EXHIBIT 99.2
ESCROW AGREEMENT
This Escrow Agreement is entered into as of January 30 2004, by and
between ILIA LEKACH ("Lekach"), IZJD CORP., PACIFIC INVESTMENT GROUP, INC. and
DEBORAH LEKACH (collectively, the "Stockholders"), all with an address at 137
Golden Beach Road, Golden Beach, Florida 33160, STEPHEN NUSSDORF and GLENN
NUSSDORF or their respective assignees or designees (the "Purchasers"), with an
address at 2060 Ninth Avenue, Ronkonkoma, New York 11779, PERFUMANIA, INC., a
Florida corporation, (the "Company") and EDWARDS & ANGELL, LLP ("Escrow Agent"),
a Massachusetts limited liability partnership, with an address at 750 Lexington
Avenue, New York, New York 10022.
RECITALS
A. The Stockholders and Purchasers are parties to that certain Option
Agreement, dated as of January 30, 2004 (the "Option Agreement"), whereby
Stockholders have granted to Purchasers an option to purchase certain shares of
the common stock of E Com Ventures, Inc., a Florida corporation, that are either
owned by Stockholders or which Stockholders have a right to acquire (the "E Com
Stock") and Purchasers and the Company are parties to that certain Subordinated
Secured Demand Note (the "Note") and that certain Security Agreement (the
"Security Agreement") (all as attached to the Option Agreement as Exhibit B
thereto);
B. Pursuant to the Option Agreement, upon the first exercise of the
option granted thereunder, which is required to occur upon the execution of the
Option Agreement, Purchasers will be purchasing a total of 433,070 shares of E
Com Stock (the "First Stock Purchase") for the total price of $5,499,989, some
portion of which may be advanced directly to Merrill Lynch in accordance with
paragraph 2(g)(i) of the Option Agreement, and some portion of which may be
advanced directly to E Com Ventures, Inc. under paragraph 2(g)(ii) of the Option
Agreement as an advance to enable Mr. Lekach to exercise certain stock options
to acquire shares of E Com Stock; and pursuant to the Note and Security
Agreement, the Purchasers will be loaning to the Company $5,000,000.00;
C. Any balance (the "First Stock Purchase Balance") of the $5,499,989
purchase price for the First Stock Purchase not advanced to Merrill Lynch or E
Com Ventures, Inc. under paragraph 2(g)(i) and (ii) is to be paid, pursuant to
paragraph 2(c) of the Option Agreement, to Stockholders at the Closing Date for
the First Stock Purchase;
D. To secure Stockholders for the timely payment of the First Stock
Purchase Balance at the Closing Date for the First Stock Purchase, upon
execution of this Agreement, the parties have agreed to deposit sums equal to
the First Stock Purchase Balance into escrow upon the execution of the Option
Agreement, pursuant to this Escrow Agreement (the "Purchase Fund"), and the
Purchasers have agreed to deposit the principal for the loan in the Note and
Security Agreement (the "Loan Fund") (collectively, the Purchase Funds and the
Loan Funds and any accrued interest are referred to as the "Escrow Fund");
E. The Escrow Agent has agreed to hold the Escrow Fund pursuant to the
terms of this Escrow Agreement; and
F. Capitalized terms used herein shall have the meaning ascribed to
such terms in the Option Agreement, unless otherwise defined herein.
NOW, THEREFORE, in consideration of entering into the Option Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Deposit. As security for the payment in accordance with the Option
Agreement of the First Stock Purchase Balance upon execution of this Agreement,
the Purchasers are herewith depositing with the Escrow Agent the aggregate sum
of eight million three hundred and ninety-seven thousand five hundred and twenty
three and six one-hundredths U.S. dollars (USD$8,397,523.06), representing a sum
equal to the First Stock Purchase Balance and the Loan Fund. In order to make
such deposit, Purchasers shall effect a wire transfer for such amount to such
account as the Escrow Agent shall direct as of the date of execution of this
Agreement. Upon receipt of such amount, the Escrow Agent will issue a receipt to
Purchasers (with a copy to Stockholders) indicating that such funds have been
received and are being held in escrow pursuant to the terms of this Escrow
Agreement.
2. Deposit of Escrow Fund. The Escrow Agent shall hold the Escrow Fund
in its interest bearing trust account specifically identified in the accounting
and banking records of the Escrow Agent with this Escrow Agreement and subject
to the terms of this Escrow Agreement. Interest earned and accrued on the Escrow
Fund shall be payable to Purchasers after all other disbursements required under
this Escrow Agreement have been made.
3. Disposition of Escrow Fund.
A. Purchase Fund. At the expiration of three (3) business days
(the "Disbursement Period") following receipt by the Escrow Agent of a written
notice (a "Disbursement Notice") from Stockholders, a copy of which Stockholders
shall simultaneously provide to Purchasers and which shall bear on its face
evidence that a copy of such written notice has been sent to Purchasers,
advising Escrow Agent (i) that the Closing Date of the First Stock Purchase has
occurred, and (ii) that upon such Closing Date, Stockholders caused to be
delivered to Purchasers stock certificates evidencing 433,070 shares of E Com
Stock to be acquired by Purchasers under the Option Agreement at the Closing
Date of the First Stock Purchase, which certificates are registered in the name
of Stephen Nussdorf or his designee, and bear a legend substantially as follows:
The shares of stock represented by this Certificate have been
acquired, for investment only, directly or indirectly from the
issuer or an affiliate of the issuer without being registered
under the Securities Act of 1933, as amended ("Act"), or the
securities laws of any state or other jurisdiction, and are
restricted securities as that term is defined under Rule 144
promulgated under the Act. These shares may not be sold,
transferred, pledged, hypothecated or otherwise disposed of (a
"Transfer") unless they are registered under such Act and the
securities laws of any applicable states and other jurisdictions
or unless such Transfer is exempt from such registration",
the Escrow Agent shall pay to Stockholders the amount of the Purchase Fund in
cash or other certifiable funds. Such payment by the Escrow Agent may be made
prior to the expiration of the Disbursement Period in the event that a joint
instruction to such effect is made to Escrow Agent in a writing signed by both
Stockholders and Purchasers. In the event that a Disbursement Notice is sent to
the Escrow Agent, and Purchasers dispute under the terms of the Option Agreement
the validity of such notice or the amount or portion of the Purchase Fund that
Stockholders have requested the Escrow Agent to disburse, Purchasers shall,
prior to the expiration of the Disbursement Period, assert a claim (the "Escrow
Claim") by delivering a written notice (the "Escrow Claim Notice") to the Escrow
Agent with a copy to Stockholders, stating the basis for the claim and the
dollar amount thereof. If any Stockholder receiving an Escrow Claim Notice
disputes such Escrow Claim, it may respond to such Escrow Claim Notice by
delivering a response thereto (the "Dispute Notice") to the Escrow Agent (with a
copy to Purchasers) within five (5) days from the date such Stockholder received
the Escrow Claim Notice (the "Response Period"). At the expiration of the
Disbursement Period, the Escrow Agent shall deliver to Stockholders in cash or
immediately available funds, that portion of the Purchase Fund that is not the
subject of an Escrow Claim. If none of the Stockholders responds to an Escrow
Claim Notice with a Dispute Notice within the Response Period, the Escrow Agent,
within five (5) business days following the expiration of the Response Period,
shall pay to Purchasers the amount of such Escrow Claim in cash or immediately
available funds from the Escrow Fund. If Stockholders and Purchasers shall not
reach agreement as to any disputed amount of an Escrow Claim, any of the parties
hereto may submit to binding arbitration in accordance with Section 7 below for
a determination of the parties' respective rights or obligations with respect to
such disputed amount. Thereafter, the Escrow Agent shall only disburse any or
all of the Escrow Fund as directed in writing upon the occurrence of one of the
following events: (i) the Escrow Agent shall have been directed in accordance
with joint instructions of Stockholders and Purchasers; or (ii) the Escrow Agent
shall have received a certified copy of the decision of the arbitrator(s) in
accordance with Section 7 hereof with respect to the Escrow Claim or Escrow
Claims set forth in the Escrow Claim Notice, in which case the Escrow Agent
shall pay, in cash or other certifiable funds, the party or parties in
accordance with such decision. The Escrow Agent shall not dispose of the Escrow
Fund other than as provided in this Escrow Agreement.
B. Loan Fund. Upon (i) disbursement of the Purchase Fund, as
provided in Section 3A above, and (ii) delivery to Purchasers of the Note and
Security Agreement duly executed by the Company together with a certified copy
of a resolution of the board of directors of the Company approving the loan
transaction, the Escrow Agent will disburse the funds held in the Loan Fund to
the Company in cash or other certifiable funds.
4. No Release of Claims. The acceptance by any party of any amounts
from the Escrow Fund on account of an Escrow Claim shall not constitute a
release of any of any such party's rights against the other parties under the
Option Agreement or otherwise, nor shall any such acceptance by any party in any
way limit the rights of such party to assert a claim against the other parties
for the balance of any Escrow Claim which remains unsatisfied after such party
has accepted such payment.
5. Liability. Stockholders and Purchasers understand and agree that the
Escrow Agent's liability hereunder is solely that of a stakeholder and that the
Escrow Agent is only required to act as expressly set forth in this Escrow
Agreement. No legal relationship exists between the parties hereto and the
Escrow Agent other than that specified in these instructions.
The parties hereto further agree that:
(a) Other than as provided in this Escrow Agreement, the
Escrow Agent is not a party to, and is not bound by or charged with notice of,
any agreement, document, instruction or certificate out of which this Escrow
Agreement may arise or relating hereto.
(b) The Escrow Agent may act upon any written notice, request,
waiver, consent, certificate, receipt, authorization, power of attorney or other
paper or document that the Escrow Agent in good faith believes to be genuine and
what it purports to be.
(c) The Escrow Agent shall not be liable for anything that it
may do or refrain from doing in good faith in connection herewith, except for
its own gross negligence, recklessness or willful misconduct.
(d) The Escrow Agent shall have no duties or responsibilities
other than the duties and responsibilities expressly set forth in this Escrow
Agreement. After release of the Escrow Fund, the Escrow Agent's duties,
responsibilities and liabilities of every kind and character under this Escrow
Agreement shall cease and terminate.
(e) This Escrow Agreement may not be modified or amended
except by written instruction, executed by each of the Stockholders and
Purchasers and a duly authorized officer of each of the corporate parties and
the Escrow Agent. Any such modification or amendment shall be effective only
upon receipt by the Escrow Agent.
(f) The term "Escrow Agent" used herein shall include Edwards
& Angell, LLP, a Massachusetts limited liability partnership, and its partners,
agents, officers, employees, successors and assigns.
6. Compensation of the Escrow Agent. Any fees, costs or expenses of the
Escrow Agent shall be paid immediately upon demand, one half by Stockholders and
one half by Purchasers, but in no event shall the Escrow Agent's fee exceed
three thousand U.S. dollars (USD$3,000).
7. Arbitration. Any controversy or claim arising out of or relating to
this Escrow Agreement, or any breach thereof, shall be settled by arbitration in
Miami, Florida before a single arbitrator pursuant to the Commercial Rules of
the American Arbitration Association. The arbitration may be commenced by any
party hereto by giving written notice to each other party to a dispute that such
dispute has been referred to arbitration under this Section 7. The arbitrator
shall be selected by the joint agreement of the parties to the dispute, but if
they do not so agree within twenty (20) days after the date of the notice
referred to above, the selection shall be made pursuant to the Commercial Rules
of the American Arbitration Association from the panels or arbitrators
maintained by such Association. Any award rendered by the arbitrator shall be
conclusive, final and binding upon the parties hereto and specifically
enforceable by the parties; provided, however, that any such award shall only be
final and binding if accompanied by a written opinion of the arbitrator giving
the reasons for the award.
8. Expenses. Each party shall bear its own expenses incurred in
connection with this Escrow Agreement, other than the Escrow Agent, which shall
be compensated for its time and expenses, subject to the conditions set forth in
Section 6 above.
9. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be delivered both by overnight courier (UPS,
Federal Express, Airborne, or DHL) and by facsimile as set forth below:
If to Stockholders: Ilia Lekach
c/o Mark Young
Perfumania, Inc.
251 International Parkway
Sunrise, FL 33325
Fax No: 954-335-9179
Steel Hector & Davis, LLP
200 South Biscayne Boulevard
Miami, FL 33131-2398
If to Purchasers: Stephen Nussdorf
c/o Michael Katz
Quality King Distributors, Inc.
2060 9th Avenue
Ronkonkoma, N.Y. 11779
Fax No: 631-439-2333
Edwards & Angell, LLP
750 Lexington Avenue
New York, New York 10022
Attention: Geoffrey Etherington, Esq.
If to Escrow Agent, at address set forth above.
10. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York. exclusive of its
choice of law provisions and regardless of the laws that might otherwise govern
under applicable principles of conflict of laws.
11. Counterparts. This Escrow Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument. This Escrow Agreement may
be effectively delivered via facsimile transmission.
12. Attorney's Fees. In the event that an action is brought for the
enforcement or interpretation of this Escrow Agreement, the prevailing party
shall be entitled to recover reasonable attorney's fees and costs in said
action, including enforcement and collection of any judgment or award rendered
therein. Said costs and attorney's fees shall be included as a part of the
judgment in any such action.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
PERFUMANIA, INC.
By: /s/ A. Mark Young
---------------------------
Name: A. Mark Young
Title: CFO
IZJD CORP. PACIFIC INVESTMENT GROUP, INC.
By: /s/ Ilia Lekach
------------------------
By: /s/ Ilia Lekach Name: Ilia Lekach
---------------------- Title: CEO
Name: Ilia Lekach
Title: CEO
/s/ Ilia Lekach /s/ Stephen Nussdorf
- -------------------------- ----------------------------
ILIA LEKACH STEPHEN NUSSDORF
/s/ Deborah Lekach /s/ Glenn Nussdorf
- -------------------------- -------------------
DEBORAH LEKACH GLENN NUSSDORF
EDWARDS & ANGELL, LLP, a
Massachusetts limited liability
partnership
By: /s/ Patricia Kantor
---------------------
Name: Patricia Kantor
Title: Partner