Exhibit 10.8
FUNDS ESCROW AGREEMENT
This Agreement (this "Agreement") is dated as of the 28th day of May,
2004 among Pacific Biometrics, Inc., a Delaware corporation (the "Company"),
Laurus Master Fund, Ltd. (the "Purchaser"), and Loeb & Loeb LLP (the "Escrow
Agent"):
W I T N E S S E T H:
WHEREAS, the Purchaser has advised the Escrow Agent that (a) the
Company and the Purchaser have entered into a Securities Purchase Agreement (the
"Purchase Agreement") for the sale by the Company to the Purchaser of a secured
convertible term note (the "Term Note"), (b) the Company has issued to the
Purchaser common stock purchase warrants (collectively, the "Term Note
Warrants") in connection with the issuance of the Term Note, and (c) the Company
and the Purchaser have entered into a Registration Rights Agreement covering the
registration of the Company's common stock underlying the Term Note and the Term
Note Warrants (the "Term Note Registration Rights Agreement");
WHEREAS, the Company and the Purchaser wish the Purchaser to deliver to
the Escrow Agent copies of the Documents (as hereafter defined) and the Escrowed
Payment (as hereafter defined) to be held and released by 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. Whenever used in this Agreement, the following terms
shall have the meanings set forth below.
(a) "Agreement" means this Agreement, as amended, modified and/or
supplemented from time to time by written agreement among the parties
hereto.
(b) "Closing Payment" means the closing payment to be paid to Laurus
Capital Management, LLC, the fund manager, as set forth on Schedule A
hereto.
(c) "Disbursement Letter" means that certain letter delivered to the
Escrow Agent by each of the Purchaser and the Company setting forth
wire instructions and amounts to be funded at the Closing.
(d) "Documents" means copies of the Disbursement Letter, [the Purchase
Agreement, the Term Note, the Term Note Warrants, and the Term Note
Registration Rights Agreement.
(e) "Escrowed Payment" means $2,500,000.
1.2. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the matters contained herein and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties, whether oral or written. 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.
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, in each case only by a written instrument signed by all parties
hereto, 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; Consent to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of laws. With
respect to any suit, action or proceeding relating to this Agreement or to the
transactions contemplated hereby ("Proceedings"), each party hereto irrevocably
submits to the exclusive jurisdiction of the courts of the County of New York,
State of New York and the United States District court located in the county of
New York in the State of New York. Each party hereto hereby irrevocably and
unconditionally (a) waives trial by jury in any Proceeding relating to this
Agreement and for any related counterclaim and (b) waives any objection which it
may have at any time to the laying of venue of any Proceeding brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction over such party. As
between the Company and the Purchaser, the prevailing party shall be entitled to
recover from the other party its reasonable attorneys' fees and costs. In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, then the remainder of this
Agreement shall not be affected and shall remain in full force and effect.
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1.7. Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Agreement to
favor any party against the other.
ARTICLE II
APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT
2.1. Appointment. The Company and the Purchaser hereby irrevocably
designate and appoint the Escrow Agent as their escrow agent for the purposes
set forth herein, and the Escrow Agent by its execution and delivery of this
Agreement hereby accepts such appointment under the terms and conditions set
forth herein.
2.2. Copies of Documents to Escrow Agent. On or about the date hereof,
the Purchaser shall deliver to the Escrow Agent copies of the Documents executed
by the Company to the extent it is a party thereto.
2.3. Delivery of Escrowed Payment to Escrow Agent. On or about the date
hereof, the Purchaser shall deliver to the Escrow Agent the Escrowed Payment.
2.4. Intention to Create Escrow Over the Escrowed Payment. The
Purchaser and the Company intend that the Escrowed Payment shall be held in
escrow by the Escrow Agent and released from escrow by the Escrow Agent only in
accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROW
3.1. Release of Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrowed Payment from escrow as follows:
(a) Promptly following receipt by the Escrow Agent of (i) copies of the
fully executed Documents and this Agreement, (ii) the Escrowed Payment
in immediately available funds, (iii) joint written instructions
("Joint Instructions") executed by the Company and the Purchaser
setting forth the payment direction instructions with respect to the
Escrowed Payment and (iv) Escrow Agent's verbal instructions from
Xxxxx Grin and/or Xxxxxx Grin (each of whom is a director of the
Purchaser) indicating that all closing conditions relating to the
Documents have been satisfied and directing that the Escrowed Payment
be disbursed by the Escrow Agent in accordance with the Joint
Instructions, then the Escrowed Payment shall be deemed released from
escrow and shall be promptly disbursed in accordance with the Joint
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Instructions. The Joint Instructions shall include, without
limitation, Escrow Agent's authorization to retain from the Escrowed
Payment Escrow Agent's fee for acting as Escrow Agent hereunder and
the Closing Payment for delivery to Laurus Capital Management, LLC in
accordance with the Joint Instructions.
(b) 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") relating to the Escrowed Payment, the Escrow Agent
shall remit the Escrowed Payment 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 is a court of competent jurisdiction and
that the Court Order is final and non-appealable.
3.2. Acknowledgement of Company and Purchaser; Disputes. The Company
and the Purchaser acknowledge that the only terms and conditions upon which the
Escrowed Payment are to be released from escrow are as set forth in Sections 3
and 4 of this Agreement. The Company and the Purchaser reaffirm their agreement
to abide by the terms and conditions of this Agreement with respect to the
release of the Escrowed Payment. Any dispute with respect to the release of the
Escrowed Payment shall be resolved pursuant to Section 4.2 or by written
agreement between the Company and Purchaser.
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 Purchaser and the Company acknowledge and agree that the Escrow
Agent (i) shall not be required to inquire into whether the Purchaser,
the Company or any other party is entitled to receipt of any Document
or all or any portion of the Escrowed Payment; (ii) shall not be
called upon to construe or review any Document or any other document,
instrument or agreement entered into in connection therewith; (iii)
shall be obligated only for the performance of such duties as are
specifically assumed by the Escrow Agent pursuant to this Agreement;
(iv) 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; (v) may assume
that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been
duly authorized to do so; (vi) shall not be responsible for the
identity, authority or rights of any person, firm or company executing
or delivering or purporting to execute or deliver this Agreement or
any Document or any funds deposited hereunder or any endorsement
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thereon or assignment thereof; (vii) 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 (viii) may
consult counsel satisfactory to Escrow Agent (including, without
limitation, Loeb & Loeb, LLP or such other counsel of Escrow Agent's
choosing), 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 Purchaser and the 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
Purchaser and the Company hereby, jointly and severally, indemnify and
hold harmless the Escrow Agent and any of Escrow Agent's partners,
employees, agents and representatives from and against any and all
actions taken or omitted to be taken by Escrow Agent or any of them
hereunder and any and all claims, losses, liabilities, costs, damages
and expenses suffered and/or incurred by the Escrow Agent arising in
any manner whatsoever out of the transactions contemplated by this
Agreement and/or any transaction related in any way hereto, including
the fees of outside counsel and other costs and expenses of defending
itself against any claims, losses, liabilities, costs, damages and
expenses arising in any manner whatsoever out the transactions
contemplated by this Agreement and/or any transaction related in any
way hereto, except for such claims, losses, liabilities, costs,
damages and expenses incurred by reason of the Escrow Agent's gross
negligence or willful misconduct. The Escrow Agent shall owe a duty
only to the Purchaser and Company under this Agreement and to no other
person.
(c) The Purchaser and the Company shall jointly and severally reimburse
the Escrow Agent for its reasonable out-of-pocket expenses (including
counsel fees (which counsel may be Loeb & Loeb LLP or such other
counsel of the Escrow Agent's choosing) incurred in connection with
the performance of its duties and responsibilities hereunder, which
shall not (subject to Section 4.1(b)) exceed $1,500.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder by
giving five (5) business days prior written notice of resignation to
the Purchaser and the Company. Prior to the effective date of
resignation as specified in such notice, the Purchaser and Company
will issue to the Escrow Agent a Joint Instruction authorizing
delivery of the Documents and the Escrowed Payment to a substitute
Escrow Agent selected by the Purchaser and the Company. If no
successor Escrow Agent is named by the Purchaser and the 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
deposit the Documents and the Escrowed Payment with the clerk of any
such court and/or otherwise commence an interpleader or similar action
for a determination of where to deposit the same.
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(e) The Escrow Agent does not have and will not have any interest in the
Documents and the Escrowed Payment, but is serving only as escrow
agent, having only possession thereof.
(f) The Escrow Agent shall not be liable for any action taken or omitted
by it in good faith and reasonably believed by it to be authorized
hereby or within the rights or powers conferred upon it hereunder, nor
for action taken or omitted by it in good faith, and in accordance
with advice of counsel (which counsel may be Loeb & Loeb, LLP or such
other counsel of the Escrow Agent's choosing), and shall not be liable
for any mistake of fact or error of judgment or for any acts or
omissions of any kind except to the extent any such liability arose
from its own willful misconduct or gross negligence.
(g) 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.
(h) The Escrow Agent shall be permitted to act as counsel for the
Purchaser or the Company, as the case may be, in any dispute as to the
disposition of the Documents and the Escrowed Payment, in any other
dispute between the Purchaser and the Company, whether or not the
Escrow Agent is then holding the Documents and/or the Escrowed Payment
and continues to act as the Escrow Agent hereunder.
(i) 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 Documents and/or the
Escrowed Payment, 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 Documents and the
Escrowed Payment pending receipt of a Joint Instruction from the
Purchaser and Company, (ii) commence an interpleader or similar
action, suit or proceeding for the resolution of any such dispute;
and/or (iii) deposit the Documents and the Escrowed Payment 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
Purchaser 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 Documents and the
Escrowed Payment. 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 which such counsel may be Loeb &
Loeb LLP or such other counsel of the Escrow Agent's choosing.
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(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 Purchaser
and Company or to any other person, firm, company or entity by reason
of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon disbursement of the
Escrowed Payment in accordance with the terms of this Agreement or earlier upon
(i) the agreement in writing of the Purchaser and Company; (ii) the resignation
of the Escrow Agent in accordance with the terms hereof; or (iii) the date ten
(10) days after the date hereof.
5.2. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):
(a) If to the Company, to:
Pacific Biometrics, Inc.
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Facsimile: (206) 298 - 9838
with a copy to:
Cairncross & Hempelmann, P.S
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 9810
Attention: Xxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Purchaser, to:
LAURUS MASTER FUND, LTD.
c/o Ironshore Corporate Services Ltd.
X.X. Xxx 0000 G.T., Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Fax: 000-000-0000
Attention: Xxxx Xxxxxx, Esq.
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(c) If to the Escrow Agent, to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
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.
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 inure 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 agreement. This
Agreement may be executed by facsimile transmission.
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IN WITNESS WHEREOF, the parties hereto have executed this Funds Escrow
Agreement as of the date and year first above written.
COMPANY:
PACIFIC BIOMETRICS, INC.
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
PURCHASER:
LAURUS MASTER FUND, LTD.
By: /s/
----------------------------------
Name:
Title:
ESCROW AGENT:
LOEB & LOEB LLP
By: /s/
----------------------------------
Name:
Title:
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SCHEDULE A TO FUNDS ESCROW AGREEMENT
------------------------------------
PURCHASER PRINCIPAL NOTE AMOUNT
----------------------------------------------------------------------
LAURUS MASTER FUND, LTD., Term Note in an aggregate principal
c/o Ironshore Corporate Services amount of $2,500,000
Ltd., X.X. Xxx 0000 G.T.,
Queensgate House, South Church
Street, Grand Cayman, Cayman
Islands
Fax: 000-000-0000
----------------------------------------------------------------------
TOTAL $2,500,000
----------------------------------------------------------------------
FUND MANAGER CLOSING PAYMENT
----------------------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C. Closing payment payable in
000 Xxxxx Xxxxxx, 00xx Xxxxx connection with investment by
Xxx Xxxx, Xxx Xxxx 00000 Laurus Master Fund, Ltd. for which
Fax: 000-000-0000 Laurus Capital Management, L.L.C.
is the Manager.
----------------------------------------------------------------------
TOTAL $87,500
----------------------------------------------------------------------
WARRANTS
WARRANT RECIPIENT WARRANTS IN CONNECTION WITH
OFFERING
------------------------------------------------------------------------
LAURUS MASTER FUND, LTD. Term Note Warrant exercisable into
A Cayman Island corporation 681,818 shares of common stock of
c/o Ironshore Corporate Services Ltd. the Company issuable in connection
X.X. Xxx 0000 G.T. with the Term Note.
Xxxxxxxxxx Xxxxx, Xxxxx Xxxxxx
Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Fax: 000-000-0000
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TOTAL Warrants exercisable into 681,818
shares of common stock of the
Company
-------------------------------------------------------------------------
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