Exhibit 10.1
SETTLEMENT AND MUTUAL RELEASE
AGREEMENT
This Agreement (“
Agreement ”) is made effective as of July 28,
2008, by and between DATARADIO CORPORATION , a Delaware
corporation (“ Dataradio ”), on the one hand,
and BIO-KEY INTERNATIONAL, INC. , a Delaware corporation
(“ BIO-key ”), on the other hand.
Dataradio and BIO-key may hereinafter individually be referred to
as a “ Party ” and shall hereinafter
collectively be referred to as the “ Parties
”. Myers, Widders, Gibson, Jones & Schneider,
LLP is also a party to this Agreement, solely for the purpose of
serving as the Escrow Agent under Section 5 hereof. This
Agreement is entered into with regard to the following
facts:
R
E C
I T A L
S
WHEREAS , on or about June 1, 2003, BIO-key’s
predecessor-in-interest, Aether Systems, Inc. (“
Aether ”), entered into a Subcontractor Agreement with
Dataradio (the “ Subcontractor Agreement
”). BIO-key is the successor-in-interest to the rights
and obligations of Aether under the Subcontractor Agreement.
Pursuant to the terms of the Subcontractor Agreement, among other
things, Dataradio agreed to provide equipment, products, goods,
software and documentation to Aether in connection with the
“Copsmart Project” for Aether’s customer,
Hamilton County, Ohio; and
WHEREAS, as of April 3, 2008, the balance owing
Dataradio by BIO-key pursuant to the Subcontractor Agreement
amounted to $2,356,771.00 comprised of $2,149,030.00 owed pursuant
to Dataradio invoice number 273 dated January 18, 2008 and
$207,741.00 representing amounts retained by BIO-key under previous
Dataradio invoices; and
WHEREAS, on April 3, 2008, counsel for Dataradio
submitted a demand for payment to BIO-key demanding payment in the
sum of $2,356,771.00 (the “ Claim ”);
and
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WHEREAS , without admission of any liability or fault,
and to avoid the expense and uncertainties of litigation, the
Parties wish to settle the Claim, and agree as follows:
NOW, THEREFORE, FOR GOOD CAUSE AND VALUABLE
CONSIDERATION, THE ADEQUACY OF WHICH IS HEREBY ACKNOWLEDGED, THE
PARTIES EXPRESSLY AGREE AS FOLLOWS:
T
E R
M S O
F S E T
T L E M
E N T
1.
Payment Terms
.
A.
BIO-key shall pay to Dataradio the
sum of $2,356,771.00 (the “ Balance ”), plus
interest at seven percent (7%) per annum on the unpaid balance in
accordance with the payment terms and schedule set forth in
Attachment “A” hereto and incorporated herein by
reference (the “ Promised Installment Payments
”). The first “Total Payment” due under the
Promised Installment Payments shall be immediately due and payable
to Dataradio upon execution of this Agreement by both
Parties.
B.
As indicated on Attachment
“A”, BIO-key anticipates receiving payments from
Hamilton County, Ohio on or about September 1, 2008 in the sum
of $236,538.00, and on or about April 1, 2009, in the sum of
$808,452.00 (the “ Hamilton County Monies
”). Notwithstanding Section 2 hereof, in the
event these payments are made by Hamilton County, Ohio to BIO-key
directly, within three (3) business days following actual
receipt of any or all of the Hamilton County Monies by BIO-key,
BIO-key agrees to deliver to Dataradio, in the manner provided in
Section 1.E. hereof, the full amount of such payments actually
received by BIO-key, without deduction or offset of any kind, which
amounts actually received by Dataradio shall be applied to the
Balance. In the event any or all of the Hamilton County
Monies are not received by BIO-key or Dataradio, the total amount
of the Hamilton County Monies not received shall
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continue to be included in the Balance and such
amount shall be paid at the time of the June 1, 2009 scheduled
payment by BIO-key to Dataradio contemplated under the Promised
Installment Payments.
C.
The total of any unpaid Balance and
accrued interest is due and payable on June 1,
2009.
D.
All payments made shall first be
applied to interest then due and the balance applied to the
principal to reduce the balance thereof.
E.
All Promised Installment Payments
made by BIO-key or on behalf of BIO-key shall be made payable to
“ Dataradio ” and delivered to Erik B.
Feingold, Esq. c/o the law offices of Myers, Widders, Gibson,
Jones & Schneider, LLP, 5425 Everglades Street, Ventura,
California 93003 (the “ Payment Address
”).
F.
BIO-key shall be entitled to
pre-pay, in whole or in part, the remaining unpaid Balance plus
accrued interest at any time without penalty.
2.
Assignment of Hamilton County
Monies .
BIO-key does hereby irrevocably convey, transfer and assign to
Dataradio all of BIO-key’s right, title and interest in and
to the Hamilton County Monies. Concurrently with the
execution of this Agreement, BIO-key shall execute the Assignment
Agreement, attached hereto as Attachment “B” (the
“ Hamilton County Assignment ”), which
assignment instructs Hamilton County, Ohio to make all payments of
the Hamilton County Monies payable directly to Dataradio and
delivered to the Payment Address. Upon execution of the
Hamilton County Assignment, BIO-key shall deliver, or shall cause
to be delivered, the executed Hamilton County Assignment to
Hamilton County, Ohio.
3.
Default
. So long as there is no
Uncured Default (as defined in Section 4, below)
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existing, Dataradio and counsel for Dataradio
shall forbear from demanding the payment of the Claim and from
exercising, directly or indirectly, any of Dataradio’s rights
and remedies against BIO-key with respect to the Claim and any
amounts related thereto. The occurrence of any one or more of
the following events, acts or occurrences, unless otherwise waived
in writing by Dataradio, shall constitute an event of default (each
an “ Event of Default ”):
(i) BIO-key shall fail to pay as and when due any
installment required pursuant to the Promised Installment Payments,
or shall fail to pay any interest or other amounts payable under
this Agreement as and when due; or (ii) BIO-key shall fail to
perform, comply with or observe any agreement, covenant or
obligation under Section 7 of this Agreement. Upon the
occurrence of an Event of Default, Dataradio or its counsel shall
give notice thereof to BIO-key and its counsel, and BIO-key shall
have until the seventh (7th) business day following the date of its
receipt of Dataradio’s notice (the “ Cure Date
”) to cure the Event of Default. Said notice shall
specify the exact Cure Date to cure any monetary Event of
Default. Cure of an Event of Default pertaining to the
payment of money shall require that the delinquent payment be
received at the Payment Address on or prior to the Cure Date with
readily available funds, which shall be accomplished solely by
cashier’s check or the wire transfer of funds. Cure of
an Event of Default pertaining to any act or failure to act by
BIO-key resulting in a breach of this Agreement other than for the
payment of money, shall require that such Event of Default be fully
cured on or prior to the Cure Date, or, if the nature of the Event
of Default is such that more than seven (7) business days are
reasonably required for its cure, BIO-key shall not be deemed to be
in default if BIO-key promptly commences the cure on or prior to
the Cure Date and diligently and continuously prosecutes such cure
to completion within fourteen (14) business days following the Cure
Date. Notwithstanding
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the notice and cure periods set forth above, any
Event of Default occurring more than twice during a twelve (12)
month period shall be immediately deemed an Uncured Default (as
defined below), and Dataradio shall be entitled, without notice to
BIO-key or its attorney, to proceed as provided herein.
4.
Remedies Upon Event of
Default . In
the event there exists an Event of Default that, after the giving
of notice as and if required under this Agreement, is not timely
cured as set forth in Section 3 above (an “ Uncured
Default ”), then the entire unpaid Balance, plus accrued
and unpaid interest due thereon, shall automatically become
immediately due and payable, and Dataradio and counsel for
Dataradio shall be entitled to proceed with entry of judgment (the
“ Judgment ”) for the amount of the unpaid
Balance, plus accrued and unpaid interest due thereon.
5.
Confession of
Judgment .
A.
Concurrently with the execution of
this Agreement, BIO-key will (i) execute a Confession of
Judgment Statement and provide an Attorney’s Declaration in
support of the Confession of Judgment Statement in the forms
attached collectively as Attachment “C” (the “
Judgment Documents ”) and (ii) deliver the
Judgment Documents to the law offices of Myers, Widders, Gibson,
Jones & Schneider, LLP, 5425 Everglades Street, Ventura,
California 93003 (the “ Escrow Agent ”), to be
held in escrow in accordance with this Agreement.
Notwithstanding anything contained herein, neither Dataradio nor
the Escrow Agent shall file or record the Judgment Documents in any
manner until there occurs an Uncured Default and the procedures
described in Section 5.B(i) below have been
satisfied.
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B.
The Escrow Agent shall release the
Judgment Documents from escrow as follows:
(i)
In the event that the Escrow Agent
receives a written declaration under penalty of perjury by an
authorized representative of Dataradio stating that an Uncured
Default has occurred and attesting to the facts and circumstances
surrounding the Event of Default and the Uncured Default, the
Escrow Agent shall deliver the Judgment Documents to
Dataradio. Dataradio may then file the Judgment Documents,
which filing shall include the declaration described in the
preceding sentence, and obtain, by ex parte application in
any court of competent jurisdiction in the states of either
California, Massachusetts, New Jersey or Minnesota, a judgment
against BIO-key as set forth in the Judgment Documents, for the
amount of the unpaid Balance, plus accrued and unpaid interest due
thereon. Dataradio may record and enforce the judgment
against BIO-key to the fullest extent allowed by law.
(ii)
If no Uncured Default occurs, upon
Dataradio’s receipt of the entire unpaid Balance, plus
accrued and unpaid interest thereon, pursuant to this Agreement,
Dataradio shall, within one (1) business day after receiving
such final payment, deliver written notice to the Escrow Agent that
such payment has been made. Within two (2) business days
after receiving such notice, the Escrow Agent shall deliver the
Judgment Documents to BIO-key.
C.
Should the Judgment Documents be
rejected by the Clerk of the Court in any of the states of
California, Massachusetts, New Jersey or Minnesota for any reason,
or should the Courts in any of the states of California,
Massachusetts, New Jersey or Minnesota decline to enter judgment in
Dataradio’s favor on the Judgment Documents, then BIO-key
will reasonably cooperate in providing Dataradio, or the Court with
any and all different or additional documents as may prove
necessary in order to have the Judgment entered, consistent with
the purposes of this Agreement.
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6.
No Appeal from
Judgment .
BIO-key acknowledges and agrees that the payment of the Balance
which is settled and resolved by this Agreement, and upon which the
Judgment would be based is subject to being confessed by
judgment. Accordingly, and in recognition of the fact that
such Judgment would be entered by Confession of Judgment, BIO-key
acknowledges and agrees that BIO-key has, or would have, no right
of appeal from such judgment; nevertheless, BIO-key hereby
unconditionally and irrevocably surrenders and waives any and all
rights of appeal from such Judgment that BIO-key may arguably have,
on any ground whatsoever.
7.
Covenants of
BIO-key .
A.
Preservation of
Existence . So long
as any portion of the Balance shall remain unpaid, BIO-key shall,
unless Dataradio shall otherwise consent in writing, maintain and
preserve, , its existence, rights and privileges, and become or
remain, , duly qualified and in good standing in each jurisdiction
in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification
necessary.
B.
Compliance with Laws
. So long as any portion of
the Balance shall remain unpaid, BIO-key shall, unless Dataradio
shall otherwise consent in writing, comply, in all material
respects, with all applicable laws, rules, regulations, orders,
judgments and awards.
C.
Liens . So long as any portion of the Balance
shall remain unpaid, BIO-key shall not, unless Dataradio shall
otherwise consent in writing, (i) create, incur, assume or
suffer to exist, or permit any of its subsidiaries to create,
incur, assume or suffer to exist, any lien, mortgage, deed of
trust, pledge,
