PLEDGE AND ESCROW AGREEMENT
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THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered
into as of January 27, 2006 (the "Effective Date") by and among NEWGOLD, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Pledgor"), CORNELL CAPITAL PARTNERS, LP, (the "Pledgee"), and XXXXX XXXXXXXX,
ESQ., as escrow agent ("Escrow Agent").
RECITALS:
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WHEREAS, in order to secure the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all of the
Company's obligations (the "Obligations") to the Pledgee or any successor to the
Pledgee under this Agreement, the Securities Purchase Agreement of even date
herewith between the Pledgor and the Pledgee (the "Securities Purchase
Agreement"), the Convertible Debentures (the "Convertible Debentures") issued or
to be issued by the Company to the Pledgee, either now or in the future, up to a
total of One Million Dollars ($1,000,000) of principal, plus any interest,
costs, fees, and other amounts owed to the Pledgee thereunder, the Security
Agreement of even date herewith between the Pledgor and the Pledgee (the
"Security Agreement") and the Memorandum of Interest dated January 30, 2006 (the
"Memorandum of Interest"), and all other contracts entered into between the
parties hereto (collectively, the "Transaction Documents"), the Pledgor has
agreed to irrevocably pledge to the Pledgee 24,050,025 shares (the "Pledged
Shares") of the Pledgor's common stock which will be delivered to the Secured
Party along with medallion guaranteed stock powers no later than January 30,
2006.
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
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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
Convertible Debentures. 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 Convertible Debentures as proportionately reduced through
repayment in accordance with the terms of the Convertible Debentures, 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
Exhibit 10.13
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 repayment in accordance
with the terms of the Convertible Debentures of Six Hundred Fifty Thousand
Dollars ($650,000) of the principal amount of the Convertible Debentures the
Pledgor shall return the certificates representing one half (1/2) of the Pledged
Shares and corresponding Transfer Documents to the Pledgee. Upon the payment of
all amounts due to the Pledgee under the Convertible Debentures by repayment or
conversion in accordance with the terms of the Convertible Debentures , 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 Convertible Debentures, the Escrow Agent shall return to the Pledgor
the Transfer Documents and the certificates representing the balance of 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 Convertible Debentures, by repayment or conversion in
accordance with the terms of the Convertible Debentures, 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 and continuance of an Event of Default
for ten (10) business days, the Pledgee shall have the right to provide written
notice of such Event of 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. Upon receipt of the Pledged Materials, the Pledgee
shall have the right to (i) sell the Pledged Shares and to apply the proceeds of
such sales, net of any selling commissions, to the Obligations owed to the
Pledgee by the Pledgor under the Transaction Documents, including, without
limitation, outstanding principal, interest, legal fees, and any other amounts
owed to the Pledgee, and exercise all other rights and (ii) any and all 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. To the extent
that the net proceeds received by the Pledgee are insufficient to satisfy the
Obligations in full, the Pledgee shall be entitled to a deficiency judgment
against the Pledgor for such amount. The Pledgee shall have the absolute right
to sell or dispose of the Pledged Shares in any manner it sees fit and shall
have no liability to the Pledgor or any other party for selling or disposing of
such Pledged Shares even if other methods of sales or dispositions would or
allegedly would result in greater proceeds than the method actually used. The
Escrow Agent shall have the absolute right to disburse the Pledged Shares to the
Pledgee in batches not to exceed 9.9% of the outstanding capital of the Pledgor
(which limit may be waived by the Pledgee providing not less than 65 days' prior
written notice to the Escrow Agent). The Pledgee shall return any Pledged Shares
released to it and remaining after the Pledgee has applied the net proceeds to
all amounts owed to the Pledgee.
5.1 Each right, power and remedy of the Pledgee provided for
in this Agreement or any other Transaction Document shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise
Exhibit 10.13
by the Pledgee of any one or more of the rights, powers or remedies provided for
in this Agreement or any other Transaction Document or now or hereafter existing
at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee of all such other rights, powers
or remedies, and no failure or delay on the part of the Pledgee to exercise any
such right, power or remedy shall operate as a waiver thereof. No notice to or
demand on the Pledgor in any case shall entitle it to any other or further
notice or demand in similar or other circumstances or constitute a waiver of any
of the rights of the Pledgee to any other further action in any circumstances
without demand or notice. The Pledgee shall have the full power to enforce or to
assign or contract is rights under this Agreement to a third party.
5.2 DEMAND REGISTRATION RIGHTS. In addition to all other
remedies available to the Pledgee, upon an Event of Default continuing for at
least ten (10) business days, the Pledgee may demand and the Pledgor shall
promptly, but in no event more than thirty (30) days after the date of such
registration demand include the Pledged Shares for resale in any currently
effective Registration Statement required pursuant to the Investor Registration
Rights Agreement or if no Registration Statement is currently effective, file a
registration statement to register with the United States Securities and
Exchange Commission the Pledged Shares for the resale by the Pledgee. The
Pledgor shall cause the registration statement to remain in effect until all of
the Pledged Shares have been sold by the Pledgee.
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
Exhibit 10.13
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 Dispute Resolution. In the event of any dispute or
discrepancy, with regards to the foreclosure or release of the Pledged Property
the parties hereto shall submit such dispute to an independent third party
mutually chosen and agreed upon by the parties. Notwithstanding the foregoing in
the event that a party hereto does not agree with such determination by the
independent third party they shall be free to pursue any and all legal remedies
available including but not limited to a declaratory judgment by a court of
competent jurisdiction.
6.8 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.
Exhibit 10.13
6.9 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: Newgold, Inc.
000 Xxxxxxx Xxxx - Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxx
000 Xxxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Weintraub Genshlea Chediak
000 Xxxxxxx Xxxx - 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Pledgee: Cornell Capital Partners, LP
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.
Exhibit 10.13
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.
Exhibit 10.13
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: Yorkville Advisors, LLC
Its: General Partner
By: /s/ XXXX XXXXXX
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Name: Xxxx Xxxxxx
Title: Portfolio Manager
NEWGOLD, INC.
By: /s/ XXXXX XXXXXX
---------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
ESCROW AGENT
By: /s/ XXXXX XXXXXXXX
---------------------------------
Name: Xxxxx Xxxxxxxx, Esq.
Exhibit 10.13
