ESCROW AGREEMENT
Exhibit
10.3
ESCROW
AGREEMENT
made as
of the 19
day of
April, 2007.
AMONG:
PURE
BIOFUELS CORP.,
a Nevada
corporation with an address at 0000 Xxxxxx Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx
Xxxxx, XX.
(“PBOF”)
AND:
Xxxx
Xxxxxxxx
(the
“Shareholder”)
AND:
Cornell
Capital Partners, L.P., a
Cayman
Islands limited partnership with an address at 000 Xxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx Xxxx, XX 00000.
(“Cornell”)
AND:
U.S.
Bank National Association, a
national banking association with a corporate trust services office at 000
Xxxxxx Xxxxxx, 00xx
Xxxxx,
Xxxxxxxx, XX 00000, attention: Corporate Trust Services
(the
“Escrow
Agent”)
WITNESS
THAT WHEREAS:
A. The
Shareholder and PBOF wish to appoint the Escrow Agent to accept, hold and
deliver, pursuant to the terms of this Agreement, 5,000,000 shares of common
stock of PBOF registered in the name of the Shareholder (the “Shares”);
B. PBOF
and
Cornell are parties to the Securities Purchase Agreement of even date herewith
(the “Purchase
Agreement”),
pursuant to which PBOF shall issue and sell to Cornell, as provided in the
Purchase Agreement and Cornell shall purchase secured convertible
debentures;
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C. The
Shareholder and PBOF have agreed that the Shares will be held by the Escrow
Agent and released only in accordance with this Agreement.
THEREFORE,
in consideration of the mutual covenants and agreements herein contained
and
other good and valuable consideration (the receipt and sufficiency of which
are
hereby acknowledged), the parties covenant and agree as follows:
1.
INTERPRETATION
1.1 In
this
Agreement:
| (a) |
the
headings have been inserted for convenience of reference only and
in no
way define, limit, or enlarge the scope or meaning of the provisions
of
this Agreement;
|
| (b) |
all
references to any party, whether a party to this Agreement or not,
will be
read with such changes in number and gender as the context or reference
requires; and
|
| (c) |
when
the context hereof makes it possible, the word “person” includes in its
meaning any firm and any body corporate or
politic.
|
2. DEPOSIT
INTO ESCROW
2.1 The
Shareholder will, within five (5) business days of the execution of this
Agreement, deliver the Shares and fully executed stock power of attorney,
signature guaranteed as required by the transfer agent of PBOF (the
“PA”),
to
the Escrow Agent and the Escrow Agent will hold the Shares and the PA in
escrow
subject to the terms and conditions of this Agreement.
3. ESCROW
PROVISIONS
3.1 The
Shareholder and PBOF hereby direct the Escrow Agent to retain the Shares
and the
PA and not to cause anything to be done to release the same from escrow except
in accordance with this Agreement. The Escrow Agent accepts its responsibilities
hereunder and agrees to perform them in accordance with the terms
hereof.
3.2 The
Escrow Agent will hold the Shares and the PA in escrow and will, unless
prohibited by an order of a court of competent jurisdiction, deliver the
Shares
and PA as follows:
| (a) |
within
five business days after its receipt of
a certificate signed
by each of PBOF and Cornell to
the effect that an “Event of Default” (as defined in Secured Convertible
Debenture issued to Cornell as of even date herewith (the “Debenture”))
has occurred, the
Escrow Agent shall deliver the Shares and the PA to Cornell
at the address set forth in Section 7.5 hereto or at such other address
as
Cornell shall instruct the Escrow Agent in writing from time to time.
For
the avoidance of doubt, the parties other than the Escrow Agent agree
among themselves that, in the event they instruct the Escrow Agent
to
deliver the Shares in accordance with this Section 3.2(a), they will
instruct the Escrow Agent to transfer such Shares, or a portion thereof,
so that the Shares previously owned by and registered in the name
of the
Shareholder
shall be delivered to and re-registered in the name
of
Cornell;
or
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| (b) |
within
five business days after its receipt of
a certificate signed
by each of PBOF and Cornell to
the effect that the Debenture has been fully repaid or converted
pursuant
to Sections 3 and 4 of the Debenture, the Escrow Agent shall
deliver the Shares and related PA to the Shareholder
at
the address set out in Section 7.5 hereto or at such other address
as the
Shareholder shall instruct the Escrow Agent in writing from time
to
time.
|
The
period of time any of the Shares are held by the Escrow Agent pursuant to
this
Section 3.2 shall be referred to herein as the “Escrow Period.”
4. RIGHTS
OF SHAREHOLDER IN THE SHARES
4.1 The
Shareholder, as the registered owner of the Shares, shall retain all of its
rights as Shareholder of the Company during the Escrow Period, including,
without limitation, the right to vote such shares, but not including the
right
to sell or transfer the Shares except as set forth in Section 4.3.
4.2 During
the Escrow Period, all cash dividends payable with respect to the Shares
shall
be paid to the Shareholder, as the registered owners of the Shares. As used
herein, the term “Shares” shall be deemed to include all
non-cash dividends distributed
thereon, if any. PBOF agrees to deliver all such non-cash dividends attributable
to the Shares to the Escrow Agent. Unless and until the Escrow Agent actually
receives such non-cash dividends, it may assume without inquiry that no such
non-cash dividends have been, or are required to be, paid.
4.3 During
the Escrow Period, no sale, transfer,
assignment, encumbrance, pledge, hypothecation,
or other
disposition may be made by
the
Shareholder with respect to
any or
all of the Shares or
its
rights under this Agreement except
(i) by gift to an
immediate family member of the Shareholder or to a trust, the beneficiary
of
which is the Shareholder or a member of the immediate family of the Shareholder,
(ii) by virtue of the laws of descent and distribution upon the
death
of
the Shareholder, or (iii) pursuant to a qualified domestic relations order;
provided, however, that any
such
transfer
may be
implemented only upon the respective transferee’s written agreement to be bound
by the terms and conditions of this Agreement delivered to, and in form and
substance acceptable to, the Escrow Agent. Any
such
transfer that does not comply with the terms of this Section 4.3 shall be
null
and void and shall not be recognized in the books and records of the Company.
5. ESCROW
AGENT
5.1 In
exercising the rights, duties and obligations prescribed or confirmed by
this
Agreement, the Escrow Agent will act honestly and in good faith and will
exercise that degree of care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
5.2 The
Shareholder,
PBOF
and
Cornell agree
from time to time and at all times hereafter
to save,
defend and keep harmless and fully indemnify the Escrow Agent, its officers,
directors, employees, shareholders,
successors
and assigns from and against any
and all
losses,
costs,
charges, suits, demands, claims, damages and expenses which the Escrow Agent,
its officers,
directors, employees, shareholders,
successors
or assigns may at any time or times hereafter bear, sustain, suffer or be
put
unto for or by reason or on account of its acting pursuant to this Agreement
or
anything in any manner relating thereto or by reason of the Escrow Agent’s
compliance in good faith with the terms hereof.
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5.3 In
case
proceedings should hereafter be taken in any court respecting the Shares,
the
Escrow Agent will not be obliged to defend any such action or submit its
rights
to the court until it has been indemnified by other good and sufficient security
in addition to the indemnity given in Clause 5.2
against
its costs of such proceedings.
Such
costs shall be advanced by the indemnifying party as requested by the Escrow
Agent.
5.4 The
Escrow Agent will have no responsibility in respect of loss of the Shares
except
the duty to exercise such care in the safekeeping of the stock certificates
representing the Shares as it would exercise if the Shares belonged to the
Escrow Agent. The Escrow Agent may act on the advice of counsel but will
not be
responsible for acting or failing to act on the advice of counsel.
5.5 The
Escrow Agent will not be bound in any way by any contract between the other
parties hereto whether or not it has notice thereof or of its terms and
conditions and the only duty, liability and responsibility of the Escrow
Agent
will be to hold the certificates representing the Shares and the related
PAs as
herein directed and to pay and deliver the same to such persons and other
such
conditions as are herein set forth. The Escrow Agent will not be required
to
pass upon the sufficiency of any of the Shares or to ascertain whether or
not
the person or persons who have executed, signed or otherwise issued or
authenticated the said documents have authority to so execute, sign or
authorize, issue or authenticate the said documents or any of them, or that
they
are the same persons named therein or otherwise to pass upon any requirement
of
such instruments that may be essential for their validity, but it shall be
sufficient for all purposes under this Agreement insofar as the Escrow Agent
is
concerned that the said documents are deposited with it as herein specified
by
the parties executing this Agreement with the Escrow Agent.
5.6 In
the
event that the Shares are attached, garnished or levied upon under any court
order, or if the delivery of such property is stayed or enjoined by any court
order or if any court order, judgment or decree is made or entered affecting
such property or affecting any act by the Escrow Agent, the Escrow Agent
may, in
its sole discretion, obey and comply with all writs, orders, judgments or
decrees so entered or issued, whether with or without jurisdiction,
notwithstanding any provision of this Agreement to the contrary. If the Escrow
Agent obeys and complies with any such writs, orders, judgments or decrees,
it
will not be liable to any of the parties hereto or to any other person, form
or
corporation by reason of such compliance, notwithstanding that such writs,
orders, judgments or decrees may be subsequently reversed, modified, annulled,
set aside or vacated.
5.7 Except
as
herein otherwise provided, the Escrow Agent is authorized and directed to
disregard in its sole discretion any and all notices and warnings which may
be
given to it by any of the parties hereto or by any other person, firm,
association or corporation. It will, however, at its sole discretion, obey
the
order, judgment or decree of any court of competent jurisdiction, and it
is
hereby authorized to comply with and obey such orders, judgments or decrees
and
in case of such compliance, it shall not be liable by reason thereof to any
of
the parties hereto or to any other person, firm, association or corporation,
even if thereafter any such order, judgment or decree may be reversed, modified,
annulled, set aside or vacated.
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5.8 If
the
Escrow Agent receives any valid court order contrary to the instructions
contained in this Agreement, the Escrow Agent may continue to hold the Shares
until the lawful determination of the issue between the parties
hereto.
5.9 If
written notice of protest is made by any of the Shareholder, PBOF or
Cornell
to
the
Escrow Agent to any action contemplated
by
the Escrow Agent under this Agreement, and such notice sets out reasons for
such
protest, the Escrow Agent may at its sole discretion continue to hold the
Shares
until the right to the documents is legally determined by a court of competent
jurisdiction or otherwise.
5.10 The
Escrow Agent may resign as Escrow Agent by giving not less than five (5)
days’
written
notice
thereof to the Shareholder,
PBOF
and
Cornell.
The
Shareholder,
PBOF
and
Cornell
may terminate the Escrow Agent by giving not less than five (5) days’
written
notice
to
the Escrow Agent. The resignation or termination of the Escrow Agent will
be
effective and the Escrow Agent will cease to be bound by this Agreement on
the
date that is five (5) days after the date of receipt of the termination notice
given hereunder by
all
parties or
on
such other date as the Escrow Agent and the Shareholder,
PBOF
and
Cornell
may agree in
writing.
All
indemnities granted to the Escrow Agent herein will survive the termination
of
this Agreement or the termination or resignation of the Escrow Agent. In
the
event of termination or resignation of the Escrow Agent for any reason, the
Escrow Agent shall, within that five (5) days’ notice period deliver the Shares
to the new escrow agent to be named in
a
writing signed by
the
Shareholder,
PBOF
and Cornell or as otherwise instructed in a writing signed by the Shareholder,
PBOF and the Cornell.
5.11 Notwithstanding
anything herein to the contrary, the Escrow Agent may act upon any written
instructions given jointly by the Shareholder,
PBOF
and
Cornell.
5.12 Notwithstanding
anything to the contrary contained herein, in the event of any dispute arising
between the Shareholder,
PBOF,
or
Cornell,
this
Agreement or any matters arising thereto, the Escrow Agent may in its sole
discretion deliver and interplead the Shares into court and such delivery
and
interpleading will be an effective discharge to the Escrow Agent.
6. FEES
6.1 PBOF
will
pay all of the compensation of the Escrow Agent and will reimburse the Escrow
Agent for any and all reasonable expenses, disbursements and advances made
by
the Escrow Agent in the negotiation, execution and delivery of, and the
performance of its duties under this Agreement, including the reasonable
fees,
expenses and disbursements incurred by its counsel.
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7. GENERAL
7.1 This
Agreement contains the entire agreement of the parties hereto with respect
to
the subject matter hereof and, except as herein otherwise provided, no
subsequent alteration, amendment, change, or addition to this Agreement will
be
binding upon the parties hereto unless reduced to writing and signed by
all
the
parties.
7.2 This
Agreement will enure to the benefit of and be binding upon the parties and
their
respective heirs, executors, administrators and successors.
7.3 The
parties will execute and deliver all such further documents, do or cause
to be
done all such further acts and things, and give all such further assurances
as
may be necessary to give full effect to the provisions and intent of this
Agreement.
7.4 This
Agreement will be governed by and construed in accordance with the laws of
the
State of Colorado.
7.5 Any
notice required or permitted to be given under this Agreement will be in
writing
and may be given by delivering, sending by electronic facsimile transmission
or
other means of electronic communication capable of producing a printed copy,
or
sending by prepaid registered mail, the notice to the following address:
| (a) |
If
to the Shareholder:
|
c/o
Pure
Biofuels Corp.
Xx.
Xxxxxxx x Xxxxxxx 000
xx
000
Xxx
Xxxxxx, Xxxx
Xxxx
Attention: Xxxx
Xxxxxxxx
Telephone: x000-000-0000
Facsimile: x000-000-0000
| (b) |
If
to PBOF:
|
Xx.
Xxxxxxx x Xxxxxxx 000
xx
000
Xxx
Xxxxxx, Xxxx
Xxxx
Attention: Xxxx
Xxxxxxxx
Telephone: x000-000-0000
Facsimile: x000-000-0000
With
a
copy to:
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ARC
Investment Partners, LLC
0000
Xxxxxx Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx
Xxxxx, XX
00000
Attention:
Xxxxxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
And:
DLA
Piper
US LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx
X.
Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
| (c) |
If
to Cornell:
|
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
| (d) |
If
to the Escrow Agent:
|
000
Xxxxxx Xxxxxx, 00xx
Xxxxx
Xxxxxxxx,
XX 00000
Attention:
Corporate Trust Services (Pure Biofuels/PBOF Cornell escrow)
Attention: Xxxxxx
X.
Xxxx, Xx.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
or
to
such other address as any party may specify by notice in writing to another
party. Any notice delivered or sent by electronic facsimile transmission
or
other means of electronic communication capable of producing a printed copy
on a
business day will be deemed conclusively to have been effectively given on
the
day the notice was delivered, or the electronic communication was successfully
transmitted, as the case may be. Any notice sent by prepaid registered mail
will
be deemed conclusively to have been effectively given on the third business
day
after posting; but if at the time of posting or between the time of posting
and
the third business day thereafter there is a strike, lockout, or other labour
disturbance affecting postal service, then the notice will not be effectively
given until actually delivered. Notwithstanding the foregoing, notices addressed
to the Escrow Agent shall be effective only upon actual receipt.
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7.6 Time
is
of the essence of this Agreement.
7.7 It
is
understood and agreed by the parties to this Agreement that the only duties
and
obligations of the Escrow Agent are those specifically stated herein and
no
other.
7.8 This
Agreement may be executed in one or more counterparts, all of which will
be
considered one and the same agreement and will become effective when one
or more
counterparts have been signed by each of the parties and delivered to the
other
parties, it being understood that all parties need not sign the same
counterpart. This Agreement may be executed by delivery of executed signature
pages by fax and such fax execution will be effective for all
purposes.
7.9
Each
of
the parties to this Agreement, other than the Escrow Agent, each shall provide
to the Escrow Agent such information as the Escrow Agent may require to permit
the Escrow Agent to comply with its obligations under the USA Patriot
Act.
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IN
WITNESS WHEREOF the parties have caused this Agreement to be executed as
of the
day and year first written above.
U.S.
BANK NATIONAL ASSOCIATION, as
Escrow
Agent
Per: /s/
Xxxxxx X. Xxxx, Xx.
Name:
Xxxxxx X. Xxxx, Xx.
Title:
Vice President
Per: /s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
President
CORNELL
CAPITAL PARTNERS, L.P.
By: Yorkville
Advisors, LLC
Its: Investment
Advisor
Per: /s/
Xxxxxx Xxxxx
Name:
Xxxxxx Xxxxx
Title:
Managing Member
/s/
Xxxx Xxxxxxxx
XXXX
XXXXXXXX
