of the Company ("Common Stock").
The Company does not owe any additional amount under the Note.
WHEREAS, pursuant to the Merger Agreement, Seller and the Company engaged
an appraiser to appraise the total retail value of certain movie posters (the
"Posters"), which were the primary asset of Target. The appraisal provided that
the total retail value of the Posters was $2,233,685.18 (the "Appraised Value").
WHEREAS, the Company anticipates that the posters will sell for an amount
that is less than the Appraised Value;
WHEREAS, Seller contends that the appraisal of the Posters was made
independently, based on knowledge at the time, and that the Posters sold for a
lower retail value because, in part, of timing of the sales and a general
economic decline.
WHEREAS, the parties entered into a Settlement Agreement and Mutual
Release ("Settlement Agreement and Mutual Release") to resolve all differences
related to the Merger Agreement;
WHEREAS, as part of the settlement terms, Seller agreed to either pay cash
consideration equal to Six Hundred Thousand Dollars ($600,000) ("Cash
Consideration"), or to grant to the Company certain option rights and, with
respect thereto, is required to deposit 2,000,000 shares of Common Stock of the
Company beneficially owned by Seller into escrow (the "Escrow Shares");
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1
I. ESCROW DEPOSIT
As of the date hereof, if Seller has not paid the Cash Consideration to
the Company, Seller shall promptly deposit the Escrow Shares with the Escrow
Agent, to be held in escrow with, and released by, the Escrow Agent, in
accordance with this Agreement.
II. MAINTENANCE OF ESCROW; RIGHTS WITH RESPECT TO ESCROW SHARES
A. The Escrow Agent shall hold the Escrow Shares in certificate form or
in a brokerage account, as the Escrow Agent deems appropriate to
fulfill its duties hereunder, in either case registered in the name
of the Escrow Agent as escrow agent under this Agreement. Seller (or
her assignees) shall be the beneficial owner of the Escrow Shares
unless and until any Escrow Shares are released to the Company in
accordance with this Agreement.
B. While held in escrow, Seller (or her assignees) shall have the right
to direct the voting of the Escrow Shares and the right to receive
any cash dividends paid with respect to the Escrow Shares. Seller
shall have no right to assign or otherwise transfer the Escrow
Shares in any manner other than upon operation of law or court
decree, in which case any and all assignees or transferees shall be
bound by the terms of this Agreement without any action of such
assignee or transferee.
C. In the event that any stock or other securities become issuable with
respect to any Escrow Shares, or any stock split, share exchange or
other reclassification or recapitalization shall occur with respect
to any Escrow Shares, the stock or other securities issued in
connection therewith shall be deposited into escrow with the Escrow
Agent and held in accordance with this Agreement, and such stock or
other securities shall be deemed included within the meaning of the
term "Escrow Shares" as used herein.
III. RELEASE OF ESCROW SHARES
Escrow Shares shall be released from escrow at any time or from time to
time, in whole or in part, on or after the date hereof, solely upon written
instructions of the Company's President, or, if none, any officer authorized by
the Board of Directors of the Company, to the Escrow Agent, to such individual
or entity, and upon such terms, as may be reasonably requested by the Company,
unless otherwise ordered by a court of competent jurisdiction. Notwithstanding
the foregoing, the Escrow Agent shall release the Escrow Shares to Seller only
upon written instructions of Seller (or her assignees) at any time after one
year from the date hereof.
IV. TRANSFERS OF BENEFICIAL INTEREST PRIOR TO RELEASE FROM ESCROW
A. Prohibition on Transfers. No Escrow Shares may be sold short, made
the subject of put options, or otherwise beneficially sold,
transferred, pledged or otherwise alienated or encumbered while held
in escrow.
B. No Pledge of Right to Receive Escrow Shares. Seller shall not have
any right to grant to a lender or any other person a security
interest in Seller's right to receive
2
Escrow Shares until released to Seller under this Agreement. Seller
represents and warrants that the Escrow Shares are not currently
subject to a security interest or pledge.
V. ESCROW AGENT
The acceptance by the Escrow Agent of its duties hereunder is subject to
the following terms and conditions, which the parties to this Agreement hereby
agree shall govern and control with respect to the rights, duties, liabilities
and immunities of the Escrow Agent:
A. Validity of Communications. The Escrow Agent shall not be
responsible or liable in any manner whatever for the sufficiency,
correctness, genuineness or validity of any communication given to
the Escrow Agent.
B. Genuineness. The Escrow Agent shall be protected in acting upon any
written notice, certificate, instruction, request or other paper or
document believed by the Escrow Agent to be genuine and to have been
signed or presented by the proper party or parties.
C. Limitation on Liability. The Escrow Agent shall not be liable for
any act done hereunder except in the case of the Escrow Agent's
willful misconduct or bad faith. Any release of Escrow Shares by the
Escrow Agent pursuant to this Agreement shall fully discharge the
Escrow Agent's duties with respect to such shares, and the Escrow
Agent shall have no further obligation with respect to such shares.
D. No Investigation. The Escrow Agent shall not be obligated to
investigate the correctness or accuracy of any document or to
determine whether or not the signatures contained in such documents
are genuine or to require documentation or evidence substantiating
any such document or signature.
E. Duties. The Escrow Agent shall have no duties as Escrow Agent except
those that are expressly set forth herein or in any modification or
amendment hereof; provided, however, that no such modification or
amendment hereof shall affect the Escrow Agent's duties unless the
Escrow Agent shall have given written consent thereto.
F. Controversies. If any controversy arises between two or more of the
parties hereto, or between any of the parties hereto and any person
not a party hereto, as to whether or not or to whom the Escrow Agent
shall deliver any Escrow Shares or as to any other matter arising
out of or relating to this Escrow Agreement, the Escrow Agent shall
not be required to determine the same and need not make any delivery
of the Escrow Shares in dispute or any portion thereof but may
retain the same until the rights of the parties to the dispute shall
have been finally determined by agreement, by final arbitral
decision or by final judgment of a court of competent jurisdiction
after all appeals have been finally determined (or the time for
further appeals has expired without an appeal having been made). The
Escrow Agent shall deliver, in accordance with the terms hereof,
that portion of the Escrow Shares not subject to such dispute. The
Escrow Agent shall deliver that portion of the Escrow Shares covered
by such agreement or final decision or order within five days after
the Escrow Agent receives a copy thereof. The Escrow Agent shall
assume that no such controversy has arisen unless and until it
receives written notice from the Company, Seller or an interested
third party that such controversy has arisen,
3
which refers specifically to this Agreement and identifies the
adverse claimants to the controversy.
G. Indemnification. The Company shall indemnify the Escrow Agent for,
and to hold the Escrow Agent harmless from and against, any loss
incurred without gross negligence, willful misconduct, or bad faith
on the Escrow Agent's part, arising out of or in connection with the
administration of this Agreement, including the costs and expenses
of defending the Escrow Agent against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall not apply to a direct
claim against the Escrow Agent by the Company or Seller alleging in
good faith a breach of this Agreement by the Escrow Agent, which
claim results in a final non-appealable judgment against the Escrow
Agent with respect to such claim.
H. Interpleader. In the event of any dispute as to the nature of the
rights or obligations of the Seller, the Company or the Escrow Agent
hereunder, the Escrow Agent may at any time or from time to time
interplead and/or deposit all or any part of the Escrow Shares with
or to a court of competent jurisdiction, in accordance with the
procedural rules thereof. The Escrow Agent shall give notice of such
action to the Company and Seller. Upon such interpleader or deposit,
the Escrow Agent shall immediately be relieved and discharged from
all further obligations and responsibilities hereunder with respect
to the Escrow Shares deposited, including the decision to interplead
or deposit such Escrow Shares.
VI. TERMINATION
This Agreement shall terminate upon the release from escrow in accordance
with this Agreement of all of the Escrow Shares, provided that the provisions of
this Agreement for the benefit of the Escrow Agent shall survive any termination
of this Agreement.
VII. MISCELLANEOUS
A. Amendment; Third Party Interests. This Agreement may be modified or
amended by a written instrument executed by the Company and the
Escrow Agent and, as long as Seller owns a beneficial interest in
any Escrow Shares, by Seller. If Seller ceases to be the beneficial
owner of any Escrow Shares other than through the Company's
assignment or exercise of any call option related to such Escrow
Shares, modification or amendment of this Agreement also shall
require the written consent of any permitted assignee or transferee.
B. Notices. All communications required or permitted to be given under
this Agreement to any party hereto shall be sent by first class
mail, return receipt requested, to the following addresses and
facsimile numbers, or such other addresses as the parties may
specify by giving written notice:
If to the Company: 0 Xxxxxxxx Xx.
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, CEO
with copies to: Bowditch & Xxxxx, LLP
000 Xxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
4
If to Seller: Xxxxxx Xxxxxx
c/o Xxxxx Xxxxxx, Esq.
Xxxxx & Xxxxxxxxx, P.C.
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
If to the
Escrow Agent: Olde Monmouth Stock Transfer Co., Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxxx
C. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and
assigns; provided that the Escrow Agent shall not assign its duties
under this Agreement and Seller shall not assign any right or
interest in any Escrow Shares except in accordance with the
provisions of this Agreement.
D. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the Commonwealth of
Massachusetts, excluding any conflicts of law principle that would
apply the law of another jurisdiction.
E. Counterparts and Facsimile. This Agreement may be executed in two or
more counterparts, each of which shall be an original, and all of
which together shall constitute one and the same agreement. This
Agreement may be executed by facsimile transmission, which shall be
deemed an original for all purposes.
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PAID, INC.
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Xxxxxxx Xxxxxx, President
/s/ Xxxxxx Xxxxxx
----------------------------------------
Xxxxxx Xxxxxx
ESCROW AGENT:
OLDE MONMOUTH STOCK TRANSFER CO.,
INC.
By: /S/ Xxxx Xxxxxxx Xxxxxxx
-------------------------------------
Xxxx Xxxxxxx Xxxxxxx, President
6
