Exhibit 10.19
ACCOMMODATION PLEDGE AGREEMENT
THIS ACCOMMODATION PLEDGE AGREEMENT (this "Agreement") is entered into
effective the ___ day of _______________, 2001, by and among SMART CHIP
TECHNOLOGIES, LLC, a Nevada limited liability company ("Pledgor"), and those
certain holders of up to $1,500,000 in aggregate principal amount of Limited
Recourse Convertible Promissory Notes (the "Notes"), as more particularly set
forth on Appendix A hereto (collectively, the "Secured Parties").
WITNESSETH:
WHEREAS, Pledgor has entered into that certain Technology License and
Membership Purchase Agreement of even date herewith pursuant to which Pledgor
has obtained rights as licensee to certain intellectual properties and related
tangible and intangible property from SCHIMATIC Cash Transactions Xxxxxxx.xxx,
Inc. ("Schimatic") in consideration of the issuance of units of membership
interest in Pledgor and certain other covenants and agreements, including the
covenant to grant the security interest evidenced by this Agreement as
additional security for the full and timely performance by Schimatic of its
obligations under the Notes;
WHEREAS, Pledgor has entered into that certain Technology License and
Membership Purchase Agreement of even date herewith pursuant to which Pledgor
has obtained rights as licensee to certain intellectual properties and related
tangible and intangible property from IC One, Inc. in consideration of the
issuance of units of membership interest in Pledgor and certain other covenants
and agreements; and
WHEREAS, Pledgor wishes to secure the payment of the indebtedness evidenced
by the Notes and any promissory note taken in renewal, exchange or substitution
thereof or therefor, including interest on all of the foregoing and all costs of
collecting the same, and Pledgor's obligations and liabilities under this
Agreement (together with the Notes and this Agreement, the "Documents") however
created, arising or evidenced, whether direct or indirect, primary or secondary,
absolute or contingent, joint or several, or now or hereafter existing, or due
or to become due (all of the obligations and liabilities described in the
preceding clauses being herein collectively called the "Liabilities");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and of the direct and indirect benefits to be
received by Pledgor as a result of the foregoing, the parties hereto agree as
follows:
1. Grant of Security Interest. As collateral security for the due and
punctual performance and payment of all the Liabilities, Pledgor hereby grants
to Secured Parties a continuing security interest in all of Pledgor's "Available
Cash," which for purposes hereof shall mean all cash funds of Pledgor on hand
from time to time (excluding cash funds obtained as contributions to the capital
of Pledgor by its members, loans to Pledgor, net proceeds from "Capital
Transactions" (as defined below), and cash funds obtained from "Terminating
Transactions" (as defined below"), after payment of all operating and general
and administrative expenses of Pledgor, provision for payment of all outstanding
and unpaid current obligations (including interest payments) of Pledgor as of
such time, and provision for an adequate working capital reserve as determined
by Pledgor's managers to be reasonably necessary for operations of the business
of Pledgor and Capital Transactions expected in the foreseeable future, all as
Pledgor's managers may from time to time determine in accordance with Pledgor's
operating agreement (the "Collateral"). For purposes hereof, "Capital
Transaction" shall mean a transaction (a) pursuant to which Pledgor borrows
funds, (b) pursuant to which part of the assets of Pledgor are sold, condemned,
exchanged, abandoned or otherwise disposed of, (c) pursuant to which Pledgor
purchases or otherwise acquires assets, (d) pursuant to which insurance proceeds
or other damages are recovered by Pledgor in respect of a capital asset of
Pledgor (and not for such items as business interruption or similar items), or
(e) that, in accordance with generally accepted accounting principles, is
otherwise considered capital in nature. "Terminating Transaction" shall mean a
sale, condemnation, exchange or other disposition, whether by foreclosure,
abandonment or otherwise, of all or substantially all of the then-remaining
assets of Pledgor that is entered into in connection with the dissolution,
termination and winding-up of Pledgor or that will result in the dissolution of
Pledgor.
2. Representations and Warranties of Pledgor. As an inducement to Secured
Parties to enter into this Agreement and to consummate the transactions
contemplated hereby, Pledgor represents, covenants and warrants to Secured
Parties and agrees as follows:
(a) Pledgor is a limited liability company duly organized, validly
existing and in good standing under the laws of Nevada and has the power
and is duly authorized, qualified, franchised and licensed under all
applicable laws, regulations, ordinances and orders of public authorities
to own all its properties and assets and to carry on its business in all
material respects as it is now being conducted, including qualification to
do business as a foreign corporation in the states in which the character
and location of the assets owned by it or the nature of the business
transacted by it requires qualification, except to the extent the failure
to so qualify would not materially and adversely affect the business,
operations, properties, assets or condition of Pledgor.
(b) Pledgor has taken all action required by law, its articles of
organization, its operating agreement, or otherwise to authorize the
execution and delivery of the Documents and the consummation of the
transactions herein contemplated. Pledgor has full power and authority to
execute, deliver and perform all of the Documents. This Agreement is the
legal, valid and binding agreement of Pledgor, enforceable between the
parties in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or other laws affecting enforcement of
creditors' rights generally and by general principles of equity. The
execution and delivery of this Agreement does not and the consummation of
the transactions contemplated by this Agreement in accordance with the
terms hereof will not violate any provision of Pledgor's articles of
organization or operating agreement or violate, conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a
default, an Event of Default, or an event creating rights of acceleration,
termination, cancellation or a loss of rights under, or result in the
creation or imposition of any encumbrance upon, any of the Collateral,
under any other material note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which Pledgor or any of the Collateral is subject or by which
Pledgor is bound.
(c) Pledgor has made no other or prior pledges of the Collateral. No
Uniform Commercial Code financing statement covering any of the Collateral
is on file in any public office other than the security interest created by
this Agreement. All information with respect to the Collateral set forth in
any schedule, certificate or other writing at any time heretofore or
hereafter furnished by Pledgor to Secured Parties, and all other written
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information heretofore or hereafter furnished by Pledgor to Secured
Parties, are and will be true and correct as of the date furnished.
3. Certificates, Schedules and Reports. Within 20 business days, Pledgor
will deliver to Secured Parties such additional schedules and such certificates
and reports with respect to all or any of the Collateral subject to the security
interest hereunder as Secured Parties may reasonably request. Any such schedule,
certificate or report shall be executed by a duly authorized officer of Pledgor
and shall be in such form and detail as Secured Parties may specify.
4. Agreements of Pledgor. Pledgor covenants and agrees that, until the
satisfaction of all of its obligations under the terms of this Agreement and the
Documents, it will:
(a) within 10 business days after request of Secured Parties, execute
and deliver to Secured Parties such Uniform Commercial Code financing
statements and other documents (and pay the cost of filing or recording the
same or this Agreement in all public offices deemed necessary or
appropriate by Secured Parties) and do such other acts and things, all as
Secured Parties may from time to time request, to establish and maintain a
valid, perfected security interest in the Collateral to secure the
performance and payment of the Liabilities;
(b) within 20 business days after Secured Parties' request therefor,
furnish Secured Parties such information concerning Pledgor and the
Collateral as Secured Parties may from time to time reasonably request;
(c) within 20 business days after Secured Parties' request therefor,
permit Secured Parties and their designees to inspect, audit and make
copies of and extracts from all records and all other papers in the
possession of Pledgor that pertain to the Collateral and, within 20
business days after request of Secured Parties, deliver to Secured Parties
all of such records and papers that pertain to the Collateral;
(d) without the prior written consent of Secured Parties, not sell,
lease, assign, create or permit to exist any encumbrance on any Collateral
to or in favor of anyone other than Secured Parties or as set forth herein;
(e) comply with all laws, rules and regulations relating to, and
promptly pay when due all license fees, registration fees, taxes,
assessments and other charges that may be levied upon or assessed against,
the ownership, operation, possession, maintenance or use of its equipment
and other goods (as applicable) and will not relinquish or terminate any
rights, qualifications, licenses or permits that would materially and
adversely affect its financial condition or business; provided, however,
that Pledgor shall not be required to comply with any such law, rule or
regulation, or to pay any such fee, tax, assessment or other charge, the
validity of which is being contested by Pledgor in good faith by
appropriate proceedings, so long as forfeiture of any part of its equipment
or other goods will not result from the failure of Pledgor to comply with
any such law, rule or regulation, or to pay any such fee, tax, assessment
or other charge, during the period of such contest; and
(f) use its best efforts consistent with prudent business practices to
preserve and maintain its business and keep its business organization
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intact; to preserve its goodwill; to pay its obligations as they mature; to
retain its employees; and to retain its relationships with customers.
5. Payment of Expenses. At their option, Secured Parties may discharge
taxes, liens, security interests or other encumbrances on the Collateral.
6. Default.
(a) An Event of Default shall be deemed to have occurred upon the
happening of any of the following events or conditions:
(i) the failure or refusal of Schimatic to pay principal of or
interest on the Notes when the same become due in accordance with the
terms thereof and such failure or refusal is not cured within 10
calendar days after Schimatic and Pledgor have notice thereof;
(ii) the failure or refusal of Schimatic or Pledgor punctually
and properly to perform, observe and comply with any other covenant or
agreement contained in this Agreement or the Documents, and such
failure or refusal is not cured or remedied within 30 days after
Pledgor has written notice thereof;
(iii) either Schimatic or Pledgor shall (1) become insolvent, (2)
fail to pay its debts generally as they become due, (3) voluntarily
seek, consent to or acquiesce in the benefit or benefits of any Debtor
Relief Law (defined hereinafter), or (4) become a party to (or be made
the subject of) any proceeding provided for by any Debtor Relief Law,
other than as a creditor or claimant, that could suspend or otherwise
adversely affect the Rights (defined hereinafter) of Secured Parties
granted herein (unless, in the event such proceeding is involuntary,
the petition instituting same is dismissed within 60 days of the
filing of same). "Debtor Relief Law" means the Bankruptcy Code of the
United States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments or similar Laws
from time to time in effect affecting the Rights of creditors
generally. "Rights" means rights, remedies, powers and privileges.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions or decrees of any state, commonwealth,
nation, territory, possession, county, parish, municipality or
Tribunal. "Tribunal" means any court or governmental department,
commission, board, bureau, agency or instrumentality of the United
States or of any state, commonwealth, nation, territory, possession,
county, parish or municipality, whether now or hereafter constituted
and/or existing;
(iv) the failure to have discharged within a period of 30 days
after the commencement thereof any attachment, sequestration or
similar proceeding against the Collateral or any of the assets of
Pledgor or Schimatic, or the loss, theft or destruction of or
occurrence of substantial damage to a material part of the assets of
Pledgor or Schimatic, except to the extent adequately covered by
insurance; or
(iv) the occurrence of an "event of default" under the Notes.
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(b) If any one or more of the Events of Default specified above shall
have happened, the holders of the Notes may, at their option, (i) declare
the entire unpaid principal and accrued interest on the Notes to be
immediately due and payable, (ii) reduce any claim to judgment, (iii)
execute and foreclose all liens and security interests securing payment
thereof or any part thereof, and/or (iv) proceed to protect and enforce
their rights either by suit in equity and/or by action of law, or by other
appropriate proceedings, whether for the specific performance of any
covenant or agreement contained in the Notes, or in aid of the exercise
granted by the Notes, of any right, or to enforce any other legal or
equitable right or remedy of the holders of the Notes.
(c) In the Event of Default hereunder and the exercise of their
remedies or otherwise, the remedies of the Secured Parties shall be limited
to execution on the Collateral. The Secured Parties shall not seek and
shall not be entitled to obtain a deficiency or personal judgment against
the Company in the event that the proceeds from the Collateral shall be
insufficient to satisfy the Liabilities.
7. Action by Secured Parties. Any action required or permitted to be taken
by the Secured Parties shall be deemed to have been taken if evidenced by
instruments of substantially like tenor signed by the registered holders of a
majority in principal amount of the Notes outstanding.
8. Miscellaneous Provisions.
(a) The parties shall execute and deliver all documents or
instruments, provide all information, and take or forebear from all such
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
(b) Any notice, demand, request or other communication under this
Agreement shall be in writing and shall be deemed to have been given on the
date of service if personally served or by facsimile transmission (if
receipt is confirmed by the facsimile operator of the recipient), or on the
following day if delivered by overnight courier service, or on the third
day after mailing if mailed by certified mail, return receipt requested,
addressed as follows:
(i) If to Secured Parties, to the names, addresses and telecopy
numbers set forth on the attached Appendix A;
(ii) If to Pledgor, to: Smart Chip Technologies, LLC
740 East 0000 Xxxxx, Xxxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
or such other addresses and facsimile numbers as shall be furnished in
writing by any party in the manner for giving notices hereunder.
(c) No delay on the part of Secured Parties in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Secured Parties of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
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(d) This Agreement, together with the other Documents, constitutes the
entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements and understandings pertaining thereto.
No amendment to, modification or waiver of, or consent with respect to, any
provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed and delivered by Secured Parties, and then
any such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
(e) Section captions used in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(f) This Agreement may be executed in any number of counterparts and
by the different parties on separate counterparts, and each such
counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Agreement and any signed
counterpart shall be deemed signed and delivered if it is delivered by the
party signing it to any other party hereto by electronic facsimile
transmission.
(g) This Agreement has been delivered at Salt Lake City, Utah, and
shall be construed in accordance with and governed by the laws of the state
of Utah, excluding principles of choice or conflicts of law. Whenever
possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. Any action or
proceeding brought to enforce this Agreement shall be instituted in Salt
Lake County, Utah, if brought in a Utah state court, or in the District of
Utah, Central Division, if brought in a federal court.
(h) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective heirs, executors, administrators,
successors, legal representatives and assigns; provided that, this
provision shall not be construed as permitting assignment, substitution,
delegation or other transfer of rights or obligations, except strictly in
accordance with the provisions of this Agreement.
(i) Neither the rights nor the duties of a party under this Agreement
may be assigned or delegated by either party, in whole or in part, without
the prior written consent of the other party.
(j) At the option of Secured Parties, this Agreement or a carbon,
photographic or other reproduction of this Agreement or of any Uniform
Commercial Code financing statement covering the Collateral or any portion
thereof, shall be sufficient as a Uniform Commercial Code financing
statement and may be filed as such.
(k) In the event that any party institutes and prevails in any action
or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the defaulting or breaching party or parties
shall reimburse the nonbreaching party or parties for all costs, including
reasonable attorneys' fees, incurred in connection therewith and in
enforcing or collecting any judgment rendered therein.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
PLEDGOR:
SMART CHIP TECHNOLOGIES, LLC
By
-------------------------------------
Xxxxx X. Xxxxxxxx, President
COUNTERPART SECURED PARTY SIGNATURE PAGE
The undersigned, the payee of a promissory note evidencing
$________ in principal amount of the obligations up to $1,500,000 in
aggregate principal amount of Limited Recourse Convertible Promissory Notes,
hereby joins in the above Accommodation Pledge Agreement as a Secured Party.
DATED this ____ day of ________________________, 2001.
Signature
APPENDIX A
SECURED PARTIES
Name Address and Telecopy No. Note Principal
