INSIDER PLEDGE AND ESCROW AGREEMENT
Exhibit
10.9
THIS
INSIDER PLEDGE AND ESCROW AGREEMENT
(the
“Agreement”)
is
made and entered into as of August ___, 2005 (the “Effective
Date”)
by and
among CORNELL
CAPITAL PARTNERS, LP,
a
Delaware limited partnership (the “Pledgee”),
XXXXXXX
XXXXXXX GROUP, INC.,
(Formerly, Xxxxxx Engineered Plastics Corp.), a Nevada corporation (the
“Company”),
XXXXXX
X. XXX AND XXXXXXXX X. XXX TENANTS BY THE ENTIRETY, XXXXXXX X. XXXXXX,
ROADRUNNER INC., XXXXXX X. XXXXXX, ARA PROVDIAN, XXXXX X. XXXXXXXX,
and
XXXX X. XXXX
(collectively the “Pledgors”
and
individually the “Pledgor”),
and
XXXXX
XXXXXXXX,
ESQ.,
as
escrow agent (“Escrow
Agent”).
RECITALS:
WHEREAS,
Cornell
and Xxxxxxx, Xxxxxxx Group, Inc., a Florida corporation (“Xxxxxxx
Florida”)
entered into a securities purchase agreement on December 22, 2004 and amended
on
June 3, 2005, (“Securities
Purchase Agreement”)
pursuant to which Xxxxxxx Florida has issued and sold to Cornell, and Cornell
has purchased secured convertible debentures (the “Convertible
Debentures”)
in the
principal amount of $1,075,000. In connection with and contemporaneously with
the Securities Purchase Agreement Cornell and Xxxxxxx Florida entered into
an
investor registration rights agreement (“Registration
Rights Agreement”),
and
Xxxxxxx Florida, Cornell, and the Escrow Agent entered into an escrow agreement
(the “Escrow
Agreement”)
(the
Securities Purchase Agreement, Convertible Debentures, Registration Rights
Agreement, and Escrow Agreement are collectively referred to as the
“Transaction
Documents”).
WHEREAS,
on
December 22, 2004, the parties hereto entered into a pledge and Escrow Agreement
(“Xxxxxxx
Florida Pledge Agreement”)
pursuant to which the Pledgors pledged shares of stock of Xxxxxxx Florida to
the
Pledgee to secure Xxxxxxx Florida’s obligation to the Pledgee. The parties
desire that the Xxxxxxx Florida Pledge Agreement shall be terminated upon the
execution of this Agreement and the delivery of the Shares and Transfer
Documents to the Escrow Agent.
WHEREAS,
in July
2005, Xxxxxx Engineered Plastics Corp., a Nevada corporation (“Xxxxxx”)
acquired all the capital stock of Xxxxxxx Florida. Subsequent to the
acquisition, Xxxxxx changed its name to Xxxxxxx Xxxxxxx Group, Inc. (referred
to
above as the Company) and Xxxxxxx Florida became a wholly owned subsidiary
of
the Company. On even date hereof, the Company assumed all the rights and
obligations of Xxxxxxx Florida pursuant to the Transaction
Documents.
WHEREAS,
in order
to secure the Company’s obligations under the Transaction Documents, the
Pledgors have agreed to pledge to the Pledgee _____________ shares of the
Company’s common stock (the “Shares”),
which
are owned by the Pledgors in the amount specified on the signature lines
hereto.
1
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 Pledge Shares.
1.1. Each
Pledgor hereby grants to Pledgee a security interest in all Shares beneficially
owned by such Pledgor as security for Company’s obligations under the
Transaction Documents. Simultaneously with the execution of this Agreement
the
Pledgor shall deliver to the Escrow Agent stock certificates representing the
Shares, together with duly executed stock powers or other appropriate transfer
documents executed in blank by 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 Transaction
Documents issued thereunder, through either conversion of securities or
repayment in accordance with the terms of the Transaction Documents, or the
termination or expiration of this Agreement.
1.2. Each
Pledgor hereby grants Pledgee a further security interest in any stock rights,
rights to subscribe, stock dividends, new securities, or other property
(excluding cash dividends) to which each Pledgor is or may hereafter become
entitled to receive on account of the Shares originally pledged hereunder.
In
the event Pledgor receive additional property of such nature (“Additional
Pledged Property”),
Pledgor shall immediately deliver such Additional Pledged Property to the Escrow
Agent to be held by the Escrow Agent in the same manner and on the same terms
as
the Shares originally pledged hereunder.
2. Title
to Pledge Shares.
From
the
Effective Date, subject only to the security interest of Pledgee created
hereunder, the Pledgor shall be the legal and record owner of their respective
Shares, and shall be entitled to vote the Shares, to receive dividends and
other
distributions thereon, and to enjoy all other rights and privileges incident
to
the ownership of the Shares, subject to the restrictions herein. Upon the
occurrence of an Event of Default (as defined herein), the Pledgee shall be
entitled to vote the Shares, to receive dividends and other distributions
thereon, and to enjoy all other rights and privileges incident to the ownership
of the Shares.
3. Release
of Shares from Pledge.
Upon
the
payment of all amounts due to the Pledgee pursuant to Transaction Documents
and
the Convertible Debentures issued thereunder through either conversion of
securities or repayment 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 Transaction Documents and Convertible Debentures, the
Escrow Agent shall return to the Pledgor the Transfer Documents, the
certificates representing the Shares, and any Additional Pledged Property
(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 Transaction Documents and
the Convertible Debentures issued thereunder, through either conversion of
securities or repayment in accordance with the terms of the Convertible
Debentures, this Agreement and Pledgee’s security interest and rights in and to
the Shares shall terminate.
2
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 issued in connection therewith.
5. Remedies.
5.1. 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).
5.2. 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.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 Company and the Pledgors. 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.
3
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,
the Company and Pledgors hereby agree, jointly and severally, 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
Pledgors, 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
6.5. The
Escrow Agent may consult with counsel of its own choice (and the costs of such
counsel shall be paid jointly and severally by Pledgors, the Company 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.
7. Conflict
Waiver.
Pledgors
acknowledges and agree that the Escrow Agent is solely representing the Pledgee
in connection with this Agreement and the Transaction Documents and Pledgors
waive any objection it might have with respect to the Escrow Agent acting as
the
Escrow Agent pursuant to this Agreement.
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:
|
(i)
If to the Company
|
Xxxxxxx
Xxxxxxx Group, Inc.
|
|
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
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Attention: Xxxxxx
X. Xxx
|
|
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Telephone: (000)
000-0000
|
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Facsimile: (000)
000-0000
|
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With
Copy to:
|
Xxxxxxx,
Savage, Kaplowitz, Wolf & Marcus LLP
|
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000
Xxxxxxxxx Xxxxxx
|
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Xxx
Xxxx, XX 00000-0000
|
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Attention:
Xxxxxx Xxxxxx, Esq.
|
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Telephone: (000)
000-0000
|
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Facsimile: (000)
000-0000
|
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(ii)
If to the Pledgors:
|
Xxxxxx
X. Xxx
|
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000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
|
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Xxx
Xxxx, XX 00000
|
|
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Telephone: (000)
000-0000
|
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Facsimile: (000)
000-0000
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5
|
Xxxxxxx
X. Xxxxxx
|
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000
Xxxxxx Xxxxxx
|
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Xxxxxxx,
XX 00000
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Roadrunner
Inc.
|
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00
Xxxxxxx Xxxxx
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Xxxxxx
Xxxxxx, XX 00000
|
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Attention: Xxxxx
Xxxxxxxx
|
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(iii)
If to the Pledgee:
|
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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Facsimile: (000)
000-0000
|
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With
copy to:
|
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: Xxxx
X. Xxxxx, Esq.
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Facsimile: (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.
9. 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.
10. 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
or
Federal courts located in Xxxxxx County, 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.
6
11. 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.
12. 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.
13. 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.
14. No
Penalties.
No
provision of this Agreement is to be interpreted as a penalty upon any party
to
this Agreement.
15. JURY
TRIAL.
EACH OF
THE PLEDGEE, THE COMPANY AND THE PLEDGORS 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.
7
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: | ||
|
Name: Xxxx Xxxxxx |
||
| Title: Portfolio Manager | ||
| XXXXXXX XXXXXXX GROUP, INC. | ||
| |
|
|
| By: | ||
|
|
||
| Name: Xxxxxx X. Xxx | ||
| Title: Chairman and CEO | ||
| PLEDGORS: | ||
| XXXXXX X. XXX AND XXXXXXXX X. XXX | ||
| TENANTS BY THE ENTIRETY | ||
| |
|
|
| By: | ||
|
Name: Xxxxxx X. Xxx |
||
| Number of shares pledged: ___________ (held as Tenants by the Entirety) | ||
| |
|
|
| By: | ||
|
Name: Xxxxxxxx X. Xxx |
||
| Number of shares pledged: ___________ (held as Tenants by the Entirety) | ||
| |
|
|
| By: | ||
|
Name: Xxxxxxx X. Xxxxxx |
||
| Number of shares pledged: _____________ | ||
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| ROADRUNNER INC. | ||
| |
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| By: | ||
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||
| Name: | ||
| Number of shares pledged: ____________ | ||
| |
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| By: | ||
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||
| Name: Xxxxxx X. Xxxxxx | ||
| Number of shares pledged: _____________ | ||
| |
|
|
| By: | ||
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|
||
| Name: Ara Provdian | ||
| Number of shares pledged: ______________ | ||
| |
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| By: | ||
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||
| Name: Xxxxx X. Xxxxxxxx | ||
| Number of shares pledged: _______________ | ||
| |
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| By: | ||
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||
| Name: Xxxx X. Xxxx | ||
| Number of shares pledged: _______________ | ||
| XXXXX XXXXXXXX, PC | ||
| |
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| By: | ||
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||
| Name: Xxxxx Xxxxxxxx, Esq. | ||
9
