PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (this “Agreement”), made as of this 10th day of
July, 2007, by and between Laurus Master Fund. Ltd. (“Laurus”) and AILI Holding Corp., a Delaware
corporation (“Pledgor”).
BACKGROUND
Pursuant to a Secured Promissory Note dated as of the date hereof made by Pledgor in
favor of Laurus in the original principal amount of $10,000,000 (as amended, modified,
supplemented and restated from time to time, the “Note”), Laurus provides Pledgor with
certain financial accommodations.
In order to induce Laurus to provide the financial accommodations described in the Note and
to secure Pledgor’s obligations to Laurus under the Note, Pledgor has agreed to pledge and grant a
security interest in the collateral described herein to Laurus on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein which are not defined shall have
the meanings given to them in the Note.
2. Pledge and Grant of Security Interest. To secure the full and punctual payment and
performance of (a) all the obligations and liabilities of Pledgor to Laurus under the Note and (b)
all other indebtedness, obligations and liabilities of Pledgor to Laurus whether now existing or
hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or
not due arising under this Agreement and the Note ((a) and (b) collectively, the
“Indebtedness”), Pledgor hereby assigns, transfers and pledges, assigns, hypothecates,
transfers and grants to Laurus, a security interest in the personal property described on
Schedule A annexed hereto and all interest, dividends, options, warrants, increases,
profits and income received therefrom, and all substitutions therefor and in all proceeds thereof
in any form (collectively, the “Collateral”).
3. Representations and Warranties of Pledgor. Pledgor represents and warrants to
Laurus (which representations and warranties shall be deemed to continue to be made until the
Termination Date (as such term is hereinafter defined) that:
(a) The execution, delivery and performance by Pledgor of this Agreement and the pledge of
the Collateral hereunder do not and will not result in any violation of any agreement, indenture,
instrument, license, judgment, decree, order, law, statute, ordinance or other governmental rule
or regulation applicable to Pledgor.
(b) This Agreement constitutes the legal, valid, and binding obligation of Pledgor enforceable
against Pledgor in accordance with its terms, except as may be limited by general equity principles
and the effect of applicable bankruptcy, insolvency or similar laws relating to or affecting
creditors’ rights generally.
(c) No consent or approval of any person, corporation, governmental body, regulatory
authority or other entity, is or will be necessary for the execution, delivery and performance of
this Agreement or, the exercise by Laurus of any rights with respect to the Collateral or for the
pledge and assignment of, and the grant of a security interest in, the Collateral hereunder.
(d) There are no pending or, to Pledgor’s knowledge, threatened actions or proceedings before
any court, judicial body, administrative agency or arbitrator which may materially adversely
affect the Collateral.
(e) Pledgor has the requisite power and authority to enter into this Agreement and to pledge
and assign the Collateral to Laurus in accordance with the terms of this Agreement.
(f) Pledgor owns each item of the Collateral and, except for the pledge and security interest
granted to Laurus hereunder and any lien on the Collateral that may be held by the institution at
which the Account (as hereinafter defined) that constitutes part of the Collateral is located
(collectively, “Permitted Liens”), the Collateral is free and clear of any other security
interest, pledge, claim, lien, charge, hypothecation, assignment, offset or encumbrance whatsoever
(collectively, “Liens”).
(g) The pledge and assignment of the Collateral and the grant of a security interest under
this Agreement vest in Laurus all rights of Pledgor in the Collateral as contemplated by this
Agreement.
4. Affirmative Covenants. Until the Termination Date, Pledgor shall:
(a) Defend the Collateral against the claims and demands of all other parties and keep the
Collateral free from all Liens, except for the Permitted Liens.
(b) In the event Pledgor comes into possession of any portion of the Collateral, hold the
same in trust for Laurus and deliver to Laurus such Collateral in the form received no later than
one (1) business day following Pledgor’s receipt thereof.
(c) In the event any portion of the Collateral is held by a third party, take all action that
Laurus may reasonably request so as to maintain the validity, enforceability, perfection and
priority of Agent’s security interest in the Collateral.
(d) Within two (2) business days of obtaining knowledge of any person or entity asserting a
lien, encumbrance or adverse claim against the Collateral, notify Laurus of same.
(e) Furnish to Laurus such other information relating to the Collateral as the Laurus may
from time to time reasonably request.
(f) Within fifteen (15) days following the receipt thereof by Pledgor, provide Laurus a copy
of all statements relating to the accounts set forth on Schedule A (the
“Accounts”).
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(g) If the Collateral includes securities or any other financial or other asset maintained in
a securities account or deposit account (as such term is defined in Article 9 of the Uniform
Commercial Code, as adopted in New York), cause the securities intermediary, or other financial
institution, on whose books and records the ownership interest of Pledgor in the Collateral
appears, to execute and deliver immediately a notification and control agreement (each a
“Control Agreement”) satisfactory to Lauras in its sole discretion in order to perfect and
protect Laurus’ Lien in the Collateral.
(h) Following Lauras’ request at any time and from time to time, at Pledgor’s sole expense,
promptly take such action and execute and deliver Control Agreements and further instruments,
agreements and documents as Laurus may reasonably request in order to more fully perfect, evidence
or effectuate the pledge and assignment hereunder and the security interest granted hereby and to
enable Laurus to exercise and enforce its rights and remedies hereunder. Pledgor authorizes Lauras
to file one or more financing or continuation statements under the Uniform Commercial Code of the
State of New York as in effect from time to time (the “UCC”) relating to the Collateral,
naming Lauras as “secured party”.
5. Negative Covenants. Until such time as the Indebtedness has been paid in full and
the Note has been irrevocably terminated, Pledgor shall not, without the written consent of Laurus,
(a) sell, convey, or otherwise dispose of any of the Collateral or any interest therein, (b) incur
or permit to exist any Lien whatsoever with respect to any of the Collateral or the proceeds
thereof other than the Permitted Liens, (c) withdraw any money or property from the Account and/or
(d) make any trades in the Account except to purchase common shares of AVP to the extent permitted
under Section 3.10 of the Note.
6. Events of Default.
The term “Event of Default” wherever used herein shall mean the occurrence of any one of the
following events:
(a) An “Event of Default”, as such term is defined in the Note, shall have occurred;
(b) Pledgor’s failure to comply with or perform any of its undertakings or obligations under
any agreement between Pledgor and Lauras including, without limitation, this Agreement or the
Note;
(c) Any representation, warranty, statement or covenant made or furnished to Lauras by or on
behalf of Pledgor in connection with this Agreement proves to have been false in any material
respect when made or furnished or is breached, violated or not complied with;
(d) Pledgor shall (i) apply for, consent to or suffer to exist the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit of creditors,
(iii) commence a voluntary case or proceeding under applicable federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) the filing of any petition
or proceeding against it in any involuntary case or proceeding under such bankruptcy laws, or (vi)
take any action for the purpose of effecting any of the foregoing;
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(e) The Collateral is subjected to levy of execution, attachment, distraint or other judicial
process; or the Collateral is the subject of a claim (other than a Permitted Lien) of a Lien or
other right or interest in or to the Collateral; or
(f) Pledgor’s failure to comply with or perform any of its undertakings or obligations under
any Control Agreement.
7. Remedies.
Upon the occurrence and during the continuance of an Event of Default, Laurus may:
(a) Demand, collect, receipt for, settle, compromise, adjust, xxx for, foreclose or realize
upon the Collateral (or any part thereof) and/or otherwise deal with the Collateral in any and all
respects as the holder thereof, in each case as Laurus may determine in its sole discretion;
(b) Remove any Collateral from the Accounts;
(c) Exercise voting, conversion, registration, purchase or other rights of holder of any of
the Collateral;
(d) Transfer the Collateral into its name or into the name of its nominee or nominees and/or
cause the Accounts to be registered or transfer the Accounts to another securities intermediary or
financial institution in the Agent’s name;
(e) Require that all interest and dividends paid with respect to the Collateral be delivered
to Laurus as additional collateral security for the Indebtedness; and
(f) Subject to the requirements of applicable law, sell, assign and deliver the whole or,
from time to time any part of the Collateral, with or without demand, advertisement or notice of
the time or place of sale or adjournment thereof or otherwise (all of which are hereby waived,
except such notice as is required by applicable law and cannot be waived), for such price or
prices and on such terms as Laurus its sole discretion may determine.
Pledgor acknowledges and agrees that five (5) days’ prior written notice of the time and
place of any public sale of any of the Collateral or any other intended disposition thereof shall
be reasonable and sufficient notice to Pledgor within the meaning of the UCC. Pledgor hereby
waives and releases any and all right or equity of redemption, whether before or after sale
hereunder. In addition to the foregoing, Laurus shall have all of the rights and remedies of a
secured party under applicable law and the UCC.
8. Proceeds of Collateral Agreement. The proceeds of any disposition under this
Agreement of the Collateral pledged to it by Pledgor shall be applied as follows:
(a) First, to the payment of all costs, expenses and charges of Laurus and to the
reimbursement of Laurus for the prior payment of such costs, expenses and charges incurred in
connection with the care and safekeeping of the Collateral (including, without limitation, the
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expenses of any sale or any other disposition of any of the Collateral), the expenses of any
taking, attorneys’ fees and expenses, court costs, any other expenses incurred or expenditures or
advances made by Lauras in the protection, enforcement or exercise of its rights, powers or
remedies hereunder;
(b) Second, to the payment of the Indebtedness, in whole or in part, in such order as Lauras
may elect, whether or not such Indebtedness is then due;
(c) Third, to such persons, firms corporations or other entities as required by applicable law
including, without limitation, Section 9-615 of the UCC; and
(d) Fourth, to the extent of any surplus to Pledgor or as a court of competent jurisdiction
may direct.
9. Waiver of Marshaling. Pledgor hereby waives any right to compel any marshaling of
any of the Collateral.
10. No Waiver. Any and all of Lauras’ rights with respect to the pledge, assignment
and security interest granted hereunder shall continue unimpaired, and Pledgor shall be and remain
obligated in accordance with the terms hereof, notwithstanding (a) the bankruptcy, insolvency or
reorganization of Pledgor, (b) the release or substitution of any item of the Collateral at any
time, or of any rights or interests therein, or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by Lauras in reference to any of the Indebtedness. Pledgor
hereby waives all notice of any such delay, extension, release, substitution, renewal, compromise
or other indulgence, and hereby consents to be bound hereby as fully and effectively as if Pledgor
had expressly agreed thereto in advance. No delay or extension of time by Lauras in exercising any
power of sale, option or other right or remedy hereunder, and no failure by Lauras to give notice
or make demand, shall constitute a waiver thereof, or limit, impair or prejudice Lauras’ right to
take any action against Pledgor or to exercise any other power of sale, option or any other right
or remedy.
11. Expenses. The Collateral shall secure, and Pledgor shall pay to Lauras on demand,
from time to time, all expenses, (including but not limited to, attorneys’ fees and costs, taxes,
and all transfer, recording, filing and other charges) of, or incidental to, the custody, care,
transfer, administration of the Collateral, or in any way relating to the enforcement, protection
or preservation of the rights or remedies of Lauras under this Agreement or with respect to any of
the Indebtedness.
12. Lauras Appointed Attorney-in-Fact and Performance by Lauras. Upon the occurrence
and during the continuance of an Event of Default, Pledgor hereby irrevocably constitutes and
appoints Lauras as Pledgor’s true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to do in Pledgor’s name, place and stead, all
such acts, things and deeds for and on behalf of and in the name of Pledgor, which Pledgor could or
might do or which Lauras may deem necessary, desirable or convenient to accomplish the purposes of
this Agreement, including, without limitation, to execute such instruments of assignment or
transfer or orders and to register, convey or otherwise transfer title to the Collateral into
Lauras’ name. Pledgor hereby ratifies and confirms all that said attorney-in-fact may so do and
hereby declare this power of attorney to be coupled with an interest and
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irrevocable. If Pledgor fails to perform any agreement herein contained, Laurus may itself perform
or cause performance thereof, and any expenses of Laurus incurred in connection therewith shall be
paid by Pledgor as provided in Section 11 hereof.
13. Dividends and Interest. All dividends and interest paid with respect to the
Collateral shall constitute part of the Collateral.
14. Captions. All captions in this Agreement are included herein for convenience of
reference only and shall not constitute part of this Agreement for any other purpose.
15. Termination; Release of Liens. This Agreement shall terminate and Laurus agrees
to release its Lien on the Collateral upon the irrevocable termination of the Note and the payment
in full of the Indebtedness (the “Termination Date”).
16. Miscellaneous.
(a) This Agreement constitutes the entire and final agreement among the parties with respect
to the subject matter hereof and may not be changed, terminated or otherwise varied except by a
writing duly executed by the parties hereto.
(b) No waiver of any term or condition of this Agreement, whether by delay, omission or
otherwise, shall be effective unless in writing and signed by the party sought to be charged, and
then such waiver shall be effective only in the specific instance and for the purpose for which
given.
(c) In the event that any provision of this Agreement or the application thereof to Pledgor or
any circumstance in any jurisdiction governing this Agreement shall, to any extent, be invalid or
unenforceable under any applicable statute, regulation, or rule of law, such provision shall be
deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to
conform to such statute, regulation or rule of law, and the remainder of this Agreement and the
application of any such invalid or unenforceable provision to parties, jurisdictions, or
circumstances other than to whom or to which it is held invalid or unenforceable, shall not be
affected thereby nor shall same affect the validity or enforceability of any other provision of
this Agreement.
(d) This Agreement shall be binding upon Pledgor, and Pledgor’s successors and assigns, and
shall inure to the benefit of Laurus and its successors and assigns.
(e) Any notice or request hereunder may be given to Pledgor or to Laurus at their respective
addresses set forth below or at such other address as may hereafter be specified in a notice
designated as a notice of change or address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) registered or certified mail, return receipt requested,
or (c) telecopy to the number set out below (or such other number as may hereafter be specified in
a notice designated as a notice of change of address) with telephone communication to a duly
authorized officer of the recipient confirming its receipt as subsequently confirmed by registered
or certified mail. Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of the party to whom
it is addressed, (b) on the earlier of actual receipt thereof or three (3) Business Days
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following posting thereof by certified or registered mail, postage prepaid, (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with telephone communication confirming
receipt and subsequently confirmed by registered, certified or overnight mail to the address set
forth below, in each case addressed to each party at its address set forth below or at such other
address as has been furnished in writing by a party to the other by like notice:
(A)
|
If to Laurus: | Laurus Master Fund, Ltd. | ||
| x/x Xxxxxx Xxxxxxx Xxxxxxxxxx, X.X.X. | ||||
| 000 Xxxxxxx Xxxxxx, 00xx Xxxxx | ||||
| Xxx Xxxx, Xxx Xxxx 00000 | ||||
| Attention: Portfolio Services. | ||||
| Telephone: (000) 000-0000 | ||||
| Facsimile: (000) 000-0000 | ||||
| with a copy to: | Loeb & Loeb LLP | |||
| 000 Xxxx Xxxxxx | ||||
| Xxx Xxxx, Xxx Xxxx 00000 | ||||
| Attention: Xxxxx X. Xxxxxxxx, Esq. | ||||
| Telephone: 000-000-0000 | ||||
| Telecopy: 000-000-0000 | ||||
(B)
|
If to Pledgor: | AILI Holding Corp. | ||
| c/o Xxxx Xxxxx | ||||
| 000 Xxxxxxx Xxxxxx | ||||
| Xxxxxxxx, Xxx Xxxx 00000 | ||||
| Telephone: 000-000-0000 | ||||
| Telecopy: 000-000-0000 | ||||
| with a copy to: | Xxxxx Xxxxxx & Xxxxxxx, LLP | |||
| 0000 Xxxxxxxx, 00xx Xxxxx | ||||
| Xxx Xxxx, Xxx Xxxx 00000 | ||||
| Attention: Xxxxxxxx Xxxxxxx, Esq. | ||||
| Telephone: 000-000-0000 | ||||
| Telecopy: 000-000-0000 |
(f) This Agreement shall be governed by and construed and enforced in all respects in
accordance with the laws of the State of New York (without regard to principles of conflicts of
law) applied to contracts to be performed wholly within the State of New York.
(g) PLEDGOR AND LAURUS EACH HEREBY EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OTHER AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE; AND PLEDGOR AND
LAURUS EACH HEREBY
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FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE OTHER PARTY TO THE WAIVER OF ITS RIGHT BY TRIAL BY JURY.
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(h) PLEDGOR EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF THE SUPREME COURT OF THE
STATE OF NEW YORK, COUNTY OF NEW YORK, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR ALL PURPOSES IN CONNECTION WITH THIS AGREEMENT. ANY JUDICIAL PROCEEDING
BY PLEDGOR AGAINST LAURUS INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM IN ANY WAY ARISING
OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE SUPREME COURT OF
THE STATE OF NEW YORK, COUNTY OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK. PLEDGOR FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR
PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO EITHER OF THE
AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN CONNECTION WITH ANY PROCEEDINGS
HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF
NEW YORK BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE
PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE
PERMISSIBLE UNDER THE RULES OF SAID COURTS. PLEDGOR WAIVES ANY OBJECTION TO JURISDICTION AND VENUE
OF ANY ACTION INSTITUTED HEREON AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR
VENUE OR BASED UPON FORUM NON CONVENIENS.
(i) This Agreement may be executed in one or more counterparts, each of which taken together
shall constitute one and the same instrument.
[Signature Page to Follow]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year
first above written.
| AILI HOLDING CORP. |
||||
| By: | /s/ Xxxxxxx Xxxxxxxx | |||
| Name: | ||||
| Title: | ||||
| LAURUS MASTER FUND, LTD. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
SIGNATURE PAGE TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above
written.
| AILI HOLDING CORP. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| LAURUS MASTER FUND, LTD. |
||||
| By: | /s/ Xxxxx Grin | |||
| Name: | Xxxxx Grin | |||
| Title: | Director | |||
SIGNATURE PAGE TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT
STATE OF NY
|
) | |
| ): ss.: | ||
COUNTY OF QUEENS
|
) |
On
the 10th
day of July, 2007, before me personally came Xxxxxxx Xxxxxxxx, to me known,
who, being by me duly sworn, did depose and say that he is a duly authorized signatory
of AILI Holding Corp., the entity described in and which executed the
foregoing instrument; and that
he was authorized to sign his name thereto on behalf of said entity.
| /s/ Xxxxxxx Xxxxxx
|
STATE OF NEW YORK
|
) | Xxxxxxx Xxxxxx | ||
COUNTY OF NEW YORK |
ss. ) |
Notary Public State of New York No. 01MO6002790 Qualified in Queens County Certified in Queens County Commission Expires Oct 5, 2010 |
||
On
the day of July, 2007, before me personally came , to me
known, who, being by me duly sworn, did depose and say that he is a duly authorized signatory of
Laurus Master Fund, Ltd., the entity described in and which executed
the foregoing instrument; and
that he was authorized to sign his name thereto on behalf of said entity.
SIGNATURE PAGE TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT
| STATE OF | ) | |
| ): ss.: | ||
COUNTY
OF
|
) |
On
the day of July, 2007, before me personally came , to me
known, who, being me duly sworn, did depose and say that he is a duly
authorized signatory of
AILI Holding Corp., the entity described in and which executed the
foregoing instrument; and that
he was authorized to sign his name thereto on behalf of said entity.
STATE OF NEW YORK
|
) | |
| ss.: | ||
COUNTY
OF NEW YORK
|
) |
On
the 10th
day of July 2007, before me personally came Xxxxx Grin, to me
known,
who, being by me duly sworn, did depose and say that he is a duly authorized signatory of
Laurus Master Fund, Ltd., the entity described in and which executed
the foregoing instrument; and that he was authorized to sign his name
thereto on behalf of said entity.
| /s/ Xxxxxxxx Xxxxx | ||||
| XXXXXXXX
XXXXX Notary Public, State of New York No. 01SI6124859 Qualified in Queens County Commission Expires April 4, 2009 |
SIGNATURE PAGE TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT
SCHEDULE A
Description of Collateral
All of Pledge’s right, title and interest in and to account number 12U411196407 maintained
with Legend Merchant Group, and all interest, dividends, options, warrants, increases, profits and
income received therefrom, all substitutions therefor and all proceeds thereof.
