EXHIBIT 10.14
PLEDGE AND ESCROW AGREEMENT
PLEDGE AND ESCROW AGREEMENT (the "AGREEMENT") made by each of the
undersigned (each a "PLEDGOR", and collectively, the "PLEDGORS"), in favor of
CORNELL CAPITAL PARTNERS, LP, in its capacity as collateral agent (in such
capacity, the "COLLATERAL AGENT") for the "Buyers" (as defined below) party to
the Securities Purchase Agreement, of even date herewith (the "SECURITIES
PURCHASE AGREEMENT").
RECITALS:
WHEREAS, Radial Energy, Inc., a Delaware corporation (the "COMPANY"),
and each party listed as a "Buyer" on the Schedule of Buyers attached thereto
(each a "BUYER", and collectively, the "BUYERS") are parties to the Securities
Purchase Agreement, pursuant to which the Company shall issue and sell to the
Buyers, as provided in the Securities Purchase Agreement and the Buyers shall
purchase secured convertible debentures (the "CONVERTIBLE DEBENTURES"), which
shall be convertible into shares of the Company's common stock, par value $0.001
per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES");
WHEREAS, it is a condition precedent to the Buyers purchasing the
Convertible Debentures that the Pledgors execute and deliver to the Collateral
Agent a pledge agreement securing all of the obligations of the Company under
the Securities Purchase Agreement, the Convertible Debentures and the
Transaction Documents (as defined in the Securities Purchase Agreement, the
"TRANSACTION DOCUMENTS");
WHEREAS, each Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of,
such Pledgor; and
WHEREAS, the parties to this Agreement desire to appoint DAVID
GONZALEZ, ESQ., as escrow agent ("ESCROW AGENT") to hold in escrow the Pledged
Shares (as defined below) pursuant to the terms and conditions of this
Agreement.
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. OBLIGATIONS SECURED. The security interest created hereby in the Pledged
Shares constitutes continuing collateral security for all obligations of the
Company now existing or hereinafter incurred to the Buyers, whether oral or
written and whether arising before, on or after the date hereof including,
without limitation of the following obligations (collectively, the
"Obligations"):
(a) for so long as the Convertible Debentures are outstanding, the
payment by the Company, as and when due and payable (by scheduled maturity,
acceleration, demand or otherwise), of all amounts from time to time owing by it
in respect of the Securities Purchase Agreement, the Convertible Debentures and
the other Transaction Documents; and
(b) for so long as the Convertible Debentures are outstanding, the due
performance and observance by the Company of all of its other obligations from
time to time existing in respect of any of the Transaction Documents, including
without limitation, the Company's obligations with respect to any conversion or
redemption rights of the Secured Party under the Convertible Debentures.
2. PLEDGE AND TRANSFER OF PLEDGED SHARES. Each Pledgor hereby grants to the
Collateral Agent an irrevocable, first priority security interest in all the
securities set forth next to such Pledgor's name on Schedule I attached hereto
(the "PLEDGED SHARES") as security for the Obligations. Simultaneously with the
execution of this Agreement, each Pledgor shall deliver to the Escrow Agent, and
the Escrow Agent shall hold in escrow pursuant to the terms of this Agreement,
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 each Pledgor
(the "TRANSFER DOCUMENTS"), and such stock certificates and Transfer Documents
shall be held by the Escrow Agent until the satisfaction in full of all the
Obligations.
3. RIGHTS RELATING TO PLEDGED SHARES. Upon the occurrence of an Event of Default
(as defined herein), the Collateral Agent 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 on behalf of
the Buyers.
4. RELEASE OF PLEDGED SHARES FROM PLEDGE.
a. Upon the satisfaction in full of all the Obligations 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 each Pledgor
the Transfer Documents and the certificates representing the Pledged Shares
(collectively the "PLEDGED MATERIALS"), whereupon any and all rights of
Collateral Agent in the Pledged Shares shall be terminated.
b. Upon the satisfaction of the following conditions (i) the
registration statement with respect to the resale of the Common Stock underlying
the Convertible Debentures shall have been declared effective by the Securities
and Exchange Commission, (ii) the Common Stock shall be traded on a Principal
Market (as defined in the Convertible Debentures), and (iv) no Event of Default
shall have occurred, the security interest created hereunder solely with respect
to one half of the Pledged Shares pledged hereunder by each Pledgor shall
terminate. Promptly upon the satisfaction of such conditions, 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 each Pledgor the
Pledged Materials with respect to one half of each Pledgors' Pledged Shares, and
all rights of Collateral Agent in such Pledged Shares returned shall be
terminated.
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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
Collateral Agent shall have the right acquire the Pledged Shares in accordance
with the following procedure: (a) the Collateral Agent shall provide written
notice of such Event of Default (the "DEFAULT NOTICE") to the Escrow Agent, with
a copy to the Pledgors; (b) in a Default Notice the Collateral Agent shall
specify the number of Pledged Shares to be issued to the Collateral Agent,
PROVIDED HOWEVER, that neither the Collateral Agent, nor any Buyer shall not
have the right to acquire such number of Pledged Shares which would cause the
Collateral Agent or such Buyer, together with its affiliates, to beneficially
own in excess of 4.99% of the outstanding capital of the Company (unless the
Collateral Agent or such Buyer waives such limitation by providing 65 days'
advance written notice); and (c) as soon as practicable after receipt of a
Default Notice, the Escrow Agent shall deliver the specified number of Pledged
Shares along with the applicable Transfer Documents to the Company's Transfer
Agent with instructions to issue such Pledged Shares to the Collateral Agent in
accordance with the Irrevocable Transfer Agent Instructions of even date
herewith.
b. Upon receipt of the Pledged Shares issued to a the Collateral Agent,
the Collateral Agent 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 Buyers by the Company under the Transaction Documents,
including, without limitation, outstanding principal, interest, legal fees, and
any other amounts owed to the Buyers, 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 Buyers are
insufficient to satisfy the Obligations in full, the Buyers shall be entitled to
a deficiency judgment against each Pledgor for such amount. the Collateral Agent
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 any 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. Each Pledgor shall remain liable for shortfalls, if any,
that may exist after the Collateral Agent has exhausted all remedies hereunder.
The Collateral Agent shall return any Pledged Shares issued to it and instruct
the Escrow Agent to return any Pledged Shares it is holding in escrow after the
full satisfaction of the Obligations.
c. Each right, power and remedy of the Collateral Agent 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 Collateral Agent 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 Collateral Agent or any Buyer of all such other rights, powers or remedies,
and no failure or delay on the part of the Collateral Agent or any Buyer to
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exercise any such right, power or remedy shall operate as a waiver thereof. No
notice to or demand on any Pledgor in any case shall entitle any Pledgor to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other
further action in any circumstances without demand or notice. The Collateral
Agent 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. Each 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 by it 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. Each Pledgor covenants and agrees to take all reasonable steps to
defend the Collateral Agent'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 Collateral Agent and the Escrow Agent); and
each 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 Collateral Agent
as collateral hereunder and will likewise take all reasonable steps to defend
the right thereto and security interest therein of the Collateral Agent.
c. Each 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
Collateral Agent under any Transaction Document.
d. Each Pledgor represents, warrants and covenants that (i) unless
otherwise indicated on Schedule II attached hereto, 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 Collateral Agent shall be deemed to have
acquired the Pledged Shares on the date they were acquired by the Pledgor.
Unless otherwise indicated on the Schedule II attached hereto, each 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.
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.
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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. The Collateral Agent and the Pledgors 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 Pledgors.
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 Pledgors, the Company and the Collateral Agent
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.
e. The Escrow Agent may consult with counsel of its own choice (and the
costs of such counsel shall be paid by the Pledgors, the Company, and Collateral
Agent) 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.
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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 Pledgors hereby acknowledges that the Escrow Agent is
general counsel to the Collateral Agent, a partner in the general partner of the
Collateral Agent, and counsel to the Collateral Agent in connection with the
transactions contemplated and referred herein. The Pledgors 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 Collateral
Agent and the Pledgors will not seek to disqualify such counsel and waives any
objection Pledgors 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:
If to the Company, to: Radial Energy, Inc.
1313 East Maple Street, Suite 223
Bellingham, WA 98225
Attn: Chief Financial Officer
Telephone: (360) 685-4240
With a copy to: Greenberg Traurig, LLP
650 Town Center Drive, Suite 1700
Costa Mesa, CA 92626
Attn: Raymond Lee, Esq.
Telephone: (714) 708-6510
If to the Collateral Agent: Cornell Capital Partners LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Attention: Mark A. Angelo
Telephone: (201) 985-8300
Facsimile: (201) 985-8744
With copy to: Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Attention: Troy Rillo, Esq.
Telephone: (201) 985-8300
Facsimile: (201) 985-1964
If to the Pledgors, to: To the addresses provided on the
signature pages attached hereto
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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 Hudson
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 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.
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 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.
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 COLLATERAL AGENT 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 COLLATERAL AGENT
AND PLEDGOR, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN
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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, each Pledgor has caused this Pledge and Escrow
Agreement to be executed by its respective duly authorized officer, as of the
date first above written.
By: /s/ GREGORY LEIGH LYONS
_______________________
Name: Gregory Leigh Lyons
Address: 1313 E. Maple Street, Suite 223
Bellingham, WA 98225
FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Company's Obligations (as defined above). This Agreement is made with
recourse.
BY: /s/ GREGORY LEIGH LYONS
_______________________
NAME: Gregory Leigh Lyons
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IN WITNESS WHEREOF, each Pledgor has caused this Pledge and Escrow
Agreement to be executed by its respective duly authorized officer, as of the
date first above written.
By: /s/ OMAR MICHAEL HAYES
______________________
Name: Omar Michael Hayes
Address:
FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Company's Obligations (as defined above). This Agreement is made with
recourse.
BY: /s/ OMAR MICHAEL HAYES
______________________
NAME: Omar Michael Hayes
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IN WITNESS WHEREOF, each Pledgor has caused this Pledge and Escrow
Agreement to be executed by its respective duly authorized officer, as of the
date first above written.
GUILDHALL LIMITED
By: /s/ RICHARD SMITH
_________________________________________
Name: Richard Smith
Title: Authorized Signatory
Address: 35 Barrack Road
Belize City, Belize
FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Company's Obligations (as defined above). This Agreement is made with
recourse.
GUILDHALL LIMITED
BY: /s/ RICHARD SMITH
______________________
NAME: Richard Smith
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IN WITNESS WHEREOF, each Pledgor has caused this Pledge and Escrow
Agreement to be executed by its respective duly authorized officer, as of the
date first above written.
LLORIA CORPORATION LIMITED
By: /s/ ROBERT SEELEY
_____________________________
Name: Robert Seeley
Title: Authorized Signatory
Address: Suite 906 Ocean Centre
Harbour City
5 Canton Road, TST
Kowloon, Hong Kong
FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Company's Obligations (as defined above). This Agreement is made with
recourse.
LLORIA CORPORATION LIMITED
BY: /s/ ROBERT SEELEY
___________________
NAME: Robert Seeley
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IN WITNESS WHEREOF, each Pledgor has caused this Pledge and Escrow
Agreement to be executed by its respective duly authorized officer, as of the
date first above written.
PROPHETIC LIMITED
By: /s/ CHRIS SMITH
___________________________
Name: Chris Smith
Title: Authorized Signatory
Address: Suite 100 The Studio
St. Nicholas
Close Elstree,
Hertfordshire
U.K. WD6 3EW
FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Company's Obligations (as defined above). This Agreement is made with
recourse.
PROPHETIC LIMITED
BY: /s/ CHRIS SMITH
__________________________
NAME: Chris Smith
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SCHEDULE I
PLEDGED SHARES
___________________________________________________________________________________
PLEDGOR PLEDGED SHARES
___________________________________________________________________________________
Gregory Leigh Lyons 2,672,000 Shares of Common Stock of Radial Energy, Inc.
(certificate numbers: _______, ________)
___________________________________________________________________________________
Omar Michael Hayes 1,500,000 Shares of Common Stock of Radial Energy, Inc.
(certificate numbers: _______, ________)
___________________________________________________________________________________
Guildhall Ltd. 1,160,000 Shares of Common Stock of Radial Energy, Inc.
(certificate numbers: _______, ________)
___________________________________________________________________________________
Lloria Corporation Limited 1,100,000 Shares of Common Stock of Radial Energy, Inc.
(certificate numbers: _______, ________)
___________________________________________________________________________________
Prophetic Limited 1,240,000 Shares of Common Stock of Radial Energy, Inc.
(certificate numbers: _______, ________)
___________________________________________________________________________________
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SCHEDULE II
EXCEPTIONS
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