EXHIBIT 10.61
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "AGREEMENT") made as of May 31, 2005, by and
among BIO-KEY INTERNATIONAL, INC., (the "ISSUER"), JESUP & XXXXXX SECURITIES
CORP. (the "PLACEMENT AGENT"), whose addresses and other information appear
below, and Xxxxxx Xxxx & Priest LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(the "ESCROW AGENT").
WITNESSETH:
WHEREAS, the Issuer proposes to sell $2.5-5 million (the "OFFERING AMOUNT")
of the Issuer's subordinated convertible debentures and warrants to purchase
common stock of the Issuer (the "SECURITIES") to investors (the subscribers of
the Securities pursuant to this offering are hereinafter referred to as
"INVESTORS"), in a private offering to accredited investors (the "OFFERING");
WHEREAS, the Issuer and the Placement Agent propose to establish an escrow
account (the "ESCROW ACCOUNT"), to which subscription monies which are received
by the Escrow Agent from the Placement Agent in connection with the Offering are
to be credited, and the Escrow Agent is willing to establish the Escrow Account
on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
2. ESTABLISHMENT OF THE BANK ACCOUNT.
2.1 The Escrow Agent shall use its XXXX account which is a
non-interest-bearing escrow account at the branch of a bank selected by the
Escrow Agent, (heretofore defined as the "BANK ACCOUNT"). The purpose of the
Bank Account is for (a) the deposit of all subscription monies (checks or wire
transfers) which are received by the Placement Agent from prospective purchasers
of the Securities and are delivered by the Placement Agent to the Escrow Agent,
(b) the holding of amounts of subscription monies which are collected through
the banking system and (c) the disbursement of collected funds, all as described
herein.
3. DEPOSITS TO THE BANK ACCOUNT.
3.1 The Placement Agent shall promptly deliver to the Escrow Agent
all monies which it receives from prospective purchasers of the Securities,
which monies shall be in the form of wire transfers or checks, such monies, they
shall be credited to the Escrow Account. All checks delivered to the Escrow
Agent shall be made payable to "Xxxxxx Xxxx & Priest LLP as Escrow Account." Any
check payable other than to the Escrow Agent as required hereby shall be
returned to the prospective purchaser, or if the Escrow Agent has insufficient
information to do so, then to the Placement Agent (together with any
Subscription Information, as defined below or other documents delivered
therewith) by noon of the next business day
following receipt of such check by the Escrow Agent, and such check shall be
deemed not to have been delivered to the Escrow Agent pursuant to the terms of
this Agreement.
3.2 Promptly after receiving subscription monies as described in
Section 3.1, the Escrow Agent shall deposit the same into the Bank Account.
Amounts of monies so deposited are hereinafter referred to as "ESCROW AMOUNTS".
Simultaneously with each deposit to the Escrow Account, the Placement Agent (or
the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent
in writing of the name, address, and the tax identification number of the
purchaser, the aggregate dollar amount of such subscription (collectively, the
"SUBSCRIPTION INFORMATION").
3.3 The Escrow Agent shall not be required to accept for credit to
the Escrow Account or for deposit into the Bank Account checks which are not
accompanied by the appropriate Subscription Information, which at minimum shall
include the name address and tax identification number. Wire transfers
representing payments by prospective purchasers shall not be deemed deposited in
the Escrow Account until the Escrow Agent has received in writing the
Subscription Information required with respect to such payments.
3.4 The Escrow Agent shall not be required to accept in the Escrow
Account any amounts representing payments by prospective purchasers, whether by
check or wire, except during the Escrow Agent's regular business hours.
3.5 Only those Escrow Amounts, which have been deposited in the Bank
Account and which have cleared the banking system and have been collected by the
Escrow Agent, are herein referred to as the "FUND."
3.6 If the Offering is terminated before the Termination Date, as
defined below, the Escrow Agent shall refund any portion of the Fund prior to
disbursement of the Fund in accordance with Article 4 hereof upon instructions
in writing signed by both the Issuer and the Placement Agent. The parties hereto
acknowledge and agree that the Offering will not be effected until a binding
securities purchase agreement with respect to such Offering is duly executed and
delivered by the Issuer.
4. DISBURSEMENT FROM THE BANK ACCOUNT.
4.1 Upon written instructions from the Issuer and the Placement Agent
the Escrow Agent shall release the Funds as directed in such instructions as
long as such instructions are received prior to the close of regular banking
hours on the Termination Date. After the Termination Date, unless extended by a
writing agreed to by all parties, the Escrow Agent shall promptly refund to each
prospective purchaser the amount of payment received from such purchaser which
is then held in the Fund or which thereafter clears the banking system, without
interest thereon or deduction there from, by drawing checks on the Bank Account
for the amounts of such payments and transmitting them to the purchasers. In
such event, the Escrow Agent shall promptly notify the Issuer and the Placement
Agent of its distribution of the Fund.
4.2 Upon disbursement of the Fund pursuant to the terms of this
Article 4, the Escrow Agent shall be relieved of further obligations and
released from all liability under this Agreement. It is expressly agreed and
understood that in no event shall the aggregate amount of payments made by the
Escrow Agent exceed the amount of the Fund.
5. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW AGENT. It is
understood and agreed that the duties of the Escrow Agent are purely ministerial
in nature, and that:
5.1 The Escrow Agent shall notify the Placement Agent, on a daily
basis, of the Escrow Amounts which have been deposited in the Bank Account and
of the amounts, constituting the Fund, which have cleared the banking system and
have been collected by the Escrow Agent.
5.2 The Escrow Agent shall not be responsible for or be required to
enforce any of the terms or conditions of the selling agreement or any other
agreement between the Placement Agent and the Issuer nor shall the Escrow Agent
be responsible for the performance by the Placement Agent or the Issuer of their
respective obligations under this Agreement.
5.3 The Escrow Agent shall not be required to accept from the
Placement Agent (or the Issuer) any Subscription Information pertaining to
prospective purchasers unless such Subscription Information is accompanied by
checks or wire transfers meeting the requirements of Section 3.1, nor shall the
Escrow Agent be required to keep records of any information with respect to
payments deposited by the Placement Agent (or the Issuer) except as to the
amount of such payments; however, the Escrow Agent shall notify the Placement
Agent within a reasonable time of any discrepancy between the amount set forth
in any Subscription Information and the amount delivered to the Escrow Agent
therewith. Such amount need not be accepted for deposit in the Escrow Account
until such discrepancy has been resolved.
5.4 The Escrow Agent shall be under no duty or responsibility to
enforce collection of any check delivered to it hereunder. The Escrow Agent,
within a reasonable time, shall return to the Placement Agent any check received
which is dishonored, together with the Subscription Information, if any, which
accompanied such check.
5.5 The Escrow Agent shall be entitled to rely upon the accuracy, act
in reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature, instrument or other document which is given
to the Escrow Agent pursuant to this Agreement without the necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.
5.6 If the Escrow Agent is uncertain as to its duties or rights
hereunder or shall receive instructions with respect to the Bank Account, the
Escrow Amounts or the Fund which, in its sole determination, are in conflict
either with other instructions received by it or with any provision of this
Agreement, it shall be entitled to hold the Escrow Amounts, the Fund, or a
portion thereof, in the Bank Account pending the resolution of such uncertainty
to the Escrow
Agent's sole satisfaction, by final judgment of a court or courts of competent
jurisdiction or otherwise.
5.7 The Escrow Agent shall not be liable for any action taken or
omitted hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct or gross negligence.
The Escrow Agent shall be entitled to consult with counsel of its own choosing
and shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
5.8 The Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Escrow Amounts, the
Fund or any part thereof or to file any financing statement under the Uniform
Commercial Code with respect to the Fund or any part thereof.
6. AMENDMENT; RESIGNATION OR REMOVAL OF ESCROW AGENT. This Agreement may
be altered or amended only with the written consent of the Issuer, the Placement
Agent and the Escrow Agent. The Escrow Agent may resign and be discharged from
its duties hereunder at any time by giving written notice of such resignation to
the Issuer and the Placement Agent specifying a date when such resignation shall
take effect and upon delivery of the Fund to the successor escrow agent
designated by the Issuer or the Placement Agent in writing. Such successor
Escrow Agent shall become the Escrow Agent hereunder upon the resignation date
specified in such notice. If the Company fails to designate a successor Escrow
Agent within thirty (30) days after such notice, then the resigning Escrow Agent
shall promptly refund the amount in the Fund to each prospective purchaser,
without interest thereon or deduction. The Escrow Agent shall continue to serve
until its successor accepts the escrow and receives the Fund. The Company shall
have the right at any time to remove the Escrow Agent and substitute a new
escrow agent by giving notice thereof to the Escrow Agent then acting. Upon its
resignation and delivery of the Fund as set forth in this Section 6, the Escrow
Agent shall be discharged of and from any and all further obligations arising in
connection with the escrow contemplated by this Agreement. Without limiting the
provisions of Section 8 hereof, the resigning Escrow Agent shall be entitled to
be reimbursed by the Issuer and the Placement Agent for any expenses incurred in
connection with its resignation, transfer of the Fund to a successor escrow
agent or distribution of the Fund pursuant to this Section 6.
7. REPRESENTATIONS AND WARRANTIES. The Issuer and the Placement Agent
hereby severally represent and warrant to the Escrow Agent that:
7.1 No party other than the parties hereto and the prospective
purchasers have, or shall have, any lien, claim or security interest in the
Escrow Amounts or the Fund or any part thereof.
7.2 No financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Escrow Amounts or the Fund or any part thereof.
7.3 The Subscription Information submitted with each deposit shall,
at the time of submission and at the time of the disbursement of the Fund, be
deemed a representation
and warranty that such deposit represents a bona fide payment by the purchaser
described therein for the amount of Securities set forth in such Subscription
Information.
7.4 Reasonable controls have been established and required due
diligence performed to comply with "Know Your Customer" regulations, USA Patriot
Act, Office of Foreign Asset Control (OFAC) regulations and the Bank Secrecy
Act.
8. FEES AND EXPENSES. The Escrow Agent shall be entitled to the Escrow
Agent Fees set forth below, payable upon the release of the Funds. In addition,
the Issuer and the Placement Agent jointly and severally agree to reimburse the
Escrow Agent for any reasonable expenses incurred in connection with this
Agreement, including, but not limited to, reasonable counsel fees. The Escrow
Agent Fees for the first closing shall be $1,000. All subsequent closings shall
be $500.
9. INDEMNIFICATION AND CONTRIBUTION.
9.1 The Issuer and the Placement Agent (collectively referred to as
the "INDEMNITORS") jointly and severally agree to indemnify the Escrow Agent and
its partners, employees and agents (collectively referred to as the
"INDEMNITEES") against, and hold them harmless of and from, as and when
incurred, any and all loss, liability, cost, damage and expense, including
without limitation, reasonable counsel fees, which the Indemnitees may suffer or
incur by reason of any action, claim or proceeding brought against the
Indemnitees arising out of or relating in any way to this Agreement or any
transaction to which this Agreement relates, unless such action, claim or
proceeding is the result of the willful misconduct or gross negligence of the
Indemnitees.
9.2 If the indemnification provided for in Section 9.1 is applicable,
but for any reason is held to be unavailable, the Indemnitors shall contribute
such amounts as are just and equitable to pay, or to reimburse the Indemnitees
for, the aggregate of any and all losses, liabilities, costs, damages and
expenses, including counsel fees, actually incurred by the Indemnitees as a
result of or in connection with, and any amount paid in settlement of, any
action, claim or proceeding arising out of or relating in any way to any actions
or omissions of the Indemnitors.
9.3 The provisions of this Article 9 shall survive any termination of
this Agreement, whether by disbursement of the Fund, resignation of the Escrow
Agent or otherwise, for a period of 3 years from the release of the Fund.
10. TERMINATION OF AGREEMENT. This Agreement shall terminate on the final
disposition of the Fund pursuant to Section 4, provided that the rights of the
Escrow Agent and the obligations of the other parties hereto under Section 9
shall survive the termination hereof and the resignation or removal of the
Escrow Agent for a period of 3 years thereafter. The Termination Date shall be
July 1, 2005.
11. GOVERNING LAW AND ASSIGNMENT. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
regard to the
conflicts of laws principles thereof, and shall be binding, upon the parties
hereto and their respective successors and assigns; PROVIDED, HOWEVER, that any
assignment or transfer by any party of its rights under this Agreement or with
respect to the Escrow Amounts or the Fund shall be void as against the Escrow
Agent unless (a) written notice thereof shall be given to the Escrow Agent; and
(b) the Escrow Agent shall have consented in writing to such assignment or
transfer.
12. NOTICES. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Postal Service, and addressed, if to the
Issuer or the Placement Agent, at their respective addresses set forth below,
and if to the Escrow Agent, at its address set forth above.
13. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
14. EXECUTION IN SEVERAL COUNTERPARTS. This Agreement may be executed in
several counterparts or by separate instruments and by facsimile transmission,
and all of such counterparts and instruments shall constitute one agreement,
binding on all of the parties hereto.
15. NO CONFLICT. The Issuer acknowledges that the Escrow Agreement is
acting as counsel for the Placement Agent and that it agrees that such fact
shall not preclude Escrow Agreement from acting as counsel for Placement Agent
in any matters.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection therewith.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
XXXXXX XXXX & PRIEST LLP,
AS ESCROW AGENT
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Partner
ISSUER: BIO-KEY INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman of the Board
Address: 0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxx, XX 00000
PLACEMENT AGENT: JESUP & XXXXXX SECURITIES
CORP.
By: /s/ Xxxxxxxx Xxxxxxxxxx
-------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Managing Director
Address: 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
