EXHIBIT
10.2
STOCK PLEDGE AND ESCROW
AGREEMENT
THIS AGREEMENT is made the 8th day of October,
2009, between Lester Levin Inc., a New York corporation (“
LLI ”), Document Security Systems, Inc., a New
York corporation (“ DSS ”) (hereinafter
collectively referred to as “ Obligees ”)
and Raymond Meyers (hereinafter referred to as “
Pledgor ”), Internet Media Services,
Inc., a Delaware corporation (the
“Company” ), and Manufacturers and
Traders Trust Company (hereinafter referred to as “
Escrow Agent ”).
Recitals
WHEREAS, Pledgor is a controlling stockholder,
President and director of the Company;
WHEREAS, LLI and the Company have entered into
that certain Asset Purchase Agreement of even date herewith (the
“ Asset Purchase Agreement ”) pursuant to
which LLI is selling and transferring certain assets of its
LegalStore.com business to the Company in exchange for the issuance
to LLI’s parent corporation, DSS, 7,500,000 shares of common
stock of the Company;
WHEREAS, pursuant to the covenants in the Asset
Purchase Agreement, following the transaction, the Company is
obligated to take certain measures to advance the business of the
Company;
WHEREAS, Pledgor has agreed to secure the
performance of the Company’s obligations to Obligees pursuant
to such covenants in the Asset Purchase Agreement by executing this
agreement and transferring to and registering in the name of the
Escrow Agent the 9,000,000 shares of stock of the Company held by
the undersigned.
NOW, THEREFORE, in consideration of the premises
and understandings contained herein and for good and valuable
consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
(a) As
collateral security for the performance of those certain covenants
of the Company under the Asset Purchase Agreement set forth in
Section 1(b) below, Pledgor hereby (i) grants to Obligees a
security interest in and (ii) pledges to Obligees and (iii)
transfers as security all of the following instruments and property
(receipt of which is hereby acknowledged by Escrow
Agent):
(i) Nine
million (9,000,000) shares of common stock of Company held by the
Pledgor and all successor stock to said shares, replacement stock
for said shares, substituted stock for said shares or additional
shares of stock of Company issued or transferred as a dividend on
or stock split of or otherwise received because of or in lieu of
the ownership of said shares of common stock of Company during the
term of this agreement, whether the same resulted from merger,
consolidation, reorganization or otherwise (hereinafter sometimes
referred to as “ Shares ”), all to be
registered in the name of the Escrow Agent; and
(ii) Any
and all other instruments or cash or, in kind, dividends or other
property which anyone is or may hereafter become entitled to
receive with respect to replacement of, substitution for, or
succession to the aforesaid Shares.
All of the foregoing property and instruments
shall be individually and collectively hereinafter referred to as
“Collateral.” The Collateral shall be held by the
Escrow Agent hereinafter named in accordance with the terms and
pro-visions contained in this agreement.
Certificates registering the Shares should be
registered in the name of the Escrow Agent.
Pledgor agrees to forthwith deliver to Escrow
Agent any and all Collateral hereafter acquired by Pledgor along
with stock powers duly endorsed in blank with respect to any stock
certificate therefor.
(b) The
following events shall constitute an “ Event of
Default ” under this agreement: (i) The
Company’s failure to comply with the following covenants in
Article VI of the Asset Purchase Agreement: Section 6.2
Board of Directors ; Section 6.3 Working Capital ;
Section 6.4 Registration of Shares ; Section 6.8
Corporate Existence; Reporting Status ; Section 6.9
Certain Negative Covenants (the “
Company’s Covenants ”), which covenants
are incorporated herein by reference; and (ii) a breach of the
Company’s representations and warranties set forth in Section
5 of the Asset Purchase Agreement, which representations and
warranties are incorporated herein by reference.
The parties agree that the Escrow Agent shall be
Manufacturers and Traders Trust Company. Pledgor shall
deliver the Collateral described in Paragraph (1) herein,
simultaneously with the execution hereof, to Escrow Agent who shall
hold and maintain the Collateral pursuant to the terms hereof. The
Escrow Agent's compensation, if any, shall be paid one-half by the
Company and one-half by DSS.
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Voting and
Dividend Rights
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During the term of this agreement, and until
such time, if any, that an Event of Default has occurred, Pledgor
or his assigns shall have the right to vote the Shares now or
hereafter pledged. In the event an Event of Default has occurred,
(which Event of Default shall be proven by the execution of an
affidavit by an DSS officer (the “ Obligee
Representative “) stating that Company is in default
of one or more such obligations), then upon the Escrow Agent
receiving both such affidavit and a proof of service that such
affidavit was served upon Pledgor, DSS shall have the right (but
not the obligation) to vote the Shares held pursuant to this escrow
and exercise and receive all other rights and privileges, including
dividends, which are associated with the ownership of such
Shares.
Other than as set forth above, neither Obligees
nor the Escrow Agent, nor their assignees or anyone else taking
under them, shall exercise the rights of a holder of the Shares (or
its successors) unless and until the Collateral is accepted by the
Obligee Representative pursuant to Subparagraph 4(a)
herein.
(a) Whenever
an Event of Default exists as set forth in Paragraph 3 due to the
failure to comply with the Company's Covenants in Section 6.3
Working Capital , and Section 6.4 Registration of
Shares of the Asset Purchase Agreement; and such Event of
Default has not been cured on or before October 8, 2010 (the "
Registration Deadline "), Obligee Representative, at
its option, may (in addition to the rights provided for in
Paragraph 3):
(i) Accept
such portion of the Collateral as is set forth in Schedule I
attached hereto based on the Event of Default existing at
Registration Deadline, by giving notice of such fact to Pledgor and
the Escrow Agent, in which case the Escrow Agent shall forthwith
deliver the Collateral to Obligee Representative, as agent for all
the Obligees, and this escrow shall be terminated.