EXHIBIT 10.1
ESCROW
AGREEMENT
THIS ESCROW AGREEMENT (this “ Agreement ”) is made
and entered into as of September 22, 2005 by SPHERIX
INCORPORATED, a Delaware corporation (the “
Company ”); CORNELL CAPITAL PARTNERS, LP, a
Delaware limited partnership (the “ Investor ”);
and BAXTER, BAKER, SIDLE, CONN & JONES, P.A. (the
“ Escrow Agent ”).
BACKGROUND
WHEREAS , the Company and the Investor have entered into
a Standby Equity Distribution Agreement (the “ Standby
Equity Distribution Agreement ”) dated July 22,
2005, pursuant to which the Investor will purchase common stock,
par value $0.005 per share of the Company (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 an escrow
account to be held by the 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 , the Company, the Investor, and David
Gonzalez, Esq. entered into an escrow agreement (“
Initial Escrow Agreement ”) on July 22, 2005
pursuant to which David Gonzalez, Esq. was to serve as escrow
agent in connection with the Standby Equity Distribution
Agreement. On the date hereof, the Company and the Investor
entered into an agreement pursuant to which David
Gonzalez, Esq. was removed as the escrow agent and the Initial
Escrow Agreement was terminated.
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.
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c.
“ Common Stock Joint
Written Direction ” shall mean a written direction
executed by the Investor and the Company directing the Escrow Agent
to disburse all or a portion of the shares of the 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 the Escrow Agent to serve as Escrow Agent hereunder.
The 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 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 Common Stock which shall be purchased by the Investor pursuant
to the Standby Equity Distribution Agreement. The Escrow
Agent hereby accepts such appointment and, upon receipt via D.W.A.C
or the certificates representing of the shares of the Common Stock
in accordance with Section 3 below, agrees to hold and
disburse the shares of the Common Stock in accordance with this
Agreement.
c.
The Investor hereby acknowledges
that the Escrow Agent is counsel to the Company and is representing
the Company in connection with the transactions contemplated and
referenced herein and will be acting as the escrow agent for shares
of the Common Stock as outlined herein. The Investor 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 Company and the
Investor 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. The Investor will wire funds
to the account of the Escrow Agent as follows:
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Bank:
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Mercantile Safe Deposit & Trust
Company
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Routing #:
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052000618
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Account #:
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6498841
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Name on Account:
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Baxter, Baker, Sidle, Conn & Jones,
P.A. 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 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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68047138
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DTC #:
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0632
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Name on Account:
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Baxter, Baker, Sidle, Conn & Jones,
P.A. 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 shares of
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, at which time the
Escrow Agent shall wire the Escrow Funds pursuant to Joint Written
Direction. In disbursing such funds, the 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 signatory from the
Investor listed on the signature page to this Agreement.
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 signatory from the Investor
listed on the signature page to this Agreement.
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
Agent. 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 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 shall 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 the Escrow Agent is
notified by both the Company and the Investor in writing that such
dispute has been resolved, 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 the Escrow Agent in connection with performance of its
duties and the exercise of its rights hereunder.
iii.
The 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 the Escrow Agent has not received
a Joint Written Direction within ten (10) days of receipt of
funds, it may in its discretion establish a separate interest
bearing Escrow Fund.
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 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
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thereupon succe
