FUNDS ESCROW AGREEMENT
This Agreement is dated as of the 28th day of January, 2005 among Wizzard
Software Corp., a Colorado corporation (the "Company"), the Subscribers
identified on Schedule A hereto (each a "Subscriber" and collectively
"Subscribers"), and Grushko & Xxxxxxx, P.C. (the "Escrow Agent"):
W I T N E S S E T H:
WHEREAS, the Company and Subscribers have entered into a Subscription
Agreement calling for the sale by the Company to the Subscriber of Convertible
Notes and Warrants for an aggregate purchase price of up to $1,400,000 in the
amounts set forth on Schedule A hereto; and
WHEREAS, the parties hereto require the Company to deliver the Notes and
Warrants against payment therefor, with such Notes, Warrants and the Escrowed
Funds to be delivered to the Escrow Agent to be held in escrow and released by
the Escrow Agent in accordance with the terms and conditions of this
Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Capitalized terms used and not otherwise defined
herein that are defined in the Subscription Agreement shall have the meanings
given to such terms in the Subscription Agreement. Whenever used in this
Agreement, the following terms shall have the following respective meanings:
(a) "Agreement" means this Agreement and all amendments made
hereto and thereto by written agreement between the parties;
(b) "Closing Date" shall have the meaning set forth in Section
13(b) of the Subscription Agreement;
(c) "Escrowed Payment" means an aggregate cash payment of up to
$1,400,000 which is the Purchase Price;
(d) "Legal Fees" shall have the meaning set forth in Section
8(d) of the Subscription Agreement;
(e) "Legal Opinion" means the original signed legal opinion
referred to in Section 6 of the Subscription Agreement;
(f) "Notes" shall have the meaning set forth in Section 1 of the
Subscription Agreement;
(g) "Purchase Price" shall mean up to $1,400,000;
(h) "Subscription Agreement" means the Subscription Agreement
(and the exhibits thereto) entered into or to be entered into by the Company
and Subscribers in reference to the sale and purchase of the Notes and
Warrants;
(i) "Warrants" shall have the meaning set forth in Section 3 of
the Subscription Agreement and refer collectively to the Class A Warrants and
Class B Warrants;
(j) Collectively, the executed Subscription Agreement, Notes,
Legal Opinion, and Warrants are referred to as "Company Documents"; and
(k) Collectively, the Escrowed Payment and the executed
Subscription Agreement are referred to as "Subscriber Documents".
1.2. Entire Agreement. This Agreement along with the Company
Documents and the Subscriber Documents constitute the entire agreement between
the parties hereto pertaining to the Company Documents and Subscriber
Documents and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. There are no
warranties, representations and other agreements made by the parties in
connection with the subject matter hereof except as specifically set forth in
this Agreement, the Company Documents and the Subscriber Documents.
1.3. Extended Meanings. In this Agreement words importing the
singular number include the plural and vice versa; words importing the
masculine gender include the feminine and neuter genders. The word "person"
includes an individual, body corporate, partnership, trustee or trust or
unincorporated association, executor, administrator or legal representative.
1.4. Waivers and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by all
parties, or, in the case of a waiver, by the party waiving compliance. Except
as expressly stated herein, no delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right, power or privilege
hereunder preclude any other or future exercise of any other right, power or
privilege hereunder.
1.5. Headings. The division of this Agreement into articles,
sections, subsections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.6. Law Governing this Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to conflicts of laws principles that would result in the application of
the substantive laws of another jurisdiction. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party (which shall be the party which receives an award
most closely resembling the remedy or action sought) shall be entitled to
recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
1.7. Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof or thereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity. Subject to Section 1.6 hereof, each of the Company and
Subscriber hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper.
Nothing in this Section shall affect or limit any right to serve process in
any other manner permitted by law.
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1. Company Deliveries. On or before the Closing Date, the Company
shall deliver the Company Documents to the Escrow Agent.
2.2. Subscriber Deliveries. On or before the Closing Date, each
Subscriber shall deliver to the Escrow Agent such Subscriber's portion of the
Purchase Price and the executed Subscription Agreement. The Escrowed Payment
will be delivered pursuant to the following wire transfer instructions:
Citibank, N.A.
0000 0xx Xxxxxx
Xxx Xxxx, XX 00000, XXX
ABA Number: 0210-00089
For Credit to: Grushko & Xxxxxxx, XXXX Trust Account
Account Number:
2.3. Intention to Create Escrow Over Company Documents and Subscriber
Documents. The Subscriber and Company intend that the Company Documents and
Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to
this Agreement for their benefit as set forth herein.
2.4. Escrow Agent to Deliver Company Documents and Subscriber
Documents. The Escrow Agent shall hold and release the Company Documents and
Subscriber Documents only in accordance with the terms and conditions of this
Agreement.
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section 4.2,
the Escrow Agent shall release the Company Documents and Subscriber Documents
as follows:
(a) On the Closing Date, the Escrow Agent will simultaneously
release the Company Documents to the Subscriber and release the Subscriber
Documents to the Company except that: (i) the net proceeds of the Purchase
Price distributed to the Company shall be retained in escrow and disbursed
only for the purposes set forth on Schedule B hereto upon Escrow Agent's
reasonable satisfaction that the proceeds are being employed for the purposes
stated on Schedule B, and (ii) the Legal Fees will be released to the
Subscriber's attorneys.
(b) All funds to be delivered to the Company shall be delivered
pursuant to the wire instructions to be provided in writing by the Company to
the Escrow Agent.
(c) Notwithstanding the above, upon receipt by the Escrow Agent
of joint written instructions ("Joint Instructions") signed by the Company and
the Subscriber, it shall deliver the Company Documents and Subscriber
Documents in accordance with the terms of the Joint Instructions.
(d) Notwithstanding the above, upon receipt by the Escrow Agent
of a final and non-appealable judgment, order, decree or award of a court of
competent jurisdiction (a "Court Order"), the Escrow Agent shall deliver the
Company Documents and Subscriber Documents in accordance with the Court Order.
Any Court Order shall be accompanied by an opinion of counsel for the party
presenting the Court Order to the Escrow Agent (which opinion shall be
satisfactory to the Escrow Agent) to the effect that the court issuing the
Court Order has competent jurisdiction and that the Court Order is final and
non-appealable.
3.2. Acknowledgement of Company and Subscriber; Disputes. The
Company and the Subscriber acknowledge that the only terms and conditions upon
which the Company Documents and Subscriber Documents are to be released are
set forth in Sections 3 and 4 of this Agreement. The Company and the
Subscriber reaffirm their agreement to abide by the terms and conditions of
this Agreement with respect to the release of the Company Documents and
Subscriber Documents. Any dispute with respect to the release of the Company
Documents and Subscriber Documents shall be resolved pursuant to Section 4.2
or by agreement between the Company and Subscriber.
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. Duties and Responsibilities of the Escrow Agent. The Escrow
Agent's duties and responsibilities shall be subject to the following terms
and conditions:
(a) The Subscriber and Company acknowledge and agree that the
Escrow Agent (i) shall not be responsible for or bound by, and shall not be
required to inquire into whether either the Subscriber or Company is entitled
to receipt of the Company Documents and Subscriber Documents pursuant to, any
other agreement or otherwise; (ii) shall be obligated only for the performance
of such duties as are specifically assumed by the Escrow Agent pursuant to
this Agreement; (iii) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and believed by the
Escrow Agent in good faith to be genuine and to have been signed or presented
by the proper person or party, without being required to determine the
authenticity or correctness of any fact stated therein or the propriety or
validity or the service thereof; (iv) may assume that any person believed by
the Escrow Agent in good faith to be authorized to give notice or make any
statement or execute any document in connection with the provisions hereof is
so authorized; (v) shall not be under any duty to give the property held by
Escrow Agent hereunder any greater degree of care than Escrow Agent gives its
own similar property; and (vi) may consult counsel satisfactory to Escrow
Agent, the opinion of such counsel to be full and complete authorization and
protection in respect of any action taken, suffered or omitted by Escrow Agent
hereunder in good faith and in accordance with the opinion of such counsel.
(b) The Subscriber and Company acknowledge that the Escrow Agent
is acting solely as a stakeholder at their request and that the Escrow Agent
shall not be liable for any action taken by Escrow Agent in good faith and
believed by Escrow Agent to be authorized or within the rights or powers
conferred upon Escrow Agent by this Agreement. The Subscriber and Company,
jointly and severally, agree to indemnify and hold harmless the Escrow Agent
and any of Escrow Agent's partners, employees, agents and representatives for
any action taken or omitted to be taken by Escrow Agent or any of them
hereunder, including the fees of outside counsel and other costs and expenses
of defending itself against any claim or liability under this Agreement,
except in the case of gross negligence or willful misconduct on Escrow Agent's
part committed in its capacity as Escrow Agent under this Agreement. The
Escrow Agent shall owe a duty only to the Subscriber and Company under this
Agreement and to no other person.
(c) The Subscriber and Company jointly and severally agree to
reimburse the Escrow Agent for outside counsel fees, to the extent authorized
hereunder and incurred in connection with the performance of its duties and
responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving five (5) days prior written notice of resignation to the
Subscriber and the Company. Prior to the effective date of the resignation as
specified in such notice, the Subscriber and Company will issue to the Escrow
Agent a Joint Instruction authorizing delivery of the Company Documents and
Subscriber Documents to a substitute Escrow Agent selected by the Subscriber
and Company. If no successor Escrow Agent is named by the Subscriber and
Company, the Escrow Agent may apply to a court of competent jurisdiction in
the State of New York for appointment of a successor Escrow Agent, and to
deposit the Company Documents and Subscriber Documents with the clerk of any
such court.
(e) The Escrow Agent does not have and will not have any
interest in the Company Documents and Subscriber Documents, but is serving
only as escrow agent, having only possession thereof. The Escrow Agent shall
not be liable for any loss resulting from the making or retention of any
investment in accordance with this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of the
Escrow Agent with respect to any and all matters pertinent thereto and no
implied duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for
the Subscriber in any dispute as to the disposition of the Company Documents
and Subscriber Documents, in any other dispute between the Subscriber and
Company, whether or not the Escrow Agent is then holding the Company Documents
and Subscriber Documents and continues to act as the Escrow Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the
resignation of the Escrow Agent or the termination of this Agreement.
4.2. Dispute Resolution: Judgments. Resolution of disputes arising
under this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery,
ownership, right of possession or disposition of the Company Documents and
Subscriber Documents, or if the Escrow Agent shall in good faith be uncertain
as to its duties or rights hereunder, the Escrow Agent shall be authorized,
without liability to anyone, to (i) refrain from taking any action other than
to continue to hold the Company Documents and Subscriber Documents pending
receipt of a Joint Instruction from the Subscriber and Company, or (ii)
deposit the Company Documents and Subscriber Documents with any court of
competent jurisdiction in the State of New York, in which event the Escrow
Agent shall give written notice thereof to the Subscriber and the Company and
shall thereupon be relieved and discharged from all further obligations
pursuant to this Agreement. The Escrow Agent may, but shall be under no duty
to, institute or defend any legal proceedings which relate to the Company
Documents and Subscriber Documents. The Escrow Agent shall have the right to
retain counsel if it becomes involved in any disagreement, dispute or
litigation on account of this Agreement or otherwise determines that it is
necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply
with and obey any Court Order. In case the Escrow Agent obeys or complies
with a Court Order, the Escrow Agent shall not be liable to the Subscriber and
Company or to any other person, firm, corporation or entity by reason of such
compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release of
all of the Company Documents and Subscriber Documents or at any time upon the
agreement in writing of the Subscriber and Company.
5.2. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation generated
by the transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery
(if delivered other than on a business day during normal business hours where
such notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
(a) If to the Company, to:
Wizzard Software Corporation
0000 Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Fax: (000) 000-0000
With a copy by telecopier only to:
Xxxxxxxxxx & Xxxxxxxxxx
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx, Esq.
and Xxxxxxx X. Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
(b) If to the Subscribers, to: the addresses and fax numbers
listed on Schedule A hereto
(c) If to the Escrow Agent, to:
Grushko & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
or to such other address as any of them shall give to the others by notice
made pursuant to this Section 5.2.
5.3. Interest. The Escrowed Payment shall not be held in an interest
bearing account nor will interest be payable in connection therewith. In the
event the Escrowed Payment is deposited in an interest bearing account, each
Subscriber shall be entitled to receive its pro rata portion of any accrued
interest thereon, but only if the Escrow Agent receives from such Subscriber
the Subscriber's United States taxpayer identification number and other
requested information and forms.
5.4. Assignment; Binding Agreement. Neither this Agreement nor any
right or obligation hereunder shall be assignable by any party without the
prior written consent of the other parties hereto. This Agreement shall enure
to the benefit of and be binding upon the parties hereto and their respective
legal representatives, successors and assigns.
5.5. Invalidity. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the parties hereto shall be enforceable to the fullest extent permitted by
law.
5.6. Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original,
but all such counterparts shall constitute but one and the same instrument.
This Agreement may be executed by facsimile transmission and delivered by
facsimile transmission.
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Funds Escrow Agreement and understands and agrees to it.
WIZZARD SOFTWARE CORP.
the "Company"
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
/s/
ALPHA CAPITAL AKTIENGESELLSCHAFT
"Subscriber"
/s/
GENESIS MICROCAP INC.
"Subscriber"
/s/______
WHALEHAVEN CAPITAL FUND LIMITED
"Subscriber"
ESCROW AGENT:
/s/
GRUSHKO & XXXXXXX, P.C.
SCHEDULE A TO FUNDS ESCROW AGREEMENT
SUBSCRIBER
PURCHASE
PRICE
CLASS A
WARRANTS
CLASS B
WARRANTS
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 000-00-00000000
$800,000.00
266,667
533,333
GENESIS MICROCAP INC.
000 Xxxxx Xxxxx
Xxxxxx X00 0XX, Xxxxxxx
By: Xxxxxxxx X. Xxxxxxx
Fax: 000-000-0000-0000
$200,000.00
66,667
133,333
WHALEHAVEN CAPITAL FUND LIMITED
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
$400,000.00
133,334
266,667
TOTAL
$1,400,000.00
SCHEDULE B TO FUNDS ESCROW AGREEMENT
Use of Proceeds
