INSIDER PLEDGE AND ESCROW AGREEMENT
THIS
INSIDER PLEDGE AND ESCROW AGREEMENT
(the
“Agreement”)
is
made and entered into as of April 1, 2006 (the “Effective
Date”)
by and
among RAINIER
XXXXXXXX
(the
“Pledgor”),
CORNELL
CAPITAL PARTNERS, LP
(the
“Pledgee”),
PACER
HEALTH CORPORATION,
a
Florida corporation (the “Company”),
and
XXXXX
XXXXXXXX,
ESQ.,
as
escrow agent (“Escrow
Agent”).
RECITALS:
WHEREAS,
the
Company shall issue and sell to the Pledgee, as provided in the Securities
Purchase Agreement of even date herewith between the Company and the Pledgee
(the “Securities
Purchase Agreement”),
and
the Pledgee shall purchase up to Two Million Dollars ($2,000,000) of secured
convertible debentures (the “Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value
$0.0001 per share (the “Common
Stock”)
(as
converted, the “Conversion
Shares”);
and
WHEREAS,
to
induce
the Pledgee to enter into the transaction contemplated by the Securities
Purchase Agreement, the Convertible Debentures, the Investor Registration
Rights
Agreement of even date herewith between the Company and the Pledgee (the
“Investor
Registration Rights Agreement”)
and
the Irrevocable Transfer Agent Instructions among the Company, the Pledgee,
the
Transfer Agent, and the Escrow Agent (the “Transfer
Agent Instructions”)
(collectively referred to as the “Transaction
Documents”),
the
Pledgor has agreed to irrevocably pledge to the Pledgee Four Hundred Thirty
Million
Four Hundred Twenty Two Thousand Nine Hundred Three (430,422,903) shares
(the “Pledged
Shares”)
of
Common Stock beneficially owned by the Pledgor in accordance with this
Agreement.
NOW,
THEREFORE,
for and
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. Obligations
Secured.The
obligations secured hereby are any and all obligations of the Company now
existing or hereinafter incurred to the Pledgee, whether oral or written
and
whether arising before, on or after the date hereof including, without
limitation, those obligations of the Company to the Pledgee under the
Transaction Documents and any other amounts now or hereafter owed to the
Pledgee
by the Company thereunder (collectively, the “Obligations”).
2. Pledge
and Transfer of Pledged Shares.
The
Pledgor hereby grants to Pledgee an irrevocable, first priority security
interest in all Pledged Shares as security for the Company’s Obligations.
Simultaneously with the execution of the Transaction Documents, the Pledgor
shall deliver to the Escrow Agent stock certificates made out in favor of
the
Pledgor representing the Pledged Shares, together with duly executed stock
powers or other appropriate transfer documents with medallion bank guarantees
and 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 Obligations due to the Pledgee, including the
repayment of all amounts owed by the Company to the Pledgee under the
Convertible Debentures (whether outstanding principal, interest, legal fees,
or
any other amounts owed to the Pledgee by the Company).
3. 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, receive dividends and other distributions
thereon, and enjoy all other rights and privileges incident to the ownership
of
the number of Pledged Shares actually released from escrow in accordance
with
Section 6.1 hereof.
4. Release
of Pledged Shares from Pledge.
Upon
the full payment of all Obligations due to the Pledgee under the Transaction
Documents, including the repayment of all amounts owed by the Company to
the
Pledgee under the Convertible Debentures (whether outstanding principal,
interest, legal fees, and any other amounts owed to the Pledgee by the Company),
the parties hereto shall notify the Escrow Agent to such effect in writing.
Promptly upon receipt of such written notice, 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.
5. Event
of Default.
An
“Event
of Default”
shall
be deemed to have occurred under this Agreement upon an Event of Default
under
the Convertible Debentures.
6. Remedies.
a. Upon
and
anytime after the occurrence of an Event of Default, 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 Pledgor by the Company 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 or the Company 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, the
Company 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 Company (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.
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b. 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 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.
7. Representations,
Warranties and Covenants.
a. The
Pledgor represents, warrants and covenants that:
(i) Pledgor
is, and at the time when pledged hereunder will be, the legal, beneficial
and
record owner of, and has (and will have)
good and
valid title to, all Pledged Shares pledged hereunder, subject to no pledge,
lien, mortgage, hypothecation, security interest, charge, option or other
encumbrance whatsoever;
(ii) Pledgor
has full power, authority and legal right to pledge all the Pledged Shares
pledged pursuant to this Agreement; and
(iii) all
the
Pledged Shares have been duly and validly issued, are fully paid and
non-assessable and are subject to no options to purchase or similar
rights.
b. The
Pledgor covenants and agrees to take all reasonable steps to defend the
Pledgee’s right, title and security interest in and to the Pledged Shares and
the proceeds thereof against the claims and demands of all persons whomsoever
(other than the Pledgee and the Escrow Agent); and the Pledgor covenants
and
agrees that it will have like title to
and
right to pledge any other property at any time hereafter pledged to the Pledgee
as Collateral hereunder and will likewise take all reasonable steps to defend
the right thereto and security interest therein of the Pledgee.
c. The
Pledgor covenants and agrees to take no action which would violate or be
inconsistent with any of the terms of any Transaction Document, or which
would
have the effect of impairing the position or interests of the Pledgee under
any
Transaction Document.
d. The
Pledgor represents, warrants and covenants that (i) the Pledgor has been
the
beneficial owner of the Pledged Shares for a period of not less than two
(2)
years as computed in accordance with Rule 144(d) promulgated under the
Securities Act of 1933, as amended, and (ii) this Agreement is made with
recourse. Upon an Event of Default, the Pledgee shall be deemed to have acquired
the Pledged Shares on the date they were acquired by the Pledgor. The Pledgor
is
an “affiliate” of the Company, as such term is defined in Rule 144(a)
promulgated under the Securities Act of 1933, as amended.
3
8. Concerning
the Escrow Agent.
a. 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.
b. 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.
c. 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.
d. 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.
4
e. 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.
f. 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.
9. 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.
10. 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:
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If
to the Company, to:
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Pacer
Health Corporation
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0000
X.X. 000xx
Xxxxxx
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Xxxxx
Xxxxx, Xxxxxxx 00000
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Attention:
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Rainier
Xxxxxxxx
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Telephone:
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(000)
000-0000
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Facsimile:
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(000)
000-0000
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With
a copy to:
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Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxxxx Xxxxxx, LLP
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000
Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
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Xxxxx,
Xxxxxxx 00000
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Attention:
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Xxxxxxx
X. Xxxxxx, Esq.
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Telephone:
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(000)
000-0000
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Facsimile:
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(000)
000-0000
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If
to the Pledgee:
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Cornell
Capital Partners LP
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000
Xxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxx
Xxxx, XX 00000
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Attention:
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Xxxx
X. Xxxxxx
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Telephone:
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(000)
000-0000
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Facsimile:
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(000)
000-0000
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5
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With
copy to:
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Cornell
Capital Partners, LP
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000
Xxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxx
Xxxx, XX 00000
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Attention:
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Xxxxx
Xxxxxxxx, Esq.
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Telephone:
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(000)
000-0000
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Facsimile:
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(000)
000-0000
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If
to the Pledgor, to:
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Rainier
Xxxxxxxx
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0000
X.X. 000xx
Xxxxxx
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Xxxxx
Xxxxx, Xx 00000
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Telephone:
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(000)
000-0000
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Facsimile:
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(000)
000-0000
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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.
11. 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.
12. 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.
13. Enforcement
Costs.
If any
legal action or other pro-ceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresenta-tion 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 limita-tion, 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.
14. 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 here-after 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.
6
15. 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.
16. No
Penalties.
No
provision of this Agreement is to be interpreted as a penalty upon any party
to
this Agreement.
17. 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 INTENTIALLY LEFT BLANK]
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IN
WITNESS WHEREOF,
the
parties hereto have duly executed this Insider Pledge and Escrow Agreement
as of
the date first above written.
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CORNELL
CAPITAL PARTNERS, LP
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By:
Yorkville
Advisors, LLC
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Its:
General
Partner
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By:
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Name:
Xxxx
Xxxxxx
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Title:
Portfolio
Manager
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PLEDGOR
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By:
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Name:
Rainier
Xxxxxxxx
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PACER
HEALTH CORPORATION
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By:
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Name:
Rainier
Xxxxxxxx
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Title:
CEO
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ESCROW
AGENT
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By:
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Name:
Xxxxx
Xxxxxxxx, Esq.
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FOR
VALUE RECEIVED,
the
Pledgor hereby unconditionally and absolutely guarantees the Company’s
Obligations (as defined above). This Agreement is made with
recourse.
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By:
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Name:
Xxxxxx Xxxxxxxx
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