1
EXHIBIT 99.8
2
SECURITY AND PLEDGE AGREEMENT
($3,000,000.00)
Agreement made this _______ day of _____________, 1995, by and between
Digital Solutions, Inc., the undersigned ("Pledgor") and Keystone Financial,
Inc., a Delaware corporation ("Lender").
WHEREAS, Lender is about to make a certain loan to Pledgor in the
principal amount of up to $3,000,000.00 pursuant to the terms and provisions as
contained in a certain Promissory Note executed by Pledgor, the terms of which
are incorporated herein by reference the Promissory Note (the "Promissory
Note"); and
WHEREAS, to induce Lender to make the loan, Lender has required, and
Pledgor has agreed, to pledge certain stock owned by him as security for the
repayment of the loan, upon the terms and conditions hereinafter set forth.
NOW THEREFORE, Pledgor and Lender agree as follows:
1. PLEDGE. In consideration of the sum of money loaned to Pledgor by
Lender, the receipt of which is hereby acknowledged, Pledgor hereby assigns all
of his right, title and interest and grants a security interest in and to
Lender, in and to 3,000,000 free trading shares of Digital Solutions, Inc.
(DGSI) which shares will be duly authorized, endorsed and herewith
electronically transferred to Lender by DTC or ACAT. Pledgor appoints Lender as
his attorney-in-fact to arrange for the transfer of the pledged shares as
security for the repayment of the loan and shall not encumber the shares except
in accordance with the provisions of this Agreement.
2. DIVIDENDS. During the term of this Agreement, all dividends received
by Lender will be released to the Pledgor unless this loan is in default.
3. VOTING RIGHTS. During the term of this pledge, and so long as Pledgor
is not in default in the performance of any of the terms of this Agreement or
in their obligations in the Promissory Note executed by him, Pledgor shall have
the right to vote the pledged shares on all corporate questions, and Lender
shall execute due and timely proxies in favor of Pledgor to this end.
4. REPRESENTATIONS. Pledgor warrants and represents that there are no
restrictions upon the transfer of any of the pledged shares, and that Pledgor
has the right to transfer such shares free of any encumbrances and without
obtaining the consent of any other person or entity. In addition, Pledgor
hereby warrants and represents and covenants to Lender that, as of the date of
this Agreement, the fair salable value of Pledgor's assets exceeds his
liabilities, that he is meeting his current liabilities as they mature, that
all financial statements of Pledgor furnished to Lender are true and correct
and include reference to all contingent liabilities of Pledgor, since the date
of said financial statements there has been no material adverse change in the
financial conditions of Pledgor, that there are not now pending any material
court or administrative proceedings or undischarged judgments against Pledgor
and no federal or state tax liens have been
3
Digital Solutions Inc./Keystone
Security & Pledge Agreement, page 2 of 4
$3,000,000 Loan
filed or threatened against Pledgor, nor is Pledgor in default or claimed
default under any agreement for borrowed money, which will not be cured by
payment from the proceeds of the loan executed by Pledgor on the date hereof.
5. WARRANTS AND RIGHTS. In the event that, during the term of this
Agreement, subscription warrants or any other rights or options shall be issued
in connection with the pledged shares, such warrants, rights and options shall
be immediately assigned by Lendor to Pledgor, and if exercised by Pledgor, all
new shares or other securities so acquired by Pledgor shall be immediately
assigned to Lender, to be held under the terms of this Agreement in the same
manner as the shares originally pledged hereunder.
6. PROPERTY. Any property belonging to Pledgor or in which Pledgor has
an interest, either individually or jointly with others, held by Lender or any
of its subsidiaries or affiliates or carried in any accounts shall be subject
to a general lien and security interest for the discharge of Pledgor's
obligations to Lender, wherever or however arising and without regard to
whether or not Lender has made advances with respect to such property, and
Lender is hereby authorized to sell and/or purchase any and all such property
without notice to satisfy such general lien and security interest. Pledgor
irrevocably appoints Lender as his attorney-in-fact with power of substitution
to execute any documents for the perfection or registration of such general
liens and security interest.
7. MANAGEMENT OF PROPERTY. In the event that Pledgor fails to deposit
sufficient funds to satisfy any demands, or whenever in Lender's sole and
absolute discretion Lender considers it necessary, Lender may, without prior
demand or notice, when and if Lender deems appropriate, notwithstanding any
rule of any exchange, liquidate the portions in Pledgor's account(s), hedge
and/or affect those positions in the cash market or otherwise, sell any
property belonging to Pledgor's or in which Pledgor has any interest, cancel
any open orders for the purchase and sale of any property, or borrow or buy any
property, or borrow or buy any property required to make delivery against any
sale, including a short sale. Such sale or purchase may be public or private
and may be made without advertising or notice to Pledgors and in such manner as
Lender may, in Lender's sole and absolute discretion, determine, and no
demands, tenders or notices which Lender may make or give shall invalidate
Pledgor's aforesaid waiver. The proceeds of such transaction, if any are to be
applied to reduce any indebtedness owing by Pledgor to Lender.
Notwithstanding the foregoing, the Lender shall not sell or otherwise
liquidate any property belonging to the Pledgor unless (i) Pledgor defaults, as
defined in the Promissory Note and Security and Pledge Agreement and fails to
cure such default within the applicable cure period; or (ii) the aggregate
market value of the pledged property is below 60% of the outstanding balance of
the loan. In the event Lender takes action in accordance with (ii) of the
previous sentence, Lender shall simultaneously give Pledgor notice of such
action. Pledgor shall be entitled, at any time and at its option, to pledge
additional property, which additional property shall be added to the previously
pledge property when computing the loan to value ratio.
8. ACCOUNT LOSSES. Pledgor acknowledges that Pledgor shall be liable
for all losses in Pledgor's account(s) whether or not Pledgor's account(s) are
liquidated and for any debts and
4
Digital Solutions, Inc./Keystone
Security & Pledge Agreement, Page 3 of 4
3,000,000 Loan
deficiencies, including, but not limited to, interest, costs, expenses and
attorney's fees, including all debts and deficiencies resulting from a
liquidation of Pledgor's account(s).
9. DELIVERY OF PROPERTY. Pledgor acknowledges that Lender is hereby
specifically authorized for Lender's account(s) and benefit, from time to time
and without notice to Pledgor, either separately or with others, to lend,
pledge, repledge and hypothecate any and all property held by Lender in any of
Pledgor's account(s) and Lender shall not at any time be required to deliver
to Pledgor such identical property, but may fulfill Lender's obligations to
Pledgor by delivery of property of the same kind and amount.
10. LOAN FEE. Pledgor hereby agrees to pay (unless heretofore paid by
Pledgor) to Lender a loan fee for making the loan available in the amount of
$120,000.00 due and payable on or before the funding of the loan. There will be
an annual fee of $30,000.00 for the maintenance and continuation of this loan.
11. PAYMENT OF LOAN. Upon payment at or after maturity of all principal
and interest of the loan, and loan fees, less amounts theretofore received and
applied by Lender in reduction thereof, Lender shall transfer to Pledgor all of
the pledged shares, or property of the same kind and amount, and all rights
received by Lender as a result of its record ownership thereof.
12. DEFAULT. In the event that Pledgor defaults in the performance of
any of the terms of this Agreement, or if in the performance of any of his
obligation under the Promissory Note executed by him, which default shall
continue for seven (7) days after notice to borrower, Lender shall have the
rights and remedies provided in the Uniform Commercial Code in force in the
State of Michigan as of the date of this Agreement and, in connection
therewith, Lender may, upon seven (7) days advance written notice to Pledgor,
Pledgor's Bank (United Jersey Bank, Xxxxxx Xxxxx XX, Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxx Xxxxxx 00000), and Pledgor's Attorney, Xxxxxx X. XxXxxxx, Esq., Xxxxxxxxx,
Xxxxxxx & XxXxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, sent by
certified mail return receipt requested, and without liability for any
diminution in price which may have occurred, sell all of the pledged shares in
such manner and for such price as Lender may determine, at any bona fide public
sale, and Lender shall be free to purchase all or any part of the pledged
shares at such sale. Out of the proceeds of any sale, Lender may retain an
amount equal to the principal and interest then due on the loan, plus the
expenses of sale, including reasonable attorney's fees, plus any loan fees and
accrued interest and shall pay any balance of such proceeds to Pledgor.
13. WAIVER. No waiver or indulgence of Lender in enforcing the terms of
this Agreement shall be considered a waiver of future performance of this
Agreement in strict accordance with its terms, and Lender shall not be required
to give Pledgor notice of its intent to enforce such terms in the future.
14. ARBITRATION. Any dispute or controversy arising out of or relating
to this agreement shall be determined and settled by arbitration in the City of
Battle Creek, Michigan, in accordance with the Rules of the American
Arbitration Association then in effect.
5
Digital Solutions, Inc./Keystone
Security & Pledge Agreement, Page 4 of 4
$3,000,000 Loan
15. LENDER'S RIGHT TO ASSIGN. Lender shall have the right to
assign, sell or transfer this security agreement and the accompanying
promissory note without prior notice or consent of Pledgor.
16. BINDING EFFECT/APPLICABLE LAW. This agreement shall be binding
upon the parties hereto and their respective heirs, successors and assigns. The
terms and provisions hereof shall be governed and construed in accordance with
the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
WITNESS: PLEDGORS:
/s/ Xxxxxxx Xxxxx Digital Solutions, Inc.
---------------------------------
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------- ------------------------------------
Xxxxxxx Xxxxxxxxx, Vice Chairman
Address: 0000-X Xxxxxx Xxxx
Xxxxx Xxxxxxxxxx, XX 00000
LENDER:
/s/ Xxxxxx Jar
--------------------------------- Keystone Financial, Inc.
--------------------------------- By: /s/ Xxxxxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxxxxx X. Xxxxxxx
Address: 000 X. Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
STATE OF New York )
)SS.
COUNTY OF New York )
The foregoing instrument was acknowledged before me this 14th day of
September, 1995 by Xxxxxxx X. Xxxxxxxxx.
---------- ---------------------
/s/ Xxxxxx X. XxXxxxx
----------------------------------------
Notary Public, State of New York
No. 31-476368
Qualified in New York County
Commission Expires June 30, 1996
