Exhibit 10.2
Form of Pledge and Security Agreement
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (the "Agreement"), dated ___________ __,
2006, by and between [__________] (the "Pledgor") and Crown Northern Way
Capital, LLC, a Missouri limited liability company (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to that certain letter agreement, dated as of even
date hereof (the "Letter Agreement"), by and between Ecoloclean Industries, Inc.
(the "Borrower") and the Lender, the Lender has agreed to lend the Borrower the
sum of $150,000 (the "Loan"), which Loan is to be evidenced by a secured
debenture (the "Debenture") issued by the Borrower to the Lender in the
aggregate principal amount of the Loan; and
WHEREAS, the Pledgor is [a substantial stockholder][an executive
officer] of the Borrower and will derive substantial benefit from the Loan; and
WHEREAS, in order to induce the Lender to enter into the Letter
Agreement and to make the Loan, the Pledgor has agreed to pledge the Collateral
(as defined in Section 2 below) to the Lender.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, to induce the Lender to enter into the Letter Agreement and to make the
Loan, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1 Defined Terms. Capitalized terms in this Agreement shall
be defined as follows (and as defined elsewhere in this Agreement):
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the State of
New York.
"Distributions" means all stock dividends, liquidating
dividends, shares of stock resulting from stock splits, reclassifications,
non-cash dividends and other distributions on or with respect to the Shares,
whether similar or dissimilar to the foregoing, but shall not include Dividends.
"Dividends" means all cash dividends declared with respect to
the Shares.
"Obligations" means any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by the Borrower to the
Lender, including, without limitation, principal, interest, charges, fees, costs
and expenses, however evidenced, whether as principal, surety, endorser or
otherwise, whether arising under the Letter Agreement, the Debenture, the other
Agreements (as defined in the Debenture) or otherwise, whether now existing or
hereafter arising, and whether direct or indirect, absolute or contingent, joint
or several, secured or unsecured, due or not due, contractual or tortious, and
liquidated or unliquidated.
"Shares" means the ________ shares of common stock of the
Borrower owned by the Pledgor as of the date of this Agreement.(2)
"UCC" means the Uniform Commercial Code as in effect in the
State of New York from time to time.
1.2 Rules of Construction. In this Agreement, unless specified
otherwise:
a. "Any" means "any one or more"; "including" means "including
without limitation"; "or" means "and/or".
b. Singular words include plural, and vice versa.
c. Headings are for convenience only, and do not affect the
meaning of any provision.
d. Reference to an agreement includes reference to its
permitted supplements, restatements, amendments and other modifications.
e. Reference to a law includes reference to any amendment or
modification of the law and to any rules or regulations issued thereunder.
f. Reference to a person includes reference to its permitted
successors and assigns in the applicable capacity.
g. Reference to a Section signifies reference to a Section of
this Agreement, unless the context clearly indicates otherwise.
h. "Hereunder," "hereto," "hereof," "herein," and like words,
refer to the whole of this Agreement rather than to a particular part hereof,
unless the context clearly indicates otherwise.
1.3 No Strict Construction. The parties acknowledge that this Agreement
has been prepared jointly by the Pledgor and the Lender, and this Agreement
shall not be strictly construed against any party.
2. Grant of Security Interest. As security for the indefeasible payment
in full of all of the Obligations, the Pledgor hereby pledges, assigns and
transfers to the Lender, and grants to the Lender a continuing first priority
security interest in and to, the Shares (including the certificates representing
the Shares), together with all Dividends and Distributions, interest and other
payments and rights with respect thereto, together with all proceeds thereof
(collectively, the "Collateral"). The Pledgor further pledges, assigns and
transfers to the Lender, and grants to the Lender a continuing first priority
security interest in and to, and agrees to duly endorse to the order of the
Lender, any additional Collateral, together with all proceeds thereof, from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Shares. Any Collateral delivered by the Pledgor
to the Lender may be endorsed by the Lender, in its own name or in the name of
the Pledgor, on behalf of the Pledgor to the order of the Lender.
3. Stock Powers, Endorsements, Etc. The Pledgor shall, from time to
time, upon request of the Lender, promptly execute such endorsements and deliver
to the Lender such stock powers and similar documents, satisfactory in form and
substance to the Lender, with respect to the Collateral as the Lender may
reasonably request and shall, from time to time, upon request of the Lender,
promptly transfer any securities which are part of the Collateral into the name
of any nominee designated by the Lender on the books of the entity issuing such
securities; provided, however, that the Lender shall not be entitled to effect
or demand a transfer of the Collateral into the name of the Lender or the
Lender's nominee without the consent of the Pledgor unless and until an Event of
Default (as defined in Section 8) shall have occurred. The Pledgor shall cause
the Borrower to record on its books and records the pledge created by this
Agreement and to execute and deliver the Acknowledgment and Agreement in the
form of Schedule I attached hereto. The Pledgor hereby authorizes and instructs
the Borrower to comply with any instruction received by it from the Lender
without any further order or further consent from instructions from the Pledgor,
and the Pledgor agrees that the Borrower shall be fully protected in so
complying with any such instructions from the Lender.
4. Rights of the Pledgor. Unless and until an Event of Default shall
have occurred, the Pledgor shall have the following rights with regard to the
Shares:
a. To vote the Shares or to give consents, waivers, and
ratifications with respect to the Shares; provided, however, that no vote shall
be cast, and no consent, waiver or ratification shall be given or action taken,
which would have the effect of impairing the position or interest of the Lender
in respect of the Collateral or which would authorize or effect: (i) the
dissolution or liquidation of the Borrower, in whole or in part; or (ii) the
sale of the Borrower (whether by merger, consolidation, sale of all or
substantially all of the assets or stock of the Borrower or otherwise); and
b. To receive any Dividends declared on the Shares; provided,
however, that the following Dividends shall remain subject to the liens created
by this Agreement and shall be delivered to the Lender within two (2) Business
Days following receipt thereof: (i) all Dividends paid or payable in connection
with a partial or total liquidation or dissolution and (ii) cash paid, payable
or otherwise distributed in redemption of, or in exchange for, any Collateral.
5. Affirmative Covenants. Unless otherwise consented to in writing by
the Lender, until the Obligations have been indefeasibly paid in full (and so
long as the Debenture is outstanding), the Pledgor hereby covenants as follows:
a. The Pledgor will not sell, assign, or transfer any of his
rights in or to the Collateral;
b. The Pledgor will make due and timely payment or deposit of
all taxes, assessments, or contributions required by law which may be lawfully
levied or assessed with respect to the Collateral and will execute and deliver
to the Lender on demand, appropriate certificates attesting to the timely
payment or deposit of all such taxes, assessments or contributions;
c. The Pledgor shall notify the Lender in writing within two
(2) Business Days of receipt of any Distributions, and the Pledgor shall deliver
such Distributions to the Lender;
d. The Pledgor shall observe, conform and comply with the
covenants, terms and conditions of this Agreement. The Pledgor shall promptly
notify the Lender in writing upon the occurrence of any event of default (or any
event which, with the giving of notice and/or the passage of time, could become
an event of default) under this Agreement;
e. At any time, or from time to time, upon request of the
Lender, the Pledgor shall execute and deliver such further documents and do such
other acts and things as the Lender may request in order to effectuate more
fully the purposes of this Agreement. The Pledgor hereby authorizes the Lender
to file and record in such public records offices as the Lender may determine
such financing statements as the Lender may determine relative to the
transactions contemplated by this Agreement; and
f. The Pledgor has and will defend the title to the Collateral
pledged by him and the security interest granted in such Collateral to the
Lender against the claim of any Person (as defined in the Debenture) and will
maintain and preserve such security interest.
6. No Other Security Interest. Unless the Lender shall otherwise
consent in writing, until the Obligations have been indefeasbily paid in full,
the Pledgor hereby covenants that it shall not incur, create or permit to exist
any mortgage, assignment, pledge, hypothecation, security interest, lien, or
other encumbrance (collectively, "Liens") on any of the Collateral now owned and
pledged in accordance with this Agreement or hereafter acquired, except for
those Liens in favor of the Lender created by this Agreement.
7. Representations and Warranties. The Pledgor represents and warrants
to the Lender that:
a. The Pledgor has the capacity to execute and deliver this
Agreement and to perform his obligations hereunder;
b. This Agreement has been duly executed and delivered by the
Pledgor and constitutes a valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles and except insofar as the enforceability of any provision of such
agreement would be restricted or void by reason of public policy;
c. The Pledgor has obtained all requisite consents or
approvals necessary for the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby;
d. The Pledgor is the legal and beneficial owner of the Shares
and no other Person (including the Pledgor's spouse) has any right, title or
interest in or to the Shares, and there are no existing options, warrants,
calls, purchase rights or commitments of any character whatsoever relating to
the Shares;
e. The Collateral is owned by the Pledgor free and clear of
any Liens, except for the Liens granted herein in favor of the Lender; and
f. Upon delivery of the Shares to the Lender, this Agreement
shall create a first priority security interest in the Collateral and the
proceeds thereof, subject to no prior or secondary security interest or other
Liens.
8. Events of Default.
8.1 The occurrence of any one or more of the following events shall
constitute an event of default (each, an "Event of Default") by the Pledgor
under this Agreement:
a. any event of default shall occur and be continuing under
the Debenture; and
b. the breach of any warranty, representation, or covenant
made by the Pledgor in this Agreement.
9. Remedies Upon an Event of Default.
9.1 Upon an Event of Default, the Lender shall have the following
remedies available, at its election:
a. To vote the Shares;
b. To give consents, waivers and ratifications with respect to
the Shares;
c. To receive all dividends, cash, securities and all other
distributions of any kind given with respect to the Shares;
d. (i) To sell, assign or transfer the Shares and any other
Collateral pledged under this Agreement, or any part thereof, in one or more
sales, at a public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Lender, at a place designated by the Lender, for
cash, upon credit or for future delivery, and at such price or prices as the
Lender shall, in its sole and absolute discretion, determine, and the Lender
and/or the Pledgor or any or all of them may be the purchaser of any or all of
the Collateral so sold;
(ii) Upon any such sale, the Lender shall have the right to
deliver, assign and transfer to the purchaser(s) thereof the Collateral so sold.
Each purchaser (including the Lender) at any such sale shall hold the Collateral
so sold absolutely free from any claim or right of any kind whatsoever,
including, without limitation, any equity or right of redemption of the Pledgor,
which the Pledgor hereby specifically waives;
(iii) At any such public or private sale, the Collateral may
be sold in one lot as an entirety or in separate installments;
(iv) In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by the
Lender until the purchase price is paid by the purchaser(s) thereof, but the
Lender shall not incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold. In case of any such failure, such
Collateral may again be sold under and pursuant to the provisions of this
Agreement; and
(v) The receipt from the Lender for the purchase
price paid at any such sale of the Shares shall be a
sufficient discharge therefor to any purchaser(s) of the Collateral, or any
portion thereof, sold as described in this Section 9.1(d). No such purchaser (or
such purchaser's representatives or assigns), after paying such purchase price
and receiving such receipt, shall be bound to see to the application of such
purchase price or any part thereof or in any manner whatsoever be answerable for
any loss, misapplication or non-application of any such purchase price, or be
bound to inquire as to the authorization, necessity, expediency or regularity of
any such sale;
e. To institute proceedings to collect all Obligations from
the Pledgor or any other Person who may be responsible for the payment of any
Obligations; and
f. To exercise any remedy provided for under the UCC, any
other applicable law or the Agreements.
9.2 Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be applied by the Lender in the following order of
priorities:
a. first, to payment of the reasonable out-of-pocket expenses
of such sale or other realization, including reasonable compensation to agents
and counsel for the Lender, and all reasonable out-of-pocket expenses,
liabilities and advances incurred or made by the Lender in connection therewith,
and any other unreimbursed expenses for which the Lender is to be reimbursed
pursuant to the Agreements;
b. second, to the payment of accrued but unpaid interest
(including post-petition interest) on the Debenture;
c. third, to the payment of unpaid principal on the Debenture;
d. fourth, to the payment of all other Obligations, until all
such Obligations shall have been paid in full; and
e. finally, to payment to the Pledgor or as a court of
competent jurisdiction may direct of any surplus then remaining from such
proceeds.
The Lender may make distributions hereunder in cash or in kind or in any
combination thereof.
To the extent that fewer than all Shares are sold in full satisfaction of the
Obligations, the remaining Shares shall be returned to the Pledgor.
9.3 The Pledgor hereby designates, constitutes and appoints the Lender
and any designee or agent of the Lender as its attorney-in-fact, irrevocably and
with power of substitution, to make and execute all conveyances, assignments and
instruments of transfer regarding the Collateral sold pursuant to this Section 9
and to do all other acts and things necessary and advisable in the sole
discretion of the Lender to carry out and enforce this Agreement. The Lender or
any designee or agent of the Lender, in their capacity as attorney-in-fact for
the Pledgor, shall not be liable for any acts of commission or omission nor for
any error of judgment or mistake of fact or law. This power of attorney being
coupled with an interest is irrevocable while any of the Obligations shall
remain unpaid.
9.4 The Lender may, in any order and at any time, simultaneously or not
simultaneously, exercise any of the remedies set forth in this Section 9, in
addition to, and not in lieu of, any remedies that may otherwise be available at
law or in equity.
9.5 The Pledgor acknowledges that the Shares have not been registered
under the Securities Act of 1933, as amended, or any similar state or federal
law and that, therefore, the Lender may be unable to effect a public sale of all
or any part of the Shares, and may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obligated to agree, among
other things, to acquire the Shares for their own account, for investment, and
not with a view to the distribution or resale thereof. The Pledgor acknowledges
that any such private sales may be at prices and terms less favorable to the
Pledgor than those of public sales, and agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the Lender
has no obligation to delay any sale to permit the issuer thereof to register
them under the Securities Act of 1933, as amended.
10. Lien Absolute. All rights of the Lender hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
10.1. any lack of validity or enforceability of the Debenture or any
other agreement or instrument governing or evidencing any of the Obligations;
10.2. any change in the time, manner or place of payment of, or in any
other term of, all or any part of the Obligations, or any other amendment or
waiver of, or any consent to any departure, from the Debenture or any other
agreement or instrument governing or evidencing any of the Obligations;
10.3. any exchange, release or non-perfection of any collateral
(including the Collateral), or any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Obligations;
10.4. the insolvency of the Borrower; or
10.5. any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor.
11. Release. The Pledgor consents and agrees that the Lender may at any
time, or from time to time, in its discretion:
11.1. renew, extend or change the time of payment, and/or the manner,
place or terms of payment, of all or any part of the Obligations; and
11.2. exchange, release and/or surrender all or any of the collateral
(including the Collateral), or any part thereof, by whomsoever deposited, which
is now or may hereafter be held by the Lender in connection with all or any of
the Obligations; all in such manner and upon such terms as the Lender may deem
proper, and without notice to or further assent from the Pledgor, it being
hereby agreed that the Pledgor shall be and remain bound upon this Agreement,
irrespective of the value or condition of any of the collateral (including the
Collateral), and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension.
12. Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against the
Pledgor or the Borrower for liquidation or reorganization, should the Pledgor or
the Borrower become insolvent or make an assignment for the benefit of creditors
or should a receiver or trustee be appointed for all or any significant part of
the Pledgor's or the Borrower's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
13. Satisfaction; Lender's Duty Regarding Shares.
13.1 Promptly after the Obligations have been indefeasibly paid in full
and the Debenture is no longer outstanding, this Agreement shall be terminated
and of no further force and effect.
13.2 Beyond the exercise of reasonable care to assure the safe custody
of the Shares while held hereunder, the Lender shall have no liability or duty
with respect to the Shares. Placing or depositing the Shares in a bank safe
deposit box of the Lender's selection shall fully and completely satisfy the
Lender's duty to exercise reasonable care. The Lender shall not have any duty or
liability to take any action or to preserve rights pertaining to the Shares and
shall be relieved of all responsibility for the Shares upon surrendering them or
tendering surrender thereof to the Pledgor.
14. Nonwaiver. No failure or delay on the part of the Lender in
exercising any of its rights and remedies hereunder or otherwise shall
constitute a waiver thereof, and no single or partial waiver by the Lender of
any default or other right or remedy which it may have shall operate as a waiver
of any other default, right or remedy or of the same default, right or remedy on
a future occasion.
15. Waivers by the Pledgor. The Pledgor hereby waives presentment,
notice of dishonor and protest of all instruments included in or evidencing any
of the Obligations or the Collateral and any and all other notices and demands
whatsoever whether or not relating to such instruments. In the event of any
litigation at any time arising with respect to any matter connected with this
Agreement or the Obligations, the Pledgor hereby waives any and all defenses,
rights of setoff and rights to interpose counterclaims of any nature.
16. Modification. No provision hereof shall be modified, altered or
limited except by a written instrument expressly referring to this Agreement and
to the provision so modified or limited, and executed by the Pledgor and the
Lender.
17. Binding Effect. This Agreement and all Obligations of the Pledgor
hereunder shall be binding upon the successors, assigns, heirs and executors of
the Pledgor, and shall, together with the rights and remedies of the Lender
hereunder, inure to the benefit of the Lender and its successors, heirs,
executors and assigns.
18. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York, without reference to the choice of law principles thereof. Any legal
action, suit or proceeding arising out of or relating to this Agreement shall
only be instituted, heard and adjudicated (excluding appeals) in a state or
federal court located in the Southern District of New York, and each party
hereto knowingly, voluntarily and intentionally waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding, and irrevocably submits to the exclusive personal
jurisdiction of any such court in any such action, suit or proceeding. Service
of process in connection with any such action, suit or proceeding may be served
on each party hereto anywhere in the world by the same methods as are specified
for the giving of notices under this Agreement.
19. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
facsimile, (iii) sent by a recognized overnight courier, or (iv) sent by
certified mail, return receipt requested, postage prepaid.
If to the Pledgor:
[insert name and address]
Facsimile:
If to the Lender:
Crown Northern Way Capital, LLC
540 Maryville Centre, Suite 120
St. Louis, Missouri 63141
Attention: R. William Breece, Jr.
Fax:
with a copy (which shall not in itself constitute effective notice) to:
Michael Maline, Esq.
Lowenstein Sandler PC
1251 Avenue of the Americas, 18th Floor
New York, NY 10020
Fax: (973) 422-6873
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by facsimile, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight
courier, on the next Business Day following the day such notice is delivered to
the courier service, or (iv) if sent by registered or certified mail, on the
fifth (5th) Business Day following the day such mailing is made.
20. Severability. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby.
21. No Jury Trial. EACH OF THE PLEDGOR AND THE LENDER HEREBY WAIVES ANY
RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO ANY ASPECT OF
THIS AGREEMENT AND REPRESENTS THAT HE OR IT, AS THE CASE MAY BE, HAS CONSULTED
WITH COUNSEL SPECIFICALLY WITH RESPECT TO THIS WAIVER.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
______________________________
[insert name of Pledgor]
CROWN NORTHERN WAY CAPITAL,
LLC
By:___________________________
Name:
Title:
SCHEDULE I
ACKNOWLEDGMENT AND CONSENT
Crown Northern Way Capital, LLC
2 Penn Plaza, Suite 1500
New York, NY 10121
Attention: George Amrhein
Ecoloclean Industries, Inc., a Nevada corporation ("Company"), hereby
(i) acknowledges receipt of a fully executed copy of the Pledge and Security
Agreement, dated as of February __, 2006 (the "Agreement"; capitalized terms
used herein without definition have the meanings provided therein), made by
[insert name of Pledgor] ("Pledgor") in favor of Crown Northern Way Capital, LLC
("Lender"); (ii) consents and agrees to the pledge by Pledgor of the Collateral
pursuant to the Agreement and to all of the other terms and provisions of the
Agreement; (iii) agrees to comply with all instructions received by it from the
Lender without further consent by Pledgor; (iv) advises Pledgor and Lender that
a pledge of the Shares has been registered on the books of Company and in the
name of the Lender and agrees to so register any additional shares of capital
stock of the Company acquired by the Borrower; (v) represents and warrants that,
except for the pledge in favor of the Lender, there are no Liens to which the
Collateral is or may be subject as of the date hereof; and (vi) agrees to
provide the Lender with piggyback registration rights, on the same terms as set
forth in the Warrants (as defined in the Debenture), covering the Collateral
following an Event of Default in order to assist the Lender in the exercise of
its remedies under the Agreement.
IN WITNESS WHEREOF, a duly authorized officer of the undersigned has
executed and delivered this Acknowledgment and Consent as of this ___ day of
[_____________], 2006.
ECOLOCLEAN INDUSTRIES, INC.
By:___________________________
Name:
Title: