Document:

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.

 

1

 

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:

 

	
  Bank:

  	
   

  	
  Mercantile Safe
  Deposit & Trust Company

  
	
   

  	
   

  	
   

  
	
  Routing
  #:

  	
   

  	
  052000618

  
	
   

  	
   

  	
   

  
	
  Account
  #:

  	
   

  	
  6498841

  
	
   

  	
   

  	
   

  
	
  Name on
  Account:

  	
   

  	
  Baxter, Baker,
  Sidle, Conn & Jones, P.A. Escrow Account

  

 

2

 

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:

 

	
  Brokerage
  Firm:

  	
   

  	
  Sloan Securities
  Corp.

  
	
  Clearing
  House:

  	
   

  	
  Fiserv

  
	
  Account
  #:

  	
   

  	
  68047138

  
	
  DTC #:

  	
   

  	
  0632

  
	
  Name on
  Account:

  	
   

  	
  Baxter, Baker,
  Sidle, Conn & Jones, P.A. Escrow Account

  

 

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.

 

3

 

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

 

4

 

thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Escrow Agent, and the retiring Escrow
Agent shall be discharged from its duties and obligations under this Escrow
Agreement, but shall not be discharged from any liability for actions taken as
Escrow Agent hereunder prior to such succession.  After any retiring Escrow Agent’s resignation
or removal, the provisions of this Escrow Agreement shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Escrow Agent
under this Escrow Agreement.  The
retiring Escrow Agent shall transmit all records pertaining to the Escrow Funds
and shall pay all funds held by it in the Escrow Funds to the successor Escrow
Agent, after making copies of such records as the retiring Escrow Agent deems
advisable and after deduction and payment to the retiring Escrow Agent of all fees
and expenses (including court costs and attorneys’ fees) payable to, incurred
by, or expected to be incurred by the retiring Escrow Agent in connection with
the performance of its duties and the exercise of its rights hereunder.

 

10.           Liability
of Escrow Agent.

 

a.             Escrow Agent
shall have no liability or obligation with respect to the Escrow Funds except
for Escrow Agent’s willful misconduct or gross negligence. Escrow Agent’s sole
responsibility shall be for the safekeeping, investment, and disbursement of
the Escrow Funds in accordance with the terms of this Agreement.  Escrow Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice or any fact or
circumstance not specifically set forth herein. 
Escrow Agent may rely upon any instrument, not only as to its due
execution, validity and effectiveness, but also as to the truth and accuracy of
any information contained therein, which Escrow Agent shall in good faith
believe to be genuine, to have been signed or presented by the person or
parties purporting to sign the same and conform to the provisions of this
Agreement.  In no event shall Escrow
Agent be liable for incidental, indirect, special, and consequential or
punitive damages.  Escrow Agent shall not
be obligated to take any legal action or commence any proceeding in connection
with the Escrow Funds, any account in which Escrow Funds are deposited, this
Agreement or the Standby Equity Distribution Agreement, or to appear in,
prosecute or defend any such legal action or proceeding.  Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to construction of
any of the provisions hereof or of any other agreement or its duties hereunder,
or relating to any dispute involving any party hereto, and shall incur no
liability and shall be fully indemnified from any liability whatsoever in
acting in accordance with the opinion or instructions of such counsel.  The Company and the Investor jointly and
severally shall promptly pay, upon demand, the reasonable fees and expenses of
any such counsel and Escrow Agent is hereby authorized to pay such fees and
expenses from funds held in escrow.

 

b.             The Escrow
Agent is hereby authorized, in its sole discretion, to comply with orders
issued or process entered by any court with respect to the Escrow Funds,
without determination by the Escrow Agent of such court’s jurisdiction in the
matter.  If any portion of the Escrow
Funds is at any time attached, garnished or levied upon under any court order,
or in case the payment, assignment, transfer, conveyance or delivery of any
such property shall be stayed or enjoined by any court order, or in any case
any order judgment or decree shall be made or entered by any court affecting
such property or any part thereof, then and in any such event, the Escrow Agent
is authorized, in its sole discretion, to rely upon and comply with any such
order, writ judgment or decree which it is advised by legal counsel selected by
it, binding upon it, without the need for appeal or other action; and if the
Escrow Agent complies with any such

 

5

 

order, writ, judgment or decree, it shall not be liable to any of the
parties hereto or to any other person or entity by reason of such compliance
even though such order, writ judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.

 

11.           Indemnification
of Escrow Agent.  From and at all
times after the date of this Agreement, the parties jointly and severally,
shall, to the fullest extent permitted by law and to the extent provided
herein, indemnify and hold harmless Escrow Agent and each director, officer,
employee, attorney, agent and affiliate of Escrow Agent (collectively, the “Indemnified Parties”)
against any and all actions, claims (whether or not valid), losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever (including
without limitation reasonable attorney’s fees, costs and expenses) incurred by
or asserted against any of the Indemnified Parties from and after the date
hereof, whether direct, indirect or consequential, as a result of or arising
from or in any way relating to any claim, demand, suit, action, or proceeding
(including any inquiry or investigation) by any person, including without
limitation the parties to this Agreement, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under
any statute or regulation, including, but not limited to, any federal or state securities
laws, or under any common law or equitable cause or otherwise, arising from or
in connection with the negotiation, preparation, execution, performance or
failure of performance of this Agreement or any transaction contemplated
herein, whether or not any such Indemnified Party is a party to any such action
or proceeding, suit or the target of any such inquiry or investigation;
provided, however, that no Indemnified Party shall have the right to be
indemnified hereunder for liability finally determined by a court of competent
jurisdiction, subject to no further appeal, to have resulted solely from the
gross negligence or willful misconduct of such Indemnified Party.  If any such action or claim shall be brought or
asserted against any Indemnified Party, such Indemnified Party shall promptly
notify the Company and the Investor hereunder in writing, and the Investor and
the Company shall assume the defense thereof, including the employment of
counsel and the payment of all expenses. 
Such Indemnified Party shall, in its sole discretion, have the right to
employ separate counsel (who may be selected by such Indemnified Party in its
sole discretion) in any such action and to participate and to participate in
the defense thereof, and the fees and expenses of such counsel shall be paid by
such Indemnified Party, except that the Investor and/or the Company shall be
required to pay such fees and expense if (a) the Investor or the Company
agree to pay such fees and expenses, or (b) the Investor and/or the
Company shall fail to assume the defense of such action or proceeding or shall
fail, in the sole discretion of such Indemnified Party, to employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding, (c) the Investor and the Company are the plaintiff in any such
action or proceeding or (d) the named or potential parties to any such
action or proceeding (including any potentially impleaded parties) include both
Indemnified Party the Company and/or the Investor and Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the Company or the Investor.  The
Investor and the Company shall be jointly and severally liable to pay fees and
expenses of counsel pursuant to the preceding sentence, except that any
obligation to pay under clause (a) shall apply only to the party so
agreeing.  All such fees and expenses
payable by the Company and/or the Investor pursuant to the foregoing sentence
shall be paid from time to time as incurred, both in advance of and after the
final disposition of such action or claim. 
The obligations of the parties under this section shall survive any
termination of this Agreement, and resignation or removal of the Escrow Agent
shall be independent of any obligation of the Escrow Agent.

 

6

 

12.           Expenses
of Escrow Agent.  Except as set forth
in Section 11 the Company shall reimburse the Escrow Agent for all of its
reasonable out-of-pocket expenses, including attorneys’ fees, travel expenses,
telephone and facsimile transmission costs, postage (including express mail and
overnight delivery charges), and copying charges.  All of the compensation and reimbursement
obligations set forth in this Section shall be payable by the Company,
upon demand by the Escrow Agent.  The
obligations of the Company under this Section shall survive any
termination of this Agreement and the resignation or removal of the Escrow Agent.

 

13.           Warranties.

 

a.             The Investor
makes the following representations and warranties to the Escrow Agent:

 

i.              The Investor
has full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.

 

ii.             This Agreement
has been duly approved by all necessary action of the Investor, including any
necessary approval of the limited partner of the Investor, has been executed by
duly authorized officers of the Investor’s general partner, enforceable in
accordance with its terms.

 

iii.            The execution,
delivery, and performance of the Investor of this Agreement will not violate,
conflict with, or cause a default under the agreement of limited partnership of
the Investor, any applicable law or regulation, any court order or administrative
ruling or degree to which the Investor is a party or any of its property is
subject, or any agreement, contract, indenture, or other binding arrangement.

 

iv.            Mark A. Angelo
has been duly appointed to act as the representative of Investor hereunder and
has full power and authority to execute, deliver, and perform this Agreement,
to execute and deliver any Joint Written Direction, Common Stock Joint Written
Direction, to amend, modify, or waive any provision of this Agreement, and to
take any and all other actions as the Investor’s representative under this
Agreement, all without further consent or direction form, or notice to, the
Investor or any other party.

 

v.             No party other
than the parties hereto have, or shall have, any lien, claim or security
interest in the Escrow Funds or any part thereof.  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 Funds or any part
thereof.

 

vi.            All of the
representations and warranties of the Investor contained herein are true and
complete as of the date hereof and will be true and complete at the time of any
disbursement from the Escrow Funds.

 

b.             The Company
makes the following representations and warranties to Escrow Agent and the
Investor:

 

i.              The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.

 

7

 

ii.             This Agreement
has been duly approved by all necessary corporate action of the Company,
including any necessary shareholder approval, has been executed by duly
authorized officers of the Company, enforceable in accordance with its terms.

 

iii.            The execution,
delivery, and performance by the Company of this Escrow Agreement is in
accordance with the Standby Equity Distribution Agreement and will not violate,
conflict with, or cause a default under the articles of incorporation or bylaws
of the Company, any applicable law or regulation, any court order or
administrative ruling or decree to which the Company is a party or any of its
property is subject, or any agreement, contract, indenture, or other binding
arrangement.

 

iv.            Richard C.
Levin has been duly appointed to act as the representative of the Company
hereunder and has full power and authority to execute, deliver, and perform
this Agreement, to execute and deliver any Joint Written Direction, Common
Stock Joint Written Direction, to amend, modify or waive any provision of this
Agreement and to take all other actions as the Company’s representative under
this Agreement, all without further consent or direction from, or notice to,
the Company or any other party.

 

v.             No party other
than the parties hereto shall have, any lien, claim or security interest in the
Escrow Funds or any part thereof.  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 Funds or any part thereof.

 

vi.            All of the
representations and warranties of the Company contained herein are true and
complete as of the date hereof and will be true and complete at the time of any
disbursement from the Escrow Funds.

 

14.           Consent
to Jurisdiction and Venue.  In the
event that any party hereto commences a lawsuit or other proceeding relating to
or arising from this Agreement, the parties hereto agree that the United States
District Court for the District of New Jersey shall have the sole and exclusive
jurisdiction over any such proceeding. 
If all such courts lack federal subject matter jurisdiction, the parties
agree that the Superior Court Division of New Jersey, Chancery Division of
Hudson County shall have sole and exclusive jurisdiction.  Any of these courts shall be proper venue for
any such lawsuit or judicial proceeding and the parties hereto waive any
objection to such venue.  The parties
hereto consent to and agree to submit to the jurisdiction of any of the courts
specified herein and agree to accept the service of process to vest personal
jurisdiction over them in any of these courts.

 

15.           Notice.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been validly served,
given or delivered five (5) days after deposit in the United States mail,
by certified mail with return receipt requested and postage prepaid, when
delivered personally, one (1) day delivery to any overnight courier, or
when transmitted by facsimile transmission and addressed to the party to be
notified as follows:

 

8

 

	
  If to Investor,
  to:

  	
   

  	
  Cornell Capital
  Partners, LP

  
	
   

  	
   

  	
  101 Hudson
  Street – Suite 3700

  
	
   

  	
   

  	
  Jersey City, New
  Jersey 07302

  
	
   

  	
   

  	
  Attention:

  	
  Mark
  Angelo

  
	
   

  	
   

  	
  Facsimile:

  	
  (201)
  985-8266

  
	
   

  	
   

  	
   

  
	
  If to Escrow
  Agent, to:

  	
   

  	
  Baxter, Baker,
  Sidle, Conn & Jones, P.A.

  
	
   

  	
   

  	
  120 E. Baltimore
  Street, Suite 2100

  
	
   

  	
   

  	
  Baltimore, MD
  21202

  
	
   

  	
   

  	
  Attention:

  	
  James
  E. Backer, Jr. Esq.

  
	
   

  	
   

  	
  Facsimile:

  	
  (410)
  230-3801

  
	
   

  	
   

  	
   

  
	
  If to Company,
  to:

  	
   

  	
  Spherix
  Incorporated

  
	
   

  	
   

  	
  12051 Indian
  Creek Court

  
	
   

  	
   

  	
  Beltsville,
  Maryland 20705

  
	
   

  	
   

  	
  Attention:

  	
  President

  
	
   

  	
   

  	
  Telephone:

  	
  (301)
  419-3900

  
	
   

  	
   

  	
  Facsimile:

  	
  (301)
  210-4908

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  James E.
  Baker, Jr., Esq.

  
	
   

  	
   

  	
  Baxter, Baker,
  Sidle, Conn & Jones, P.A.

  
	
   

  	
   

  	
  120 E. Baltimore
  Street, Suite 2100

  
	
   

  	
   

  	
  Baltimore, MD
  21202

  
	
   

  	
   

  	
  Facsimile:

  	
  (410)
  230-3801

  

 

Or to such other address as each party may designate
for itself by like notice.

 

16.           Amendments or
Waiver. This Agreement may be changed, waived, discharged or terminated only
by a writing signed by the parties to this Agreement.  No delay or omission by any party in
exercising any right with respect hereto shall operate as waiver.  A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future
occasion.

 

17.           Severability.  To the extent any provision of this Agreement
is prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition, or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

18.           Governing Law.  This Agreement shall be construed and
interpreted in accordance with the internal laws of the State of New Jersey
without giving effect to the conflict of laws principles thereof.

 

19.           Entire
Agreement.  This
Agreement constitutes the entire Agreement between the parties relating to the
holding, investment, and disbursement of the Escrow Funds and sets forth in
their entirety the obligations and duties of the Escrow Agent with respect to
the Escrow Funds.

 

9

 

20.           Binding Effect.  All of the terms of this Agreement, as
amended from time to time, shall be binding upon, inure to the benefit of and
be enforceable by the respective heirs, successors and assigns of the Investor,
the Company, or the Escrow Agent.

 

21.           Execution of
Counterparts.  This
Agreement and any Joint Written Direction may be executed in counter parts,
which when so executed shall constitute one and same agreement or direction.

 

22.           Termination. Upon the
first to occur of the termination of the Standby Equity Distribution Agreement
dated the date hereof or the disbursement of all amounts in the Escrow Funds
and Common Stock into court pursuant to Section 7 hereof, this Agreement
shall terminate and Escrow Agent shall have no further obligation or liability
whatsoever with respect to this Agreement or the Escrow Funds or Common Stock.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

10

 

IN WITNESS WHEREOF the parties
to this Escrow Agreement have hereunto set their hands and seals the day and
year above set forth.

	
   

  	
  SPHERIX
  INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   Richard C.
  Levin

  
	
   

  	
  Title:

  	
   President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CORNELL
  CAPITAL PARTNERS, LP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   Yorkville
  Advisors, LLC

  
	
   

  	
  Its:

  	
   General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BAXTER,
  BAKER, SIDLE, CONN & JONES, P.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   James E.
  Baker, Jr., Esq.

  
					

 

11Exhibit 4.01

 

BLUE WIRELESS & DATA,
INC.

2005 STOCK OPTION AND
AWARD PLAN

 

BLUE WIRELESS & DATA, INC., a Delaware corporation (the “Company”),
hereby adopts this 2005 Stock Option and Award Plan (the “Plan”), effective as
of the 23rd day of September, 2005, under which options to acquire stock of the
Company or bonus stock may be granted from time to time to employees, including
of officers and directors of the Company and/or its subsidiaries. In addition,
at the discretion of the board of directors or other administrator of this
Plan, options to acquire stock of the Company or bonus stock may from time to
time be granted under this Plan to other individuals who contribute to the
success of the Company or its subsidiaries but who are not employees of the Company,
all on the terms and conditions set forth herein.

 

                1.             Purpose of the Plan. The
Plan is intended to aid the Company in maintaining and developing a management
team, attracting qualified officers and employees capable of assisting in the
future success of the Company, and rewarding those individuals who have
contributed to the success of the Company. It is designed to aid the Company in
retaining the services of executives and employees and in attracting new
personnel when needed for future operations and growth and to provide such
personnel with an incentive to remain employees of the Company, to use their
best efforts to promote the success of the Company’s business, and to provide
them with an opportunity to obtain or increase a proprietary interest in the
Company. It is also designed to permit the Company to reward those individuals
who are not employees of the Company but who are perceived by management as
having contributed to the success of the Company or who are important to the
continued business and operations of the Company. The above aims will be
effectuated through the granting of options (“Options”) to purchase shares of
common stock of the Company, par value $0.01 per share (the “Stock”), or the
granting of awards of bonus stock (“Stock Awards”), all subject to the terms
and conditions of this Plan. It is intended that the Options issued pursuant to
this Plan include, when designated as such at the time of grant, options which
qualify as Incentive Stock Options (“Incentive Options”) within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or
any amendment or successor provision of like tenor. If the Company has a class
of securities registered under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), it is intended that Options or Stock Awards granted
pursuant to this Plan qualify for the exemption provided for in Rule 16b-3 (“Rule
16b-3”) promulgated under the Exchange Act or any amendment or successor rule
of like tenor when granted in accordance with the provisions of such rule.

 

                2.             Stockholder Approval. The
Plan shall become effective immediately on adoption by the board of directors
of the Company (the “Board”) and awards under the Plan can be made at that time
or at any subsequent time. The Plan shall be submitted to the Company’s stockholders
in the manner set forth below:

 

                (a)            Within twelve months after the Plan
has been adopted by the Board, the Plan shall be submitted for approval by
those stockholders of the Company who are entitled to vote on such matters at a
duly held stockholders’ meeting or approved by the unanimous written consent of
the holders of the issued and outstanding Stock of the Company. If the Plan is
presented at a stockholders’ meeting, it shall be approved by the affirmative
vote of the holders of a majority of the issued and outstanding Stock in
attendance, in person or by proxy, at such meeting. Notwithstanding the
foregoing, the Plan may be approved by the stockholders in any other manner not
inconsistent with the Company’s articles of incorporation and bylaws, the
applicable provisions of state corporate laws, and the applicable provisions of
the Code and regulations adopted thereunder.

 

                (b)            In the event the Plan is so
approved, the secretary of the Company shall, as soon as practicable following
the date of final approval, prepare and attach to this Plan certified copies of
all relevant resolutions adopted by the stockholders and the Board.

 

                (c)           Failure to obtain stockholder
approval on or before the date that is twelve months subsequent to the adoption
of this Plan by the Board shall not affect awards previously granted under the
Plan; provided that, none of the
Options issued under this Plan will qualify as Incentive Options.

 

 

3.             Administration
of the Plan. Administration of the Plan shall be determined by the Board.
Subject to

 

 

1

 

compliance with applicable provisions of the governing law, the Board
may delegate administration of the Plan or specific administrative duties with
respect to the Plan, on such terms and to such committees of the Board as it
deems proper. Any Option or Stock Award approved by the Board shall be approved
by a majority vote of those members of the Board in attendance at a meeting at
which a quorum is present. Any Option or Stock Award approved by a committee
designated by the Board shall be approved as specified by the Board at the time
of delegation. The interpretation and construction of the terms of the Plan by
the Board or a duly authorized committee shall be final and binding on all
participants in the Plan absent a showing of demonstrable error. No member of
the Board or duly authorized committee shall be liable for any action taken or
determination made in good faith with respect to the Plan.

 

                The Board’s or
duly authorized committee’s determination under the Plan (including without
limitation determinations of the persons to receive Options or Stock Awards,
the form, amount, and timing of such Options or Stock Awards, the terms and
provisions of such Options or Stock Awards, and the agreements evidencing same)
need not be uniform and may be made by the Board or duly authorized committee
selectively among persons who receive, or are eligible to receive, Options or
Stock Awards under the Plan, whether or not such persons are similarly
situated.

 

                4.             Shares of Stock Subject to the
Plan.  A total of 148,000,000 shares
of Stock may be subject to, or issued pursuant to, Options or Stock Awards
granted under the terms of this Plan. Any shares subject to an Option or Stock
Award under the Plan, which Option or Stock Award for any reason expires or is
forfeited terminated, or surrendered unexercised as to such shares, shall be
added back to the total number of shares reserved for issuance under the terms
of this Plan. If any right to acquire Stock granted under the Plan is exercised
by the delivery of shares of Stock or the relinquishment of rights to shares of
Stock, only the net shares of Stock issued (the shares of Stock issued less the
shares of Stock surrendered) shall count against the total number of shares
reserved for issuance under the terms of this Plan.  The number of shares of Stock subject to the
Plan is subject to adjustment as set forth in Section 16 hereof.

 

                5.             Reservation of Stock on Granting
of Option.  At the time of granting
any Option under the terms of this Plan, there will be reserved for issuance on
the exercise of the Option the number of shares of Stock of the Company subject
to such Option. The Company may reserve either authorized but unissued shares
or issued shares that have been reacquired by the Company.

 

                6.             Eligibility. Options or
Stock Awards under the Plan may be granted to employees, including officers and
directors, of the Company or its subsidiaries, as may be existing from time to
time, and to other individuals who are not employees of the Company as may be
deemed in the best interest of the Company by the Board or a duly authorized
committee. Such Options or Stock Awards shall be in the amounts, and shall have
the rights and be subject to the restrictions, as may be determined by the
Board or a duly authorized committee at the time of grant, all as may be within
the general provisions of this Plan.

 

                                                7.             Term
of Options and Certain Limitations on Right to Exercise.

 

                (a)           Each Option shall have the term
established by the Board or duly authorized committee at the time the Option is
granted but in no event may an Option have a term in excess of five years.

 

                (b)           The term of the Option, once it is
granted, may be reduced only as provided for in this Plan or under the written
provisions of the Option.

 

 

2

 

                (c)           Unless otherwise specifically
provided by the written provisions of the Option, no holder or his or her legal
representative, legatee, or distributee will be, or shall be deemed to be, a
holder of any shares subject to an Option unless and until the holder exercises
his or her right to acquire all or a portion of the Stock subject to the Option
and delivers the required consideration to the Company in accordance with the
terms of this Plan and the Option and then only to the extent of the number of
shares of Stock acquired. Except as specifically provided in this Plan or as
otherwise specifically provided by the written provisions of the Option, no
adjustment to the exercise price or the number of shares of Stock subject to
the Option shall be made for dividends or other rights for which the record
date is prior to the date the Stock subject to the Option is acquired by the
holder.

 

                (d)            Options under the Plan shall vest
and become exercisable at such time or times and on such terms as the Board or
a duly authorized committee may determine at the time of the grant of the
Option.

 

                (e)           Options granted under the Plan shall
contain such other provisions, including, without limitation, further
restrictions on the vesting and exercise of the Option, as the Board or a duly
authorized committee shall deem advisable.

 

                                                                (f)            In no event may an Option be
exercised after the expiration of its term.

 

                (g)           Unless otherwise specifically
provided by the written provisions of an Option granted pursuant to this Plan,
upon receipt of:

 

                                                                                (i)
any request that the exercise of the Option or the resale of any shares of
Stock issued or to be issued on exercise of such Option will be registered
under the Securities Act; or

 

                                                                                (ii)
any notice of exercise of such Option pursuant to its terms, in lieu of any
obligation to effect any registration with respect to the Options or shares of
Common Stock issuable on such Option or in lieu of delivering shares of Common
Stock on the exercise of the Option;

 

                                                the Company may, within five business
days of receipt of such request to register or notice of exercise, purchase, in
whole or in part, such Options from the Optionee at an amount in cash equal to
the difference between the then current fair market value (as defined below) of
the Common Stock on the day of such repurchase and the exercise price in effect
on such day.

 

                                                In order to exercise such right, the
Company must provide written notice to the optionee at least five days prior to
the date that the Company proposes to repurchase such Options. For purposes of
this section. the fair market value of the Common Stock shall be determined by
the Board or a duly authorized committee based on the closing price for the
Stock as quoted on a registered national securities exchange or, if not listed
on a national exchange, the Nasdaq Stock Market (“Nasdaq”), on the trading day
immediately preceding the date that the Company’s provides notice of its intent
to repurchase the Options, or, if not listed on such an exchange or included on
Nasdaq, the closing price for the Stock as determined by the Board or a duly
authorized committee through any other reliable means of determination
available on the close of business on the trading day last preceding the date
of providing the notice.

 

                8.             Exercise Price. The exercise
price of each Option issued under the Plan shall be determined by the Board or
a duly authorized committee on the date of grant.

 

 

3

 

                9.             Payment of Exercise Price.
The exercise of any Option shall be contingent on receipt by the Company of
cash, certified bank check to its order, or other consideration acceptable to
the Company; provided that, at
the discretion of the Board or a duly authorized committee, the written
provisions of the Option may provide that payment can be made in whole or in
part in shares of Stock of the Company that have been owned by the optionee for
more than six months or by the surrender of Options to acquire Stock from the
Company that have been held for more than six months, which Stock or Options
shall be valued at their then fair market value as determined by the Board or a
duly authorized committee. Any consideration approved by the Board or a duly
authorized committee that calls for the payment of the exercise price over a
period of more than one year shall provide for interest, which shall not be
included as part of the exercise price, that is equal to or exceeds the imputed
interest provided for in section 483 of the Code or any amendment or successor
section of like tenor.

 

                10.           Withholding. If the grant of a
Stock Award or the grant or exercise of an Option pursuant to this Plan, or any
other event in connection with any such grant or exercise, creates an
obligation to withhold income and employment taxes pursuant to the Code or
applicable state or local laws, such obligation may, at the discretion of the
Board or a duly authorized committee at the time of the grant of the Option or
Stock Award and to the extent permitted by the terms of the Option or Stock
Award and the then governing provisions of the Code and the Exchange Act, be
satisfied (i) by the holder of the Option or Stock Award delivering to the
Company an amount of cash equal to such withholding obligation; (ii) by the
Company withholding from any compensation or other amount owing to the holder
of the Option or Stock Award the amount (in cash, Stock, or other property as
the Company may determine) of the withholding obligation; (iii) by the Company
withholding shares of Stock subject to the Option or Stock Award with a fair
market value equal to such obligation; or (iv) by the holder of the Option or Stock
Award either delivering shares of Stock that have been owned by the holder for
more than six months or canceling Options or other rights to acquire Stock from
the Company that have been held for more than six months with a fair market
value equal to such requirements. In all events, delivery of shares of Stock
issuable on exercise of the Option or on grant of the Stock Award shall be
conditioned upon and subject to the satisfaction or making provision for the
satisfaction of the withholding obligation of the Company resulting from the
grant or exercise of the Option, grant of the Stock Award, or any other event.
The Company shall be further authorized to take such other action as may be
necessary, in the opinion of the Company, to satisfy all obligations for the
payment of such taxes.

 

                11.           Incentive Options - Additional
Provisions. In addition to the other restrictions and provisions of this
Plan, any Option granted hereunder that is intended to be an Incentive Option
shall meet the following further requirements:

 

                (a)           The exercise price of an Incentive
Option shall not be less than the fair market value of the Stock on the date of
grant of the Incentive Option as determined by the Board or a duly authorized
committee based on the closing price for the Stock as quoted on a registered
national securities exchange or, if not listed on a national exchange or
Nasdaq, over the five-day trading period immediately prior to the date of grant
of such Incentive Option, or, if not listed on such an exchange or included on
Nasdaq, the closing price for the Stock as determined by the Board or a duly
authorized committee through any other reliable means of determination
available on the close of business on the trading day last preceding the date
of grant of such Incentive Option and permitted by the applicable provisions of
the Code.

 

                (b)           No Incentive Option may be granted
under the Plan to any individual that owns (either of record or beneficially)
Stock possessing more than 10% of the combined voting power of the Company or
any parent or subsidiary corporation unless both the exercise price is at least
110% of the fair market value of the Stock on the date the Option is granted
and the Incentive Option by its terms is not exercisable more than five years
after the date it is granted.

 

                (c)           Incentive Options may be granted only
to employees of the Company or its subsidiaries and only in connection with
that employee’s employment by the Company or the subsidiary. Notwithstanding
the above, directors and other individuals who have contributed to the success
of the Company or its subsidiaries may be granted Incentive Options under the
Plan, subject to, and to the extent permitted by, applicable provisions of the
Code and regulations promulgated thereunder, as they may be amended from time
to time.

 

 

4

 

                (d)           The aggregate fair market value
(determined as of the date the Incentive Option is granted) of the shares of
Stock with respect to which Incentive Options are exercisable for the first
time by any individual during any calendar year under the Plan (and all other
plans of the Company and its subsidiaries) may not exceed $100,000.

 

                (e)           No Incentive Option shall be
transferable other than by will or the laws of descent and distribution and
shall be exercisable, during the lifetime of the optionee, only by the optionee
to whom the Incentive Option is granted.

 

                (f)            No individual acquiring shares of
Stock pursuant to any Incentive Option granted under this Plan shall sell,
transfer, or otherwise convey the Stock until after the date that is both two
years after the date the Incentive Option was granted and one year after the
date the Stock was acquired pursuant to the exercise of the Incentive Option.
If any individual makes a disqualifying disposition, he or she shall notify the
Company within 30 days of such transaction.

 

                (g)           No Incentive Option may be exercised
unless the holder was, within three months of such exercise, and had been since
the date the Incentive Option was granted, an eligible employee of the Company
as specified in the applicable provisions of the Code, unless the employment
was terminated as a result of the death or disability (as defined in the Code
and the regulations promulgated thereunder as they may be amended from time to
time) of the employee or the employee dies within three months of the
termination. In the event of termination as a result of disability, the holder
shall have a one year period following termination in which to exercise the
Incentive Option. In the event of death of the holder, the Incentive Option
must be exercised within six months after the issuance of letters testamentary
or administration or the appointment of an administrator, executor, or personal
representative, but not later than one year after the date of termination of
employment. An authorized absence or leave approved by the Board or a duly
authorized committee for a period of 90 days or less shall not be considered an
interruption of employment for any purpose under the Plan.

 

                (h)           All Incentive Options shall be deemed
to contain such other limitations and restrictions as are necessary to conform
the Incentive Option to the requirements for “incentive stock options” as
defined in section 422 of the Code, or any amendment or successor statute of
like tenor.

 

All of the foregoing restrictions and limitations are based on the
governing provisions of the Code as of the date of adoption of this Plan. If at
any time the Code is amended to permit the qualification of an Option as an incentive
stock option without one or more of the foregoing restrictions or limitations
or the terms of such restrictions or limitations are modified, the Board or a
duly authorized committee may grant Incentive Options, and may modify
outstanding Incentive Options in accordance with such changes, all to the
extent that such action by the Board or duly authorized committee does not
disqualify the Options from treatment as incentive stock options under the
provisions of the Code as may be amended from time to time.

 

                12.           Awards to Directors and Officers.
To the extent the Company has a class of securities registered under the
Exchange Act, Options or Stock Awards granted under the Plan to directors and
officers (as used in Rule 16b-3 promulgated under the Exchange Act or any
amendment or successor rule of like tenor) intended to qualify for the
exemption from section 16(b) of the Exchange Act provided in Rule 16b-3 shall,
in addition to being subject to the other restrictions and limitations set
forth in this Plan, be made as follows:

 

                (a)           A transaction whereby there is a
grant of an Option or Stock Award pursuant to this Plan must satisfy one of the
following:

 

                (i)            The transaction must be approved by
the Board or a duly authorized committee composed solely of two or more
non-employee directors of the Company (as defined in Rule 16b-3);

 

 

5

 

                (ii)           The transaction must be approved or
ratified, in compliance with section 14 of the Exchange Act, by either: the
affirmative vote of the holders of a majority of the securities of the Company
present or represented and entitled to vote at a meeting of the stockholders of
the Company held in accordance with the applicable laws of the state of
incorporation of the Company; or, if allowed by applicable state law, the
written consent of the holders of a majority, or such greater percentage as may
be required by applicable laws of the state of incorporation of the Company, of
the securities of the Company entitled to vote. If the transaction is ratified
by the stockholders, such ratification must occur no later than the date of the
next annual meeting of stockholders; or

 

                (iii)          The Stock acquired must be held by the
officer or director for a period of six months subsequent to the date of the
grant; provided that, if the
transaction involves a derivative security (as defined in section 16 of the
Exchange Act), this condition shall be satisfied if at least six months elapse
from the date of acquisition of the derivative security to the date of
disposition of the derivative security (other than on exercise or conversion)
or its underlying equity security.

 

                                                (b)           Any
transaction involving the disposition to the Company of its securities in
connection with Options or Stock Awards granted pursuant to this Plan shall:

 

                (i)            be approved by the Board or a duly
authorized committee composed solely of two or more non-employee directors; or

 

                (ii)           be approved or ratified, in
compliance with section 14 of the Exchange Act, by either: the affirmative vote
of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the state of incorporation of the Company or, if allowed by
applicable state law, the written consent of the holders of a majority, or such
greater percentage as may be required by applicable laws of the state of
incorporation of the Company, of the securities of the Company entitled to
vote; provided that, such
ratification occurs no later than the date of the next annual meeting of stockholders.

 

All of the foregoing restrictions and limitations are based on the
governing provisions of the Exchange Act and the rules and regulations
promulgated thereunder as of the date of adoption of this Plan. If at any time
the governing provisions are amended to permit an Option to be granted or
exercised or Stock Award to be granted pursuant to Rule 16b-3 or any amendment
or successor rule of like tenor without one or more of the foregoing restrictions
or limitations, or the terms of such restrictions or limitations are modified,
the Board or a duly authorized committee may award Options or Stock Awards to
directors and of dicers, and may modify outstanding Options or Stock Awards, in
accordance with such changes, all to the extent that such action by the Board
or a duly authorized committee does not disqualify the Options or Stock Awards
from exemption under the provisions of Rule 16b-3 or any amendment or successor
rule of similar tenor.

 

                13.           Stock Awards. The Board or a
duly authorized committee may grant Stock Awards to individuals eligible to
participate in this Plan, in the amount, and subject to the provisions
determined by the Board or a duly authorized committee. The Board or a duly authorized
committee shall notify in writing each person selected to receive a Stock Award
hereunder as soon as practicable after he or she has been so selected and shall
inform such person of the number of shares he or she is entitled to receive,
the approximate date on which such shares will be issued, and the Forfeiture
Restrictions applicable to such shares. (For purposes hereof, the term “Forfeiture
Restrictions” shall mean any prohibitions against sale or other transfer of
shares of Stock granted under the Plan and the obligation of the holder to
forfeit his or her ownership of or right to such shares and to surrender such
shares to the Company on the occurrence of certain conditions.) The Board or a
duly authorized committee may, at its discretion, require the payment in cash
to the Company by the award recipient of the par value of the Stock. The shares
of Stock issued pursuant to a Stock Award shall not be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of during such period
or periods of time which the Board or a duly authorized committee shall
establish at the time of the grant of the Stock Award. If a Stock Award is made
to an employee of the Company or its subsidiaries, the employee shall be
obligated for no consideration other than the amount, if any, of the par value
paid in cash for such shares, to forfeit and surrender such shares as he or
shall have received under the Plan which are then subject to

 

 

6

 

Forfeiture Restrictions to the Company if he or she is no longer an
employee of the Company or its subsidiaries for any reason; provided that, in the event of termination
of the employee’s employment by reason of death or total and permanent
disability, the Board or duly authorized committee, in its sole discretion, may
cancel the Forfeiture Restrictions. Certificates representing shares subject to
Forfeiture Restrictions shall be appropriately legend as determined by the
Board or a duly authorized committee to reflect the Forfeiture Restrictions,
and the Forfeiture Restrictions shall be binding on any transferee of the
shares.

 

                14.           Assignment. At the time of
grant of an Option or Stock Award, the Board or duly authorized Committee, in
its sole discretion, may impose restrictions on the transferability of such
Option or Stock Award and provide that such Option shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code and that, except as
permitted by the foregoing, such Options or Stock Awards, granted under the
Plan and the rights and privileges thereby conferred shall not be transferred,
assigned, pledged, or hypothecated in any way (whether by operation of law or
otherwise), and shall not be subject to execution, attachment, or similar
process. On any attempt to transfer, assign, pledge, hypothecate, or otherwise
dispose of the Option or Stock Award, or of any right or privilege conferred
thereby, contrary to the provisions thereof, or on the levy of any attachment
or similar process on such rights and privileges, the Option or Stock Award and
such rights and privileges shall immediately become null and void.

 

                15.           Additional Terms and Provisions of
Awards. The Board or duly authorized committee shall have the right to
impose additional limitations on individual awards under the Plan. For example,
and without limiting the authority of the Board or a duly authorized committee,
an individual award may be conditioned on continued employment for a specified
period or may be voided based on the award holder’s gross negligence in the
performance of his or her duties, substantial failure to meet written standards
established by the Company for the performance of his or her duties, criminal
misconduct, or willful or gross misconduct in the performance of his or her
duties. In addition, the Board or a duly authorized committee may establish
additional rights in the holders of individual awards at the time of grant. For
example, and without limiting the authority of the Board or a duly authorized
committee, an individual award may include the right to immediate payment of
the value inherent in the award on the occurrence of certain events such as a
change in control of the Company, all on the terms and conditions set forth in
the award at the time of grant. The Board or a duly authorized committee may.
at the time of the grant of the Option or Stock Award, establish any other
terms, restrictions, or provisions on the exercise of an Option or the holding
of Stock subject to the Stock Award as it deems appropriate. All such terms,
restrictions, and provisions must be set forth in writing at the time of grant
in order to be effective.

 

                16.           Dilution or Other Adjustment.
In the event that the number of shares of Stock of the Company from time to
time issued and outstanding is increased pursuant to a stock split or a stock
dividend, the number of shares of Stock then covered by each outstanding Option
granted hereunder shall be increased proportionately, with no increase in the
total purchase price of the shares then so covered, and the number of shares of
Stock subject to the Plan shall be increased by the same proportion. Shares
awarded under the terms of a Stock Award shall be entitled to the same rights
as other issued and outstanding shares of Stock, whether or not then subject to
Forfeiture Restrictions, although any additional shares of Stock issued to the
holder of a Stock Award shall be subject to the same Forfeiture Restrictions as
the Stock Award. In the event that the number of shares of Stock of the Company
from time to time issued and outstanding is reduced by a combination or
consolidation of shares, the number of shares of Stock then covered by each
outstanding Option granted hereunder shall be reduced proportionately, with no
reduction in the total purchase price of the shares then so covered, and the
number of shares of Stock subject to the Plan shall be reduced by the same
proportion. Shares awarded under a Stock Award shall be treated as other issued
and outstanding shares of Stock, whether or not then subject to Forfeiture
Restrictions. In the event that the Company should transfer assets to another
corporation and distribute the stock of such other corporation without the
surrender of Stock of the Company, and if such distribution is not taxable as a
dividend and no gain or loss is recognized by reason of section 355 of the Code
or any amendment or successor statute of like tenor, then the total purchase
price of the Stock then covered by each outstanding Option shall be reduced by
an amount that bears the same ratio to the total purchase price then in effect
as the market value of the stock distributed in respect of a share of the Stock
of the Company, immediately following the distribution, bears to the aggregate
of the market value at such time of a share of the Stock of the Company plus
the stock distributed in respect thereof. Shares issued under a Stock Award
shall be treated as issued and outstanding whether or not subject to Forfeiture
Restrictions, although any stock of the other corporation to be distributed
with respect to the shares awarded under the Stock Award shall be subject to
the Forfeiture Restrictions

 

 

7

 

then applicable to such shares and may be held by the Company or
otherwise subject to restrictions on transfer until the expiration of the
Forfeiture Restrictions. In the event that the Company distributes the stock of
a subsidiary to its stockholders, makes a distribution of a major portion of
its assets, or otherwise distributes a significant portion of the value of its
issued and outstanding Stock to its stockholders, the number of shares then
subject to each outstanding Option and the Plan, or the exercise price of each
outstanding Option, may be adjusted in the reasonable discretion of the Board
or a duly authorized committee. Shares awarded under a Stock Award shall be
treated as issued and outstanding, whether or not subject to Forfeiture
Restrictions, although any Stock, assets, or other rights distributed shall be
subject to the Forfeiture Restrictions governing the shares awarded under the
Stock Award and, at the discretion of the Board or a duly authorized committee,
may be held by the Company or otherwise subject to restrictions on transfer by
the Company until the expiration of such Forfeiture Restrictions. All such
adjustments shall be made by the Board or duly authorized committee, whose
determination upon the same, absent demonstrable error, shall be final and
binding on all participants under the Plan. No fractional shares shall be
issued, and any fractional shares resulting from the computations pursuant to
this section shall be eliminated from the respective Option or Stock Award. No
adjustment shall be made for cash dividends, for the issuance of additional
shares of Stock for consideration approved by the Board, or for the issuance to
stockholders of rights to subscribe for additional Stock or other securities.

 

                17.           Options or Stock Awards to Foreign
Nationals. The Board or a duly authorized committee may, in order to
fulfill the purposes of this Plan and without amending the Plan, grant Options
or Stock Awards to foreign nationals or individuals residing in foreign
countries that contain provisions, restrictions, and limitations different from
those set forth in this Plan and the Options or Stock Awards made to United
States residents in order to recognize differences among the countries in law,
tax policy, and custom. Such grants shall be made in an attempt to provide such
individuals with essentially the same benefits as contemplated by a grant to
United States residents under the terms of this Plan.

 

                18.           Listing and Registration of Shares.
Unless otherwise expressly provided on the granting of an award under this
Plan, the Company shall have no obligation to register any securities issued
pursuant to this Plan or issuable on the exercise of Options granted hereunder.
Each award shall be subject to the requirement that if at any time the Board or
a duly authorized committee shall determine, in its sole discretion, that it is
necessary or desirable to list, register, or qualify the shares covered thereby
on any securities exchange or under any state or federal law, or obtain the
consent or approval of any governmental agency or regulatory body as a
condition of, or in connection with, the granting of such award or the issuance
or purchase of shares thereunder, such award may not be made or exercised in
whole or in part unless and until such listing. registration, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board or a duly authorized committee.

 

                19.           Expiration and Termination of the
Plan. The Plan may be abandoned or terminated at any time by the Board or a
duly authorized committee except with respect to any Options or Stock Awards
then outstanding under the Plan. The Plan shall otherwise terminate on the
earlier of the date that is: (i) ten years after the date the Plan is adopted
by the Board; or (ii) ten years after the date the Plan is approved by the stockholders
of the Company.

 

                20.           Form of Awards. Awards granted
under the Plan shall be represented by a written agreement which shall be
executed by the Company and which shall contain such terms and conditions as
may be determined by the Board or a duly authorized committee and permitted
under the terms of this Plan. Option agreements evidencing Incentive Options
shall contain such terms and conditions, among others, as may be necessary in
the opinion of the Board or a duly authorized committee to qualify them as
incentive stock options under section 422 of the Code or any amendment or
successor statute of like tenor.

 

                21.           No Right of Employment.
Nothing contained in this Plan or any Option or Stock Award shall be construed
as conferring on a director, officer, or employee any right to continue or
remain as a director, officer, or employee of the Company or its subsidiaries.

 

 

8

 

                22.           Leaves of Absence. The Board
or duly authorized committee shall be entitled to make such rules, regulations,
and determinations as the Board or duly authorized committee deems appropriate
under the Plan in respect of any leave of absence taken by the recipient of any
Option or Stock Award. Without limiting the generality of the foregoing, the
Board or duly authorized committee shall be entitled to determine (a) whether
or not any such leave of absence shall constitute a termination of employment
within the meaning of the Plan, and (b) the impact, if any, of any such leave
of absence on any Option or Stock Award under the Plan theretofore made to any
recipient who takes such leave of absence.

 

                23.           Amendment of the Plan. The
Board or a duly authorized committee may modify and amend the Plan in any
respect; provided, however, that to the extent such amendment or modification
would cause the Plan to no longer comply with the applicable provisions of the
Code with respect to Incentive Options, such amendment or modification shall
also be approved by the stockholders of the Company. Subject to the foregoing
and, if the Company is subject to the provisions of 16(b) of the Exchange Act,
the limitations of Rule 16b-3 promulgated under the Exchange Act or any
amendment or successor rule of like tenor, the Plan shall be deemed to be
automatically amended as is necessary (i) with respect to the issuance of
Incentive Options, to maintain the Plan in compliance with the provisions of
section 422 of the Code, and regulations promulgated thereunder from time to
time, or any amendment or successor statute thereto, and (ii) with respect to
Options or Stock Awards granted to officers and directors of the Company, to
maintain the awards made under the Plan in compliance with the provisions of Rule
16b-3 promulgated under the Exchange Act or any amendment or successor rule of
like tenor.

 

	
  DATE: September 23, 2005

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ATTEST:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Kit Chambers,
  Secretary

  

 

 

9

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