PLEDGE AGREEMENT
Exhibit
10.4
PLEDGE
AGREEMENT
(the
“Agreement”)
dated
April 19, 2007 made by each of the undersigned (each a “Pledgor”,
and
collectively, the “Pledgors”),
in
favor of each Buyer listed on signature pages attached hereto (individually,
a
“Buyer”
or
collectively “Buyers”).
RECITALS:
WHEREAS, Pure
Biofuels Corp., a Nevada corporation (the “Company”),
and
each Buyer are parties to the Securities Purchase Agreement of even date
herewith (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 pledge to the Buyer certain shares of Common Stock of the Company
to
secure 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);
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 U.S.
Bank
National Association,
as
escrow agent (“Escrow
Agent”)
to
hold in escrow the Pledged Shares (as defined below) pursuant to the terms
and
conditions of the Escrow Agreement dated the date hereof (the “Escrow
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 in connection with an Event of Default (as
defined herein), 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 Buyers under the Convertible Debentures.
2. Pledge
and Transfer of Pledged Shares.
Each
Pledgor hereby grants to the Buyer 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. Within five (5) business days from 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 the Escrow Agreement,
stock certificates made out in favor of the Pledgor representing the Pledged
Shares, together with fully executed stock powers of attorney, signature
guaranteed as required by the transfer agent of the Company (the “Transfer
Documents”),
and
such stock certificates and Transfer Documents shall be held by the Escrow
Agent
pursuant to the Escrow Agreement.
3. Rights
Relating to Pledged Shares.
During
the Escrow Period (as defined in the Escrow Agreement) the rights of the Pledgor
in the Pledged Shares shall be as set forth in the Escrow Agreement. Upon the
occurrence of an Event of Default, and receipt of the Pledged Shares in
accordance with the Escrow Agreement, the Buyer 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 Pledged Shares.
4. Release
of Pledged Shares from Pledge.
Upon
return of the Pledged Shares to the Pledgor from escrow pursuant to Section
3.2(b) of the Escrow Agreement, this Agreement and all rights of the Buyer
in
the Pledged Shares shall be terminated.
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 Buyer shall have the
right acquire the Pledged Shares in accordance with the procedures set forth
in
the Escrow Agreement.
b. Upon
receipt of the Pledged Shares by the Buyer in accordance with the Escrow
Agreement, the Buyer 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 Buyer by the Company under the Transaction Documents,
including, without limitation, outstanding principal, interest, legal fees,
and
any other amounts owed to the Buyer, 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 Buyer shall be entitled
to
a deficiency judgment against the Pledgor for such amount, the timing (but
not
the right) of which shall be subject to the agreements of the Buyer set forth
in
Section 6.d. below. Upon receipt of the Pledged Shares by the Buyer in
accordance with the Escrow Agreement, the Buyer shall also 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. The Pledgor shall remain liable for shortfalls, if any, that may exist
after the Buyer has exhausted all remedies hereunder. The Buyer 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.
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c. Each
right, power and remedy of the Buyer 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 of the Buyer. The
exercise or beginning of the exercise by the
Buyer
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
Buyer
of all
such other rights, powers or remedies, and no failure or delay on the part
of
the
Buyer
to
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
Buyer
to any
other further action in any circumstances without demand or notice. The
Buyer
shall
have the full power to enforce or to assign or contract is rights under this
Agreement to a third party.
d. In
the
event that the net proceeds from the Buyer’s sale or disposition of the Pledged
Shares received by the Buyers are insufficient to satisfy the Obligations in
full, the Buyer agrees to exhaust all its rights, powers, and remedies provided
for in the Security Agreement, Guaranty Agreement, Mortgage and the Peruvian
Security Documents (each as defined in the Securities Purchase Agreement),
before proceeding against the Pledgor. Nothing herein shall limit the ability
of
the Buyer to exercise any power, right, or remedy with respect to the Pledged
Shares regardless of the progress or status of any other right, power, or remedy
provided for in the Transaction Documents.
7. Representations,
Warranties and Covenants.
a. The
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.
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b. The
Pledgor covenants and agrees to take all reasonable steps to defend the Buyer’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
Buyer and the Escrow Agent); and the 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
Buyer
as
collateral hereunder and will likewise take all reasonable steps to defend
the
right thereto and security interest therein of the
Buyer.
c. The
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 Buyer under any
Transaction Document.
d. The
Pledgor covenants and agrees that this Agreement is made with recourse and
that
upon an Event of Default, the Buyer 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. 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
Buyer:
|
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
|
|
|
With
copy to:
|
Cornell
Capital Partners, LP
|
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxx
Xxxxx, Esq.
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
If
to the Pledgors, to:
|
To
the addresses provided on the signature pages attached
hereto
|
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.
9. 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.
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10. 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.
11. Enforcement
Costs.
If any
legal action or other pro-ceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresenta-tion 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 limita-tion, 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.
12. 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 here-after 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.
13. 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.
14. No
Penalties.
No
provision of this Agreement is to be interpreted as a penalty upon any party
to
this Agreement.
15. JURY
TRIAL.
EACH OF
THE COLATERAL 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 THE BUYER 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.
[REMAINDER
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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.
| Pledgor | ||
| |
|
|
| /s/ Xxxx Xxxxxxxx | ||
|
XXXX XXXXXXXX |
||
| Address: | ||
| 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 | ||
FOR
VALUE
RECEIVED, the Pledgor hereby acknowledges that this Agreement is made with
recourse.
|
/s/
Xxxx Xxxxxxxx
|
|||
|
XXXX XXXXXXXX |
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IN
WITNESS WHEREOF,
the
undersigned acknowledge and agree to the terms and conditions of this Pledge
Agreement as of the date first above written.
| |
|
THE
BUYER:
Cornell
Capital Partners, L.P.
|
| By: Yorkville Advisors, LLC | ||
| Its: Investment Advisor | ||
| By: /s/ Xxxxxx Xxxxx | ||
|
Name: Xxxxxx Xxxxx |
||
| Title: Managing Partner | ||
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