PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered into
as of June 7, 2006 (the "Effective Date") by and among HUGO INTERNATIONAL
TELECOM, INC., a corporation organized and existing under the laws of the State
of Nevada (the "Pledgor"), CORNELL CAPITAL PARTNERS, LP, (the "Pledgee"), and
XXXXX XXXXXXXX, ESQ., 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 to the Pledgee or any successor to the Pledgee under this Agreement,
the Securities Purchase Agreement 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 Twenty Two Million
Dollars ($22,000,000) of principal, plus any interest, costs, fees, and other
amounts owed to the Pledgee thereunder, the 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 all of the Pledgor's shares of common stock of GS Mean Green BioFuels,
Inc. (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 a security interest in all
Pledged Shares as security for Pledgor's obligations to the Pledgee
(the "Obligations") under the Convertible Debentures. Simultaneously
with the execution of this Agreement, 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 pursuant to this Agreement 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. Prior to the occurrence of an Event of
Default (as defined herein) and the issuance of Pledged Shares to the
Pledgee (in accordance with Section 5.1), the Pledged Shares shall not be,
or be deemed to be, issued or outstanding shares of the Pledgor and neither
the Pledgee nor any other person shall be entitled to vote the Pledged
Shares, to receive dividends and other distributions thereon, or to enjoy
any 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 Note, the parties hereto shall notify the Escrow
Agent to such effect in writing. Upon receipt of such written notice, 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 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.
5.1. Upon and anytime after the occurrence of an Event of Default, the
Pledgee shall have the right acquire the Pledged Shares in accordance
with the following procedure: (a) the Pledgee shall provide written
notice of such Event of Default (the "Default Notice") to the Escrow
Agent, with a copy to the Pledgor; (b) in a Default Notice the Pledgee
shall specify the number of Pledged Shares to be issued to the
Plegdee, provided however, that the Pledgee shall not have the right
to acquire such number of Pledged Shares which would cause the
Pledgee, together with its affiliates, to beneficially own in excess
of 9.99% of the outstanding capital of the Pledgor (unless the Pledgee
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 Pledgor's Transfer
Agent with instructions to issue such Pledged Shares to the Pledgee in
accordance with the Irrevocable Transfer Agent Instructions of even
date herewith, among the Pledgee, the Pledgor, the Escrow Agent, and
the Transfer Agent.
5.2. Upon receipt of the Pledged Shares issued to the Pledgee, 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 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 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 Pledgor shall remain liable for shortfalls, if any, that may
exist after the Pledgee has exhausted all remedies hereunder. The
Pledgee 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 all amounts owed to the Pledgee under the Convertible
Debentures have been satisfied.
5.3. 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.
5.4. Demand Registration Rights. In addition to all other remedies
available to the Pledgee, upon the issuance of Pledged Shares to the
Pledgee, the Pledgor shall promptly, but in no event more than thirty
(30) days after the date of the Default Notice, file a registration
statement to register with the Securities and Exchange Commission the
Pledged Shares for the resale by the Pledgee. The Pledgor shall cause
the registration statement to remain in effect until all of the
Pledged Shares have been sold by the Pledgee.
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 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 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.
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 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.
6.7 Conflict Waiver. The Pledgor hereby acknowledges that the Escrow Agent
is general counsel to the Pledgee, a partner in the general partner of
the Pledgee, and counsel to the Pledgee 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 Pledgee 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 Company:
Hugo International Telecom, Inc.
000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx, Chief Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With a copy to:
Sonageri & Fallon
000 Xxxxxxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Pledgee:
Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
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.
13. JURY TRIAL. EACH OF THE PLEDGEE 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
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.
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: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
-----------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
HUGO INTERNATIONAL TELECOM, INC.
By: /s/ Xxxxx Xxxxxxxx
-----------------------
Name: Xxxxx Xxxxxxxx
Title: Chairman and Chief Executive Officer
ESCROW AGENT
By: /s/ Xxxxx Xxxxxxxx
-----------------------
Name: Xxxxx Xxxxxxxx, Esq.
