EXHIBIT 10.2
ESCROW
AGREEMENT
THIS ESCROW AGREEMENT
(this “Agreement”) is
made and entered into as of July 22, 2005 by SPHERIX
INCORPORATED, a Delaware corporation (the
“Company”); CORNELL CAPITAL PARTNERS, LP, a
Delaware limited partnership (the “Investor”); and
DAVID GONZALEZ, ESQ. (the “Escrow
Agent”).
BACKGROUND
WHEREAS , the Company and the Investor have entered into
a Standby Equity Distribution Agreement (the “ Standby
Equity Distribution Agreement ”) dated as of the date
hereof, pursuant to which the Investor will purchase the
Company’s Common Stock, par value $0.005 per share (the
“ Common Stock ”), at a price per share equal to
the Purchase Price, as that term is defined in the Standby Equity
Distribution Agreement, for an aggregate price of up to Four
Million Dollars ($4,000,000). The Standby Equity
Distribution Agreement provides that on each Advance Date the
Investor, as that term is defined in the Standby Equity
Distribution Agreement, shall deposit the Advance pursuant to the
Advance Notice in a segregated escrow account to be held by Escrow
Agent and the Company shall deposit shares of the Company’s
Common Stock, which shall be purchased by the Investor as set forth
in the Standby Equity Distribution Agreement, with the Escrow
Agent, in order to effectuate a disbursement to the Company of the
Advance by the Escrow Agent and a disbursement to the Investor of
the shares of the Company’s Common Stock by Escrow Agent at a
closing to be held as set forth in the Standby Equity Distribution
Agreement (the “ Closing ”).
WHEREAS , Escrow Agent has agreed to accept, hold, and
disburse the funds and the shares of the Company’s Common
Stock deposited with it in accordance with the terms of this
Agreement.
WHEREAS , in order to establish the escrow of funds and
shares to effect the provisions of the Standby Equity Distribution
Agreement, the parties hereto have entered into this
Agreement.
NOW THEREFORE
, in consideration of the foregoing,
it is hereby agreed as follows:
1.
Definitions
. The following terms shall
have the following meanings when used herein:
a.
“ Escrow Funds ”
shall mean the Advance funds deposited with the Escrow Agent
pursuant to this Agreement.
b.
“ Joint Written
Direction ” shall mean a written direction executed by
the Investor and the Company directing Escrow Agent to disburse all
or a portion of the Escrow Funds or to take or refrain from taking
any action pursuant to this Agreement.
c.
“ Common Stock Joint
Written Direction ” shall mean a written direction
executed by the Investor and the Company directing Investor’s
Counsel to disburse all or a portion of the shares of the
Company’s Common Stock or to refrain from taking any action
pursuant to this Agreement.
2.
Appointment of and Acceptance by
Escrow Agent .
a.
The Investor and the Company hereby
appoint Escrow Agent to serve as Escrow Agent hereunder.
Escrow Agent hereby accepts such appointment and, upon receipt by
wire transfer of the Escrow Funds in accordance with Section 3
below, agrees to hold, invest and disburse the Escrow Funds in
accordance with this Agreement.
b.
The Investor and the Company hereby
appoint the Escrow Agent to serve as the holder of the shares of
the Company’s Common Stock which shall be purchased by the
Investor. The Escrow Agent hereby accepts such appointment
and, upon receipt via D.W.A.C or the certificates representing of
the shares of the Company’s Common Stock in accordance with
Section 3 below, agrees to hold and disburse the shares of the
Company’s Common Stock in accordance with this
Agreement.
c.
The Company hereby acknowledges that
the Escrow Agent is general counsel to the Investor, a partner in
the general partner of the Investor and counsel to the Investor in
connection with the transactions contemplated and referenced herein
and will be acting as the escrow agent for shares of the
Company’s Common Stock as outlined herein. The Company
agrees that in the event of any dispute arising in connection with
this Escrow Agreement or otherwise in connection with any
transaction or agreement contemplated and referenced herein, the
Escrow Agent shall be permitted to continue to represent the
Investor and the Company will not seek to disqualify such
counsel.
3.
Creation of Escrow Account/Common
Stock Account .
a.
On or prior to the date of this
Agreement the Escrow Agent shall establish an escrow account for
the deposit of the Escrow Funds entitled as follows: Spherix
Incorporated/Cornell Capital Partners, LP. The Investor will
wire funds to the account of the Escrow Agent as
follows:
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Bank:
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Wachovia, N.A. of New Jersey
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Routing #:
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031201467
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Account #:
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2000014931134
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Name on Account:
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David Gonzalez Attorney Trust Account
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Name on Sub-Account:
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Spherix Incorporated/Cornell Capital Partners,
LP Escrow account
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b.
On or prior to the date of this
Agreement the Escrow Agent shall establish an account for the
D.W.A.C. of the shares of Common Stock. The Company will D.W.A.C.
shares of the Company’s Common Stock to the account of the
Escrow Agent as follows:
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Brokerage Firm:
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Sloan Securities Corp.
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Clearing House:
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Fiserv
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Account #:
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56887298
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DTC #:
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0632
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Name on Account:
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David Gonzalez Escrow Account
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4.
Deposits into the Escrow
Account . The Investor
agrees that it shall promptly deliver all monies for the payment of
the Common Stock to the Escrow Agent for deposit in the Escrow
Account.
5.
Disbursements from the Escrow
Account .
a.
At such time as Escrow Agent has
collected and deposited instruments of payment in the total amount
of the Advance and has received such Common Stock via D.W.A.C from
the Company which are to be issued to the Investor pursuant to the
Standby Equity Distribution Agreement, the Escrow Agent shall
notify the Company and the Investor. The Escrow Agent will continue
to hold such funds until the Investor and Company execute and
deliver a Joint Written Direction directing the Escrow Agent to
disburse the Escrow Funds pursuant to Joint Written Direction at
which time the Escrow Agent shall wire the Escrow Funds to the
Company. In disbursing such funds, Escrow Agent is authorized
to rely upon such Joint Written Direction from Company and may
accept any signatory from the Company listed on the signature page
to this Agreement and any signature from the Investor that Escrow
Agent already has on file. Simultaneous with delivery of the
executed Joint Written Direction to the Escrow Agent the Investor
and Company shall execute and deliver a Common Stock Joint Written
Direction to the Escrow Agent directing the Escrow Agent to release
via D.W.A.C to the Investor the shares of the Company’s
Common Stock. In releasing such shares of Common Stock the
Escrow Agent is authorized to rely upon such Common Stock Joint
Written Direction from Company and may accept any signatory from
the Company listed on the signature page to this Agreement and any
signature from the Escrow Agent has on file.
In the event the Escrow Agent does
not receive the amount of the Advance from the Investor or the
shares of Common Stock to be purchased by the Investor from the
Company, the Escrow Agent shall notify the Company and the
Investor.
In the event that the Escrow Agent
has not received the Common Stock to be purchased by the Investor
from the Company, in no event will the Escrow Funds be released to
the Company until such shares are received by the Escrow Agreement.
For purposes of this Agreement, the term “Common Stock
certificates” shall mean Common Stock certificates to be
purchased pursuant to the respective Advance Notice pursuant to the
Standby Equity Distribution Agreement.
6.
Deposit of Funds
. The Escrow Agent is hereby
authorized to deposit the wire transfer proceeds in the Escrow
Account.
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7.
Suspension of Performance:
Disbursement Into Court .
a.
Escrow Agent
. If at any time, there shall
exist any dispute between the Company and the Investor with respect
to holding or disposition of any portion of the Escrow Funds or the
Common Stock or any other obligations of Escrow Agent hereunder, or
if at any time Escrow Agent is unable to determine, to Escrow
Agent’s sole satisfaction, the proper disposition of any
portion of the Escrow Funds or Escrow Agent’s proper actions
with respect to its obligations hereunder, or if the parties have
not within thirty (30) days of the furnishing by Escrow Agent of a
notice of resignation pursuant to Section 9 hereof, appointed a
successor Escrow Agent to act hereunder, then Escrow Agent may, in
its sole discretion, take either or both of the following
actions:
i.
Suspend the performance of any of
its obligations (including without limitation any disbursement
obligations) under this Escrow Agreement until such dispute or
uncertainty shall be resolved to the sole satisfaction of Escrow
Agent or until a successor Escrow Agent shall be appointed (as the
case may be); provided however, Escrow Agent shall continue to
invest the Escrow Funds in accordance with Section 8 hereof;
and/or
ii.
Petition (by means of an
interpleader action or any other appropriate method) any court of
competent jurisdiction in any venue convenient to Escrow Agent, for
instructions with respect to such dispute or uncertainty, and to
the extent required by law, pay into such court, for holding and
disposition in accordance with the instructions of such court, all
funds held by it in the Escrow Funds, after deduction and payment
to Escrow Agent of all fees and expenses (including court costs and
attorneys’ fees) payable to, incurred by, or expected to be
incurred by Escrow Agent in connection with performance of its
duties and the exercise of its rights hereunder.
iii.
Escrow Agent shall have no liability
to the Company, the Investor, or any person with respect to any
such suspension of performance or disbursement into court,
specifically including any liability or claimed liability that may
arise, or be alleged to have arisen, out of or as a result of any
delay in the disbursement of funds held in the Escrow Funds or any
delay in with respect to any other action required or requested of
Escrow Agent.
8.
Investment of Escrow
Funds . The Escrow Agent
shall deposit the Escrow Funds in a non-interest bearing money
market account.
If Escrow Agent has not received a
Joint Written Direction at any time that an investment decision
must be made, Escrow Agent may retain the Escrow Fund, or such
portion thereof, as to which no Joint Written Direction has been
received, in a non-interest bearing money market
account.
9.
Resignation and Removal of Escrow
Agent . Escrow
Agent may resign from the performance of its duties hereunder at
any time by giving thirty (30) days’ prior written notice to
the parties or may be removed, with or without cause, by the
parties, acting jointly, by furnishing a Joint Written Direction to
Escrow Agent, at any time by the giving of ten (10) days’
prior written notice to Escrow Agent as provided herein
below. Upon any such notice of resignation or removal, the
representatives of the Investor and the Company identified in
Sections 13a.(iv) and 13b.(iv), below, jointly shall appoint a
successor Escrow Agent hereunder, which shall be a commercial bank,
trust company or other financial institution with a combined
capital and
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surplus in excess of $10,000,000.00. Upon
the acceptance in writing of any appointment of Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow Agent
shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of
