ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the “Agreement”) is dated
as of June ____, 2008 among (i) PNG Ventures, Inc., a Nevada corporation ("PNGX" and
individually a “Party”), (ii) Black
Forest International, LLC, a Delaware limited liability company (“BFI” and individually
a “Party”), and
(iii) ___________. (the “Escrow Agent” and
individually a “Party”). PNGX, BFI
and the Escrow Agent may hereinafter be referred to collectively as the “Parties.”
RECITALS
WHEREAS,
on or about May 29, 2008, BFI filed an action against Earth Biofuels, Inc. and
its subsidiaries (“EBOF”) entitled Black Forest International, LLC v.
Earth Biofuels, Inc. et al. Case No: 2008 CA 008514 NC (the “Action”) in the
Circuit Court of the Twelfth Judicial Circuit, Sarasota County, Florida (the
“Court”),
whereby BFI asserted claims against the defendants alleging that they failed to
pay BFI certain monies due and owing;
WHEREAS,
on or about June ____, 2008, BFI amended the Action to include PNGX as a
defendant related to claims against PNGX for failure to deliver certain monies
PNGX agreed to assume related to the monies due and owing to BFI as described in
the Action;
WHEREAS,
on or about June ___, 2008, the parties to the Action, including BFI, PNGX EBOF
entered into a Settlement Agreement and Release (the “Settlement Agreement”
attached hereto as Exhibit A)
whereby BFI agreed to resolve certain bona fide claims with EBOF and PNGX and
release EBOF and PNGX from all such claims with a portion of such settlement
consideration being a $626,250 convertible promissory note (the “PNGX Note” attached
hereto as Exhibit
B). Capitalized terms used and not otherwise defined herein that are
defined in the Settlement Agreement or PNGX Note shall have the meanings given
to such terms in such agreements;
WHEREAS,
pursuant to the terms of the Settlement Agreement, PNGX is required to deposit
into escrow 700,000 shares of PNGX’s common stock (the “Settlement Shares
Pool”) which shall be disbursed to BFI pursuant to the terms of this
Agreement and the Settlement Agreement;
WHEREAS,
pursuant to the Settlement Agreement, the PNGX Note may be converted, in whole
or in part, at the sole discretion of BFI, into freely tradable non-legend
bearing shares of PNGX common stock (the “Settlement Shares”),
which shall be delivered from the Settlement Shares Pool (as defined below), the
number of which shall be derived by dividing a dollar amount of the PNGX Note to
be converted by .09 (the “Conversion
Price”);
WHEREAS,
pursuant to the terms of the Settlement Agreement, PNGX and BFI have agreed,
pursuant to 15 U.S.C. §77(a)(10), to immediately submit the terms and conditions
of the Settlement Agreement to the Court for a hearing on the fairness of such
terms and conditions, for the issuance of an exemption from registration of the
Settlement Shares Pool and an order approving the Agreement;
WHEREAS, the Escrow Agent is willing to
serve as escrow agent pursuant to the terms and conditions of this Agreement and
the Settlement Agreement;
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants and other agreements
described in this Agreement, and for good and valuable consideration, receipt of
which is hereby acknowledged, the Parties hereby agree as follows:
ARTICLE
I
DELIVERIES
TO THE ESCROW AGENT
1.1 PNGX
Deliveries. Simultaneously or before an entry of an order by
the Court in connection with the Action described herein, PNGX shall
deliver the Settlement Shares Pool to the Escrow Agent.
1.2 Intention to Create
Escrow. PNGX and BFI intend that Settlement Shares Pool shall
be held in escrow by the Escrow Agent pursuant to this Agreement and the
Settlement Agreement for BFI’s sole benefit as set forth herein.
1.3 Escrow Agent
Deliveries. The Escrow Agent shall hold and release the
Settlement Shares Pool only in accordance with the terms and conditions of this
Agreement.
1.4 Ownership and Dispositive
Rights. All shares of the Settlement Shares Pool shall be deemed owned
and under the dispositive and voting control of PNGX until released (and, once
released, deemed owned by the person to whom released) from escrow, for purposes
of Section 13 and Section 16 of the Securities Exchange Act of 1934, as
amended.
ARTICLE
II
RELEASE
OF ESCROWED ITEMS
2.1 Disbursement of Settlement
Shares. At anytime following the Merger, the Escrow Agent
shall release to BFI the Settlement Shares from the Settlement Shares Pool upon
BFI’s delivery to the Escrow Agent of a notice of conversion (a “Conversion Demand” a
form of which has been attached hereto as Exhibit C)
which shall state: (i) the amount of the PNGX Note being converted; (ii) the
number of Settlement Shares being converted from the Settlement Shares Pool; and
(iii) the current balance of the PNGX Note remaining after each Conversion
Demand.
2.3 Instructions to Release
Escrow. Notwithstanding the above and with no notice to
or confirmation by PNGX, upon receipt by the Escrow Agent of written
instructions by BFI, the Escrow Agent shall deliver the Settlement Shares Pool
in accordance with the terms of such instructions.
2.4 Court Order to Release
Escrow. Notwithstanding the above, upon receipt by
the Escrow Agent of a final and non-appealable judgment, order, decree or award
of a court of competent jurisdiction (a "Court Order"), the
Escrow Agent shall deliver the Settlement Shares Pool in accordance with the
Court Order. Any Court Order shall be accompanied by an opinion of counsel for
the Party presenting the Court Order to the Escrow Agent (which opinion shall be
satisfactory to the Escrow Agent) to the effect that the court issuing the Court
Order has competent jurisdiction and that the Court Order is final and
non-appealable.
2.5 Acknowledgement of BFI, PNGX
and Escrow Agent; Disputes. The Parties
acknowledge that the only terms and conditions upon which the Settlement Shares
Pool is to be released are set forth in this Agreement. The Parties
reaffirm their agreement to abide by the terms and conditions of this Agreement
with respect to the release of the Settlement Shares Pool. Any dispute with
respect to the release of Settlement Shares Pool shall be resolved pursuant to
Section 4.2 or by agreement between BFI and PNGX.
ARTICLE
III
COVENANTS
3.1 Covenants. As
long as any shares remain in the Settlement Shares Pool, PNGX covenants and
agree as follows:
3.1.1 Amendments. PNGX
shall not amend or waive any provision of their Articles of Incorporation or
Bylaws in any way without the express written consent of BFI.
3.1.2 Disposition of
Assets. PNGX shall not sell, transfer or otherwise dispose of
any of their properties, assets and rights including, without limitation, their
intellectual property, except for sales with the prior written consent of
BFI.
3.1.3 Restrictions on Issuances of
Debt or Securities. PNGX shall not issue any
additional common stock, preferred stock, warrants, notes, debt instruments of
any kind, convertible notes or any other securities (or otherwise enter into
agreements to issue any securities) including, but not limited to securities
convertible, exercisable or exchangeable into common stock or preferred stock or
any other equity or debt security of PNGX or otherwise create, or authorize the
creation of, or issue or obligate itself to issue shares of any additional class
or series of capital stock under any circumstances without the express written
consent of BFI.
3.1.4 Public
Filings. PNGX shall make any and all necessary
public filings, if any, in connection with this Agreement
3.1.5 Additional
Covenants. PNGX shall follow and abide by all
additional covenants contained in the PNGX Note and PNGX
Note.
3.1.6 Additional PNGX
Financing. As agreed to in the Settlement
Agreement, following the Merger, in the event PNGX issues any additional debt or
equity financing (a “Subsequent
Financing”) at a per share price below $10.00 per share, the Conversion
Price shall be adjusted (the “Adjusted Conversion
Price”) by multiplying the Conversion Price by a fraction equal to (i)
the per share price of the Subsequent Financing as the numerator and (ii) $10.00
as the denominator.
ARTICLE
IV
CONCERNING
THE ESCROW AGENT
4.1 Duties and Responsibilities
of the Escrow Agent. The Escrow Agent's duties and
responsibilities shall be subject to the following terms and
conditions:
4.1.1 BFI
and PNGX acknowledge and agree that the Escrow Agent (i) once in receipt of a
Conversion Demand from BFI, shall not be responsible for or bound by, and shall
not inquire into whether BFI is entitled to receipt of Settlement Shares
pursuant to, any other agreement or otherwise; (ii) shall be obligated only for
the performance of such duties as are specifically assumed by the Escrow Agent
pursuant to this Agreement; (iii) may rely on and shall be protected in acting
or refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and believed by the
Escrow Agent in good faith to be genuine and to have been signed or presented by
the proper person or Party, without being required to determine the authenticity
or correctness of any fact stated therein or the propriety or validity or the
service thereof; and (iv) may assume that any person believed by the Escrow
Agent in good faith to be authorized to give notice or make any statement or
execute any document in connection with the provisions hereof is so
authorized.
4.1.2 In
the event of the Escrow Agent’s resignation and/or termination, BFI and only BFI
will issue to the Escrow Agent instructions authorizing delivery of the
Settlement Shares Pool to a substitute Escrow Agent selected by the
BFI. If no successor Escrow Agent is named by BFI, the Escrow Agent
may apply to a court of competent jurisdiction in Florida for appointment of a
successor Escrow Agent, and to deposit the Settlement Shares Pool with the clerk
of any such court.
4.1.3 The
provisions of this Section shall survive the resignation of the Escrow Agent or
the termination of this Agreement.
4.1.4 In
the event of a Subsequent Financing and adjustment in the Conversion Price as
described in Section 3.1.6 herein, on the tenth day following delivery of a
notice of such adjustment to the Escrow Agent, a copy of which shall be
delivered to EBOF, the Escrow Agent shall automatically issue and deposit
additional shares of PNGX’s common stock into the Settlement Shares Pool such
that the total number of shares remaining in the Settlement Shares Pool shall be
equal to the quotient of (a) the balance of the PNGX Note as the dividend and
(b) the Adjusted Conversion Price and the divisor1. Such shares shall be automatically
issued, without any additional authorization or confirmation by PNGX, upon BFI’s
submission to the Transfer Agent of the irrevocable transfer agent
instructions attached hereto as Exhibit
D.
4.2 Dispute Resolution:
Judgments. If any dispute shall arise with respect to
the delivery, ownership, right of possession or disposition of the Settlement
Shares Pool, the Escrow Agent shall continue to follow the terms of the Escrow
Agreement and issue shares of PNGX’s common stock pursuant to a Conversion
Demand unless the Transfer Agent (i) receives instructions otherwise from BFI,
or (ii) deposits the Settlement Shares Pool with any court of competent
jurisdiction in Florida, in which event the Escrow Agent shall give 20 days
advance written notice thereof to the PNGX and BFI and shall thereupon be
relieved and discharged from all further obligations pursuant to this
Agreement.
4.3 Maximum
Conversion. The Escrow Agent shall not issue to BFI, upon a
Conversion Demand, a number of shares of PNGX’s Common Stock which would result
in beneficial ownership by BFI and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of PNGX on the date of such a Conversion
Demand; provided,
however, such restriction may be waived, in whole or in part, upon sixty
(60) days prior notice from BFI to the Escrow Agent whereby BFI may decide to
convert shares of the Settlement Shares Pool to achieve an interest of greater
than 4.99%. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder.
ARTICLE
V
GENERAL
MATTERS
5.1 Termination. This
escrow shall terminate upon the release of all of the shares in the Settlement
Shares Pool or at any time upon the agreement in writing of PNGX and
BFI.
5.2 Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such Party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
|
If to PNGX, to:
PNG
Ventures, Inc.
Attn:
Xxxxx Xxxxxx
0000
Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Fax:
(000) 000-0000
|
If to BFI, to:
Black
Forest International, LLC
c/o
BCGU, LLC
0000
Xxxxx xxx Xxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxxxx 00000
Fax:
(000) 000-0000
|
|
If to the Escrow Agent, to:
|
5.3 Assignment; Binding
Agreement. Neither this Agreement nor any right or obligation
hereunder shall be assignable by any Party without the prior written consent of
BFI. This Agreement shall inure to the benefit of and be binding upon
the Parties hereto and their respective legal representatives, successors and
assigns.
5.4 Severability. In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Parties hereto shall be
enforceable to the fullest extent permitted by law.
5.5 Counterparts/Execution. This
Agreement may be executed in any number of counterparts and by different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile
transmission and delivered by facsimile transmission.
5.6 Agreement. Each
of the undersigned states that he has read the foregoing Agreement and
understands and agrees to it.
5.7 Entire
Agreement. This Agreement along with Settlement Agreement
constitute the entire agreement between the Parties hereto pertaining to the
Settlement Shares Pool and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties. There are
no warranties, representations and other agreements made by the Parties in
connection with the subject matter hereof except as specifically set forth in
this Agreement and the Settlement Agreement.
5.8 Waivers and
Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all Parties, or, in the
case of a waiver, by the Party waiving compliance. Except as
expressly stated herein, no delay on the part of any Party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any Party of any right, power or privilege hereunder
preclude any other or future exercise of any other right, power or privilege
hereunder.
5.9 Headings. The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
5.10 Law Governing this
Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without regard to principles
of conflicts of laws. Any action brought by any Party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of Florida or in the federal courts located in
the state of Florida. All
Parties and the individuals executing this Agreement agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing Party
(which shall be the Party which receives an award most closely resembling the
remedy or action sought) shall be entitled to recover from the other Party its
reasonable attorney's fees and costs. In the event that any provision
of this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of any agreement.
5.11 Specific Enforcement,
Consent to Jurisdiction. The Parties acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the Parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity. The Parties
hereby waive, and agree not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in
this Section shall affect or limit any right to serve process in any other
manner permitted by law.
SIGNATURE
PAGE
IN WITNESS WHEREOF, the Parties have
duly executed this Agreement as of the day and year first written
above.
|
PNGX:
PNG
VENTURES, INC.
___________________________
|
BFI:
BLACK
FOREST INTERNATIONAL, LLC
___________________________
|
|
ESCROW
AGENT
|
EXHIBIT
A
Settlement
Agreement and Release
EXHIBIT
B
PNGX
Note
EXHIBIT
C
Form
of Conversion Demand
Dated
_______________
Pursuant
to the terms of the Settlement Agreement and Release and Escrow Agreement by
between Black Forest International, LLC (“BFI”), PNG Ventures,
Inc. (“PNGX”)
and Madison Stock Transfer, Inc. (the “Transfer Agent”), BFI
hereby demands the issuance of _____________________ shares of PNGX’s common
stock (the “Settlement
Shares”) to be issued in the name of Black Forest International, LLC and
delivered as follows:
Black
Forest International, LLC
c/o BCGU,
LLC
0000
Xxxxx xxx Xxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxxxx 00000
|
Amount
of PNGX Note converted……………………
|
|
|
Number
of Settlement Shares to be Issued…………………………..
|
|
|
Remaining
PNGX Note……………………………….
|
Please
send the certificate representing the Settlement Shares via Federal Express
overnight delivery using Federal Express Account
No.________________.
Very
truly yours,
BLACK
FOREST INTERNATIONAL, LLC
EXHIBIT
D
Irrevocable
Transfer Agent Instructions
Transfer
Agent of Record for
PNG
Ventures, Inc.
Dear Sir
or Madam:
Reference
is made to the Settlement Agreement and Release (the “Settlement
Agreement”) and related Escrow Agreement (the “Escrow Agreement” and
collectively with the Settlement Agreement the “Agreements”) dated as
of June , 2008, by and among PNG Ventures, Inc., a Nevada corporation
(the “Company”)
and Black Forest International, LLC ( “BFI”) in which the
Company placed into escrow 700,000 shares of the Company’s common stock (the
“Common Stock”)
to be held in escrow and issued to BFI at BFI’s instruction pursuant to the
Settlement Agreement.
Pursuant
to Section 4.1.4 of the Escrow Agreement, in the event the Company enters into a
Subsequent Financing (as defined in the Escrow Agreement) the Company is
required to issue additional shares of Common Stock into escrow under the terms
of the Escrow Agreement.
Please be
advised that in the event you receive notice from BFI pertaining to the required
issuance of additional shares pursuant to Section 4.1.4 of the Escrow Agreement,
the Company hereby irrevocable authorizes and instructs you, without additional
authorization or confirmation by the Company, to immediately issue such shares
pursuant to such instructions from BFI.
Please be
advised that BFI is relying upon this letter as an inducement to enter into the
Agreements and, accordingly, BFI is a third party beneficiary to these
instructions.
Very
truly yours,
|
PNG
Ventures, Inc.
____________________________________
|
