PLEDGE AND ESCROW
AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (the “
Agreement ”) is made and entered into as of October
31, 2008 (the “ Effective Date ”) by and among
FOX PETROLEUM, INC. , a corporation organized and existing
under the laws of the State of Nevada (the “ Pledgor
”), TRAFALGAR CAPITAL SPECIALIZED INVESTMENT FUND ,
(the “ Pledgee ”), and THE LAW OFFICE OF
JAMES G. DODRILL II, P.A., as escrow agent (“ Escrow
Agent ”).
RECITALS :
WHEREAS, in order to secure the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise)
of all of the Company’s obligations (the “
Obligations ”) to the Pledgee or any successor to the
Pledgee under this Agreement, the Securities Purchase Agreement, as
amended of even date herewith between the Pledgor and the Pledgee
(the “ Securities Purchase Agreement ”), the
Convertible Debentures (the “ Convertible
Debentures ”) issued or to be issued by the Company to
the Pledgee, either now or in the future, up to a total of Three
Million Five Hundred Thousand Dollars ($3,500,000) of principal,
plus any interest, costs, fees, and other amounts owed to the
Pledgee thereunder, the Amended Security Agreement of even date
herewith between the Pledgor and the Pledgee (the “
Security Agreement ”), and all other contracts
entered into between the parties hereto (collectively, the “
Transaction Documents ”), the Pledgor has agreed to
irrevocably pledge to the Pledgee, or its designees, fifteen
million (15,000,000) 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 .
1.1.
The Pledgor hereby grants to Pledgee, or its designees, a security
interest in all Pledged Shares as security for Pledgor’s
obligations under the Convertible Debentures. Simultaneously with
the execution of the Transaction Documents, the Pledgor shall
deliver to the Escrow Agent stock certificates representing
15,000,000 restricted 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 Pledgee under the Convertible Debentures and through
repayment in accordance with the terms of the Convertible
Debentures, or the termination or expiration of this
Agreement.
2.
Rights Relating to Pledged Shares . Upon and anytime
after the occurrence of an Event of Default (as defined herein),
the Pledgee, or its designees, shall be entitled to vote
the
Pledged
Shares, to receive dividends and other distributions thereon, to
sell the Pledged Shares, 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 Pledgee under the Convertible
Debentures by 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
Convertible Debentures, 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,
or its designees, 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
Convertible Debentures, by repayment in accordance with the terms
of the Convertible Debentures, this Agreement and Pledgee’s
security interest and rights in and to the Pledged Shares shall
terminate.
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 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 Pledgee by the
Pledgor 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 Florida. 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 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
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 4.9% of the
outstanding capital of the Pledgor (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.
5.1. 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
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