PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (the
"Agreement") is made and entered into as of February 24, 2005 (the
"Effective Date") by and among CORNELL CAPITAL PARTNERS,
LP, a Delaware limited partnership (the "Pledgee"), XXXXX
XXXXXXXXX (the "Pledgor"), and XXXXX XXXXXXXX, ESQ., as
escrow agent ("Escrow Agent").
RECITALS:
WHEREAS, in order to secure the Company's obligations under
the Promissory Note, this Agreement and the Personal Guaranty all of
even date herewith (collectively referred to as the "Transaction
Documents"), the Pledgor has agreed to pledge to the Pledgee three
million (3,000,000) shares (the "Pledged Shares") of the Pledgor's
common stock as set forth in Exhibit "A" attached hereto.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, warranties, and representations herein contained, and for
other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
TERMS AND CONDITIONS
1.Pledge and Transfer of Pledged Shares.
1.1.The Pledgor hereby grants to Pledgee a security
interest in all Pledged Shares as security for Pledgor's obligations under
the Promissory Note. Simultaneously with the execution of the
Transaction Documents, the Pledgor shall deliver to the Escrow Agent
stock certificates representing the Pledged Shares, together with duly
executed stock powers or other appropriate transfer documents executed in
blank by the Pledgor (the "Transfer Documents"), and such stock
certificates and Transfer Documents shall be held by the Escrow Agent
until the full payment of all amounts due to the Pledgee under the
Promissory Note and through repayment in accordance with the terms of
the Promissory Note, or the termination or expiration of this Agreement.
2. Rights Relating to Pledged Shares. Upon the occurrence
of an Event of Default (as defined herein), the Pledgee shall be entitled to
vote the Pledged Shares, to receive dividends and other distributions
thereon, and to enjoy all other rights and privileges incident to the
ownership of the Pledged Shares.
3. Release of Pledged Shares from Pledge. Upon the
payment of all amounts due to the Pledgee under the Promissory Note by
repayment in accordance with the terms of the Note, the parties hereto
shall notify the Escrow Agent to such effect in writing. Upon receipt of
such written notice for payment of the amounts due to the Pledgee under
the Promissory Note, the Escrow Agent shall return to the Pledgor the
Transfer Documents and the certificates representing the Pledged Shares,
(collectively the "Pledged Materials"), whereupon any and all rights of
Pledgee in the Pledged Materials shall be terminated. Notwithstanding
anything to the contrary contained herein, upon full payment of all
amounts due to the Pledgee under the Promissory Note, by repayment in
accordance with the terms of the Note, this Agreement and Pledgee's
security interest and rights in and to the Pledged Shares shall terminate.
4. Event of Default. An "Event of Default" shall be deemed
to have occurred under this Agreement upon an Event of Default under the
Transaction Documents.
5.Remedies. Upon the occurrence of an Event of Default,
Pledgee shall provide written notice of such Default (the "Default Notice")
to the Escrow Agent, with a copy to the Pledgor. As soon as practicable
after receipt of the Default Notice, the Escrow Agent shall deliver to
Pledgee the Pledged Materials held by the Escrow Agent hereunder,
whereupon Pledgee may exercise all rights and remedies of a secured
party with respect to such property as may be available under the Uniform
Commercial Code as in effect in the State of New Jersey.
6.Concerning the Escrow Agent.
6.1. The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein and no implied duties or obligations
shall be read into this Agreement against the Escrow Agent.
6.2. The Escrow Agent may act in reliance upon any
writing or instrument or signature which it, in good faith, believes to be
genuine, may assume the validity and accuracy of any statement or
assertion contained in such a writing or instrument, and may assume that
any person purporting to give any writing, notice, advice or instructions in
connection with the provisions hereof has been duly authorized to do so.
The Escrow Agent shall not be liable in any manner for the sufficiency or
correctness as to form, manner, and execution, or validity of any
instrument deposited in this escrow, nor as to the identity, authority, or
right of any person executing the same; and its duties hereunder shall be
limited to the safekeeping of such certificates, monies, instruments, or
other document received by it as such escrow holder, and for the
disposition of the same in accordance with the written instruments
accepted by it in the escrow.
6.3.Pledgee and the Pledgor hereby agree, to defend
and indemnify the Escrow Agent and hold it harmless from any and all
claims, liabilities, losses, actions, suits, or proceedings at law or
in equity, or any other expenses, fees, or charges of any character or
nature which it may incur or with which it may be threatened by reason
of its acting as Escrow Agent under this Agreement; and in connection
therewith, to indemnify the Escrow Agent against any and all expenses,
including attorneys' fees and costs of defending any action, suit, or
proceeding or resisting any claim (and any costs incurred by the Escrow
Agent pursuant to Sections 6.4 or 6.5 hereof). The Escrow Agent shall
be vested with a lien on all property deposited hereunder, for
indemnification of attorneys' fees and court costs regarding any suit,
proceeding or otherwise, or any other expenses, fees, or charges of
any character or nature, which may be incurred by the Escrow Agent by
reason of disputes arising between the makers of this escrow as to the
correct interpretation of this Agreement and instructions given to the
Escrow Agent hereunder, or otherwise, with the right of the Escrow Agent,
regardless of the instructions aforesaid, to hold said property until
and unless said additional expenses, fees, and charges shall be fully paid.
Any fees and costs charged by the Escrow Agent for serving hereunder
shall be paid by the Pledgor.
6.4. If any of the parties shall be in disagreement about
the interpretation of this Agreement, or about the rights and obligations, or
the propriety of any action contemplated by the Escrow Agent hereunder,
the Escrow Agent may, at its sole discretion deposit the Pledged Materials
with the Clerk of the United States District Court of New Jersey, sitting in
Newark, New Jersey, and, upon notifying all parties concerned of such
action, all liability on the part of the Escrow Agent shall fully cease and
terminate. The Escrow Agent shall be indemnified by the Pledgor, the
Company and Pledgee for all costs, including reasonable attorneys' fees in
connection with the aforesaid proceeding, and shall be fully protected in
suspending all or a part of its activities under this Agreement until a final
decision or other settlement in the proceeding is received.
6.5. The Escrow Agent may consult with counsel of its
own choice (and the costs of such counsel shall be paid by the Pledgor and
Pledgee) and shall have full and complete authorization and protection for
any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. The Escrow Agent shall not
be liable for any mistakes of fact or error of judgment, or for any actions
or omissions of any kind, unless caused by its willful misconduct or gross
negligence.
6.6. The Escrow Agent may resign upon ten (10) days'
written notice to the parties in this Agreement. If a successor Escrow
Agent is not appointed within this ten (10) day period, the Escrow Agent
may petition a court of competent jurisdiction to name a successor.
6.7 Conflict Waiver. The Pledgor hereby acknowledges
that the Escrow Agent is general counsel to the Pledgee, a partner in the
general partner of the Pledgee, and counsel to the Pledgee in connection
with the transactions contemplated and referred herein. The Pledgor
agrees that in the event of any dispute arising in connection with this
Agreement or otherwise in connection with any transaction or agreement
contemplated and referred herein, the Escrow Agent shall be permitted to
continue to represent the Pledgee and the Pledgor will not seek to
disqualify such counsel and waives any objection Pledgor might have with
respect to the Escrow Agent acting as the Escrow Agent pursuant to this
Agreement.
6.8 Notices. Unless otherwise provided herein, all
demands, notices, consents, service of process, requests and other
communications hereunder shall be in writing and shall be delivered in
person or by overnight courier service, or mailed by certified mail, return
receipt requested, addressed:
If to the
Pledgor,
to:
EYI Industries,
Inc.
0000 Xxxxxx Xxxxxx Xxxxxxx - Xxxxx 000
Xxx Xxxxx,Xxxxxx 00000
Attention:
Xxx Xxxxxxxx, President
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
With a
copy to:
Xxxxxxxxxxx &
Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000-0000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
If to the
Pledgee:
Cornell Capital
Partners, L.P.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX
00000
Attention:
Xxxx X. Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
With
copy to:
Xxxxx Xxxxxxxx,
Esq.
000 Xxxxxx
Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Any such notice shall be effective (a) when delivered, if delivered by hand
delivery or overnight courier service, or (b) five (5) days after deposit
in the United States mail, as applicable.
7. Binding Effect. All of the covenants and obligations
contained herein shall be binding upon and shall inure to the benefit of the
respective parties, their successors and assigns.
8. Governing Law; Venue; Service of Process. The
validity, interpretation and performance of this Agreement shall be
determined in accordance with the laws of the State of New Jersey
applicable to contracts made and to be performed wholly within that state
except to the extent that Federal law applies. The parties hereto agree that
any disputes, claims, disagreements, lawsuits, actions or controversies of
any type or nature whatsoever that, directly or indirectly, arise from or
relate to this Agreement, including, without limitation, claims relating to
the inducement, construction, performance or termination of this
Agreement, shall be brought in the state superior courts located in Xxxxxx
County, New Jersey or Federal district courts located in Newark, New
Jersey, and the parties hereto agree not to challenge the selection of that
venue in any such proceeding for any reason, including, without
limitation, on the grounds that such venue is an inconvenient forum. The
parties hereto specifically agree that service of process may be made, and
such service of process shall be effective if made, pursuant to Section 8
hereto.
9. Enforcement Costs. If any legal action or other
proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection
with any provisions of this Agreement, the successful or prevailing party
or parties shall be entitled to recover reasonable attorneys' fees, court costs
and all expenses even if not taxable as court costs (including, without
limitation, all such fees, costs and expenses incident to appeals), incurred
in that action or proceeding, in addition to any other relief to which such
party or parties may be entitled.
10. Remedies Cumulative. No remedy herein conferred upon
any party is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity, by statute, or otherwise. No single or partial exercise by any party
of any right, power or remedy hereunder shall preclude any other or
further exercise thereof.
11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same instrument.
12. No Penalties. No provision of this Agreement is to be
interpreted as a penalty upon any party to this Agreement.
13. JURY TRIAL. EACH OF THE PLEDGEE AND THE
PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT WHICH IT MAY HAVE TO
A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN ANY WAY CONNECTED WITH THE DEALINGS
BETWEEN PLEDGEE AND PLEDGOR, THIS PLEDGE AND
ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN
CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have duly executed
this Pledge and Escrow Agreement as of the date first above written.
CORNELL CAPITAL PARTNERS, LP
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Portfolio Manager
EYI INDUSTRIES, INC.
By:/s/ Xxx Xxxxxxxx
Name: Xxx Xxxxxxxx
Title: President
ESCROW AGENT
By:/s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx, Esq.
EXHIBIT A
NAME
NUMBER OF SHARES
CERTIFICATE NO.
Xxxxx Xxxxxxxxx
3,000,000
5228-2
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