EXHIBIT 10.2
PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered into as
of July 15, 2005 (the "Effective Date") by and among CORNELL CAPITAL PARTNERS,
LP, a Delaware limited partnership and HIGHGATE HOUSE FUNDS, LTD., a Delaware
limited partnership (the "Pledgees"), FALCON NATURAL GAS CORPORATION, a
corporation organized and existing under the laws of the State of Nevada (the
"Pledgor"), and XXXXXXXXXXX & XXXXXXXX XXXXXXXXX XXXXXX LLP, as escrow agent
("Escrow Agent").
RECITALS:
WHEREAS, in order to secure the Company's obligations under the Promissory Note,
and this Agreement all of even date herewith (collectively referred to as the
"Transaction Documents"), the Pledgor has agreed to pledge to the Pledgees
twenty-four million (24,000,000) shares (the "Pledged Shares") of the Pledgor's
common stock.
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.
The Pledgor hereby grants to Pledgees 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 Pledgees 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 Pledgees 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 Pledgees 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 Pledgees 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 Pledgees in the Pledged Materials shall be terminated.
Notwithstanding anything to the contrary contained herein, upon full payment of
all amounts due to the Pledgees under the Promissory Note, by repayment in
accordance with the terms of the Note, this Agreement and Pledgees's security
interest and rights in and to the Pledged Shares shall terminate.
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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, Pledgees 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 Pledgees the Pledged Materials
held by the Escrow Agent hereunder, whereupon Pledgees 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 Pledgees 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 Pledgees 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.
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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 Pledgees) 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 Pledgees, a partner in the general partner of
the Pledgees, and counsel to the Pledgees 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 Pledgees 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: Falcon Natural Gas Corporation
Westchase Center
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Massimiliano Pozzoni
Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx 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 Pledgees: 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
0
Xxxxxxxx Xxxxx Funds, Ltd.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
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.
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13. JURY TRIAL. EACH OF THE PLEDGEES 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 PLEDGEES 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.
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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
HIGHGATE HOUSE FUNDS, LTD.
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Portfolio Manager
FALCON NATURAL GAS CORPORATION
By: /s/ Massimiliano Pozzoni
--------------------------------------
Name: Massimiliano Pozzoni
Title: Vice President
ESCROW AGENT
XXXXXXXXXXX & XXXXXXXX XXXXXXXXX XXXXXX LLP
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Partner
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