EXHIBIT 4.23
ESCROW AGREEMENT
ESCROW AGREEMENT (the "ESCROW AGREEMENT") made as of the 28th day of May,
2004, by and among Vertex Interactive, Inc., a New Jersey corporation (the
"COMPANY"), the Purchasers listed on Schedule A attached hereto (each a
"PURCHASER" and collectively, the "PURCHASERS") and Xxxx Xxxxxxxxx, Esq. (the
"ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, the Company desires to raise capital in order to finance the
growth of its business operations and for other general corporate purposes;
WHEREAS, the Company and the Purchasers have agreed that, in order to
raise capital, the Company shall issue and sell to the Purchasers notes (the
"NOTES"), convertible into shares of the Company's common stock, $0.005 par
value per share (the "COMMON STOCK"), and Warrants to purchase shares of Common
Stock (the "Warrants") for an aggregate purchase price of $1,500,000;
WHEREAS, the Company has entered into that certain Securities Purchase
Agreement dated as of April 28, 2004 (the "PURCHASE AGREEMENT") with the
Purchasers;
WHEREAS, the parties have agreed that certain interest payments due and
payable through the Maturity Date (as defined in the Notes) shall be paid into
escrow and the Escrow Agent has agreed to receive, hold and pay such funds, upon
the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and legal sufficiency
of which is hereby acknowledged, the parties to this Escrow Agreement hereby
agree as follows:
1. DEFINED TERMS. Capitalized terms used and not otherwise defined herein
shall have the meanings respectively assigned to them in the Purchase Agreement.
2. ESCROW OF FUNDS. On the date hereof, the following shall occur: the
Company shall instruct the Purchasers to remit by wire transfer $112,500 to the
Escrow Agent pursuant to this Escrow Agreement (the "ESCROW AMOUNT"). The Escrow
Agent shall hold the Escrow Amount only in accordance with the terms and
conditions of this Escrow Agreement.
3. INVESTMENT OF FUNDS. The Escrow Agent shall invest the monies in the
Escrow Amount in an interest bearing bank account with, or certificates of
deposit or time deposits with, maturities of no more than thirty (30) days
issued by, a domestic commercial bank or such other bank or other financial
institution as it normally holds such funds.
4. RELEASE OF FUNDS.
(a) So long as all or a portion of the aggregate principal amount of
the Notes remains outstanding, the Escrow Agent shall release the Escrow Amount,
or a portion thereof, to the Purchasers in an amount equal to the aggregate
outstanding principal amount of the Notes multiplied by 2.5% on March 31, June
30, September 30 and December 31 of each year (the "INTEREST PAYMENT DATES")
beginning on December 31, 2004. The Purchasers shall provide written
instructions regarding the aggregate outstanding principal amount of the Notes
and directing the manner in which the distribution of the Escrow Amount, or a
portion thereof, is to be made on or prior to each of the Interest Payment
Dates. Upon receipt of joint written instructions from the Purchasers and the
Company stating that that no portion of the aggregate principal amount of the
Notes remains outstanding, the Escrow Agent shall release any remaining portion
of the Escrow Amount to the Company in accordance with the written instructions
of the Company directing the manner in which the distribution of the remaining
portion of the Escrow Amount is to be made.
(b) Upon written notice from the Purchasers that the Company is in
default of its obligations under the Purchase Agreement, the Escrow Agent shall
immediately release all of the Escrow Amount to the Purchasers in accordance
with the written instruction provided by the Purchasers directing the manner in
which the distribution of the Escrow Amount is to be made.
5. FURTHER ASSURANCES. The Company and the Purchasers agree to do such
further acts and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the Escrow Agent from time to
time reasonably may request in connection with the administration, maintenance,
enforcement or adjudication of this Escrow Agreement in order (a) to give the
Escrow Agent confirmation and assurance of the Escrow Agent's rights, powers,
privileges, remedies and interests under this Escrow Agreement and applicable
law, (b) to better enable the Escrow Agent to exercise any such right, power,
privilege, remedy or interest, or (c) to otherwise effectuate the purpose and
the terms and provisions of this Escrow Agreement, each in such form and
substance as may be reasonably acceptable to the Escrow Agent.
6. CONFLICTING DEMANDS. If conflicting or adverse claims or demands are
made or notices served upon the Escrow Agent with respect to the escrow provided
for herein, the Company and the Purchasers agree that the Escrow Agent shall
refuse to comply with any such claim or demand and withhold and stop all further
performance of this escrow so long as such disagreement shall continue. In so
doing, the Escrow Agent shall not be or become liable for damages, losses,
costs, expenses or interest to any or any other person for its failure to comply
with such conflicting or adverse demands. The Escrow Agent shall be entitled to
continue to so refrain and refuse to so act until such conflicting claims or
demands shall have been finally determined by a court or arbitrator of competent
jurisdiction or shall have been settled by agreement of the parties to such
controversy, in which case the Escrow Agent shall be notified thereof in a
notice signed by such parties. The Escrow Agent may also elect to commence an
interpleader or other action for declaratory judgment for the purpose of having
the respective rights of the claimants adjudicated, and may deposit with the
court all funds held hereunder pursuant to this Escrow Agreement; and if it so
commences and deposits, the Escrow Agent shall be relieved and discharged from
any further duties and obligations under this Escrow Agreement.
7. DISPUTES. Each of the parties hereto hereby covenants and agrees that
the Federal or state courts located in the Borough of Manhattan, State of New
York shall have jurisdiction over any dispute with the Escrow Agent or relating
to this Escrow Agreement.
8. EXPENSES OF THE ESCROW AGENT. The Company agrees to pay any and all
out-of-pocket costs and expenses incurred by the Escrow Agent in connection with
all waivers, releases, discharges, satisfactions, modifications and amendments
of this Escrow Agreement, the administration and holding of the Escrow Amount
and the investment of such funds, and the enforcement, protection and
adjudication of the Escrow Agent's rights hereunder by the Escrow Agent,
including, without limitation, the out-of-pocket disbursements of the Escrow
Agent itself and expenses and costs of other attorneys it may retain, if any.
The Company shall be liable to the Escrow Agent for any expenses payable by the
Escrow Agent.
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9. RELIANCE ON DOCUMENTS AND EXPERTS. The Escrow Agent shall be entitled
to rely upon any notice, consent, certificate, affidavit, statement, paper,
document, writing or communication (collectively, the "Certificate") (which to
the extent permitted hereunder may be by telegram, cable, telex, telecopier, or
telephone) reasonably believed by it to be genuine and to have been signed, sent
or made by the proper person or persons, and upon opinions and advice of legal
counsel (including itself or counsel for any party hereto), independent public
accountants and other experts selected by the Escrow Agent and mutually
acceptable to each of the Company and the Purchasers. The Escrow Agent shall not
be responsible to review the Certificate other than to confirm that it has been
signed or to determine the clearance of checks received for the Escrow Amount.
10. STATUS OF THE ESCROW AGENT, ETC. The Escrow Agent is acting under this
Escrow Agreement as a stakeholder only. No term or provision of this Escrow
Agreement is intended to create, nor shall any such term or provision be deemed
to have created, any joint venture, partnership or attorney-client relationship
between or among the Escrow Agent and the Company or the Purchasers. This Escrow
Agreement shall not be deemed to prohibit or in any way restrict the Escrow
Agent's representation of the Company, who may be advised by the Escrow Agent on
any and all matters pertaining to this Escrow Agreement. To the extent the
Purchasers have been represented by the Escrow Agent, the Purchasers hereby
waive any conflict of interest and irrevocably authorize and direct the Escrow
Agent to carry out the terms and provisions of this Escrow Agreement fairly as
to all parties, without regard to any such representation and irrespective of
the impact upon the Purchasers. The Escrow Agent's only duties are those
expressly set forth in this Escrow Agreement, and each of the Company and the
Purchasers authorize the Escrow Agent to perform those duties in accordance with
its usual practices in holding funds of its own or those of other escrows. The
Escrow Agent may exercise or otherwise enforce any of its rights, powers,
privileges, remedies and interests under this Escrow Agreement and applicable
law or perform any of its duties under this Escrow Agreement by or through its
partners, employees, attorneys, agents or designees.
11. EXCULPATION. The Escrow Agent and its designees, and their respective
partners, employees, attorneys and agents, shall not incur any liability
whatsoever for the investment or disposition of funds or the taking of any other
action in accordance with the terms and provisions of this Escrow Agreement, for
any mistake or error in judgment, for compliance with any applicable law or any
attachment, order or other directive of any court or other authority
(irrespective of any conflicting term or provision of this Escrow Agreement), or
for any act or omission of any other person selected with reasonable care and
engaged by the Escrow Agent in connection with this Escrow Agreement (other than
for such Escrow Agent's or such person's own acts or omissions breaching a duty
owed to the claimant under this Escrow Agreement and amounting to gross
negligence or willful misconduct as finally determined pursuant to applicable
law by a governmental authority having jurisdiction); and each of the Company
and the Purchasers hereby waive any and all claims and actions whatsoever
against the Escrow Agent and its designees, and their respective partners,
employees, attorneys and agents, arising out of or related directly or
indirectly to any and all of the foregoing acts, omissions and circumstances.
Furthermore, the Escrow Agent and its designees, and their respective partners,
employees, attorneys and agents, shall not incur any liability (other than for a
person's own acts or omissions breaching a duty owed to the claimant under this
Escrow Agreement and amounting to willful misconduct as finally determined
pursuant to applicable law by a governmental authority having jurisdiction) for
other acts and omissions arising out of or related directly or indirectly to
this Escrow Agreement or the Escrow Amount; and each of the Company and the
Purchasers hereby expressly waive any and all claims and actions (other than
those attributable to a person's own acts or omissions breaching a duty owed to
the claimant and amounting to gross negligence or willful misconduct as finally
determined pursuant to applicable law by a governmental authority having
jurisdiction) against the Escrow Agent and its designees, and their respective
partners, employees, attorneys and agents, arising out of or related directly or
indirectly to any and all of the foregoing acts, omissions and circumstances.
The Escrow Agent's designees excludes the Purchasers for purposes hereof.
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12. INDEMNIFICATION. The Escrow Agent and its designees (excluding the
Purchasers), and their respective partners, employees, attorneys and agents,
shall be indemnified, reimbursed, held harmless and, at the request of the
Escrow Agent, defended, by the Company from and against any and all claims,
liabilities, losses and expenses (including, without limitation, the reasonable
disbursements, expenses and fees of their respective attorneys) that may be
imposed upon, incurred by, or asserted against any of them, arising out of or
related directly or indirectly to this Escrow Agreement or the Escrow Amount,
except such as are occasioned by the indemnified person's own acts and omissions
breaching a duty owed to the claimant under this Escrow Agreement and amounting
to willful misconduct as finally determined pursuant to applicable law by a
governmental authority having jurisdiction.
13. NOTICES. Any notice, request, demand or other communication permitted
or required to be given hereunder shall be in writing, shall be sent by one of
the following means to the addressee at the address set forth below (or at such
other address as shall be designated hereunder by notice to the other parties
and persons receiving copies, effective upon actual receipt) and shall be deemed
conclusively to have been given: (a) on the first business day following the day
timely deposited with Federal Express (or other equivalent national overnight
courier) or United States Express Mail, with the cost of delivery prepaid; (b)
on the fifth business day following the day duly sent by certified or registered
United States mail, postage prepaid and return receipt requested; or (c) when
otherwise actually delivered to the addressee.
If to the Company: Vertex Interactive, Inc.
0000 Xxxxxxx Xxxx
Xxxxx Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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If to any Purchaser: At the address of such Purchaser set
forth on Schedule A to the Escrow
Agreement, with copies to such
Purchaser's counsel as set forth on
Schedule A or as specified in
writing by such Purchaser.
If to the Escrow Agent: Xxxx Xxxxxxxxx, Esq.
Xxxxxxxxx & Associates
00000 Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
14. SECTION AND OTHER HEADINGS. The section and other headings contained
in this Escrow Agreement are for convenience only, shall not be deemed a part of
this Escrow Agreement and shall not affect the meaning or interpretation of this
Escrow Agreement.
15. GOVERNING LAW. This Escrow Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without regard to principles of conflicts of law. Each of the Company and the
Purchasers (i) hereby irrevocably submit to the jurisdiction of the United
States District Court sitting in the Southern District of New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement or the Purchase Agreement and (ii) hereby waive, and agree not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchasers consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 15 shall affect
or limit any right to serve process in any other manner permitted by law.
16. COUNTERPARTS. This Escrow Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts shall together constitute one and
the same agreement.
17. RESIGNATION OF ESCROW AGENT. The Escrow Agent may, at any time, at its
option, elect to resign its duties as Escrow Agent under this Escrow Agreement
by providing notice thereof to each of the Company and the Purchasers. In such
event, the Escrow Agent shall deposit the Escrow Amount with a successor
independent escrow agent to be appointed by (a) the Company and the Purchasers
within thirty (30) days following the receipt of notice of resignation from the
Escrow Agent, or (b) the Escrow Agent if the Company and the Purchasers shall
have not agreed on a successor escrow agent within the aforesaid 30-day period,
upon which appointment and delivery of the Escrow Amount the Escrow Agent shall
be released of and from all liability under this Escrow Agreement.
18. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Whenever in this Escrow Agreement
reference is made to any party, such reference shall be deemed to include the
successors, assigns and legal representatives of such party, and, without
limiting the generality of the foregoing, all representations, warranties,
covenants and other agreements made by or on behalf of each of the Company and
the Purchasers in this Escrow Agreement shall inure to the benefit of any
successor escrow agent hereunder; PROVIDED, HOWEVER, that nothing herein shall
be deemed to authorize or permit the Company or the Purchasers to assign any of
its rights or obligations hereunder to any other person (whether or not an
affiliate of the Company or the Purchasers) without the written consent of each
of the other parties nor to authorize or permit the Escrow Agent to assign any
of its duties or obligations hereunder except as provided in Section 17 hereof.
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19. NO THIRD PARTY RIGHTS. The representations, warranties and other terms
and provisions of this Escrow Agreement are for the exclusive benefit of the
parties hereto, and no other person, including the creditors of the Company or
the Purchasers, shall have any right or claim against any party by reason of any
of those terms and provisions or be entitled to enforce any of those terms and
provisions against any party.
20. NO WAIVER BY ACTION, ETC. Any waiver or consent respecting any
representation, warranty, covenant or other term or provision of this Escrow
Agreement shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of a party
at any time or times to require performance of, or to exercise its rights with
respect to, any representation, warranty, covenant or other term or provision of
this Escrow Agreement in no manner (except as otherwise expressly provided
herein) shall affect its right at a later time to enforce any such term or
provision. No notice to or demand on either the Company or the Purchasers in any
case shall entitle such party to any other or further notice or demand in the
same, similar or other circumstances. All rights, powers, privileges, remedies
and interests of the parties under this Escrow Agreement are cumulative and not
alternatives, and they are in addition to and shall not limit (except as
otherwise expressly provided herein) any other right, power, privilege, remedy
or interest of the parties under this Escrow Agreement or applicable law.
21. MODIFICATION, AMENDMENT, ETC. Each and every modification and
amendment of this Escrow Agreement shall be in writing and signed by all of the
parties hereto, and each and every waiver of, or consent to any departure from,
any covenant, representation, warranty or other provision of this Escrow
Agreement shall be in writing and signed by the party granting such waiver or
consent.
22. ENTIRE AGREEMENT. This Escrow Agreement contains the entire agreement
of the parties with respect to the matters contained herein and supersedes all
prior representations, agreements and understandings, oral or otherwise, among
the parties with respect to the matters contained herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the date first written above.
VERTEX INTERACTIVE, INC.
By: /S/ XXXXXXXX X. XXXX
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Xxxxxxxx X. Xxxx
Chief Executive Officer
By: /S/ OWN XXXXXXXXX
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Xxxx Xxxxxxxxx, Esquire, as escrow agent
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /S/ XXXXX X. XXXXXXXX
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Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By: /S/ XXXXX X. XXXXXXXX
---------------------
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
By: /S/ XXXXX X. XXXXXXXX
---------------------
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /S/ XXXXX X. XXXXXXXX
---------------------
Xxxxx X. Xxxxxxxx
Manager
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