Exhibit 10.4
AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AGREEMENT is made this 23th day of February 2004 by and between
TOTAL IDENTITY CORP., a Florida corporation ("Shareholder") and XXXXXX XXXXX
("Secured Party").
RECITALS
A. Shareholder and Secured Party entered into a Pledge
Agreement October 13, 2004 (the "Original Pledge Agreement") relating
to the sale by Secured Party to Shareholder of shares of the common
capital stock of Total Identity Systems Corp., a New York corporation
("Total New York") pursuant to a Stock Purchase Agreement dated of even
date therewith (the "Stock Purchase Agreement").
B. Shareholder and Secured Party have amended the Stock
Purchase Agreement in Amendment No. 1 to Stock Purchase Agreement of
even date herewith ("Amendment No. 1").
C. As provided in Amendment No. 1, the promissory note issued
by Shareholder in favor of Secured Party under the Stock Purchase
Agreement has been amended and restated in an Amended and Restated
Promissory Note of even date herewith (the "Restated Promissory Note").
D. On October 13, 2003, Shareholder acquired shares of the
common capital stock of Total New York from Total New York pursuant to
a Stock Purchase Agreement (the "Corporate Stock Purchase Agreement").
E. Shareholder, Total New York and Secured Party have amended
the Corporate Stock Purchase Agreement in Amendment No. 1 to Stock
Purchase Agreement of even date herewith ("Corporate Amendment No. 1").
F. Shareholder and Secured Party are entering into this
Amended and Restated Pledge Agreement to amend and restate the Original
Pledge Agreement to confirm to the understandings reached in Amendment
No. 1 and Corporate Amendment No. 1.
G. On October 13, 2003, an affiliate of Secured Party and
Total New York entered into a Lease covering certain premises located
at 0000 Xxxxxxxx Xxxx, Xxxxxxxxx Xxx Xxxx (the "Lease"), which Lease
was amended by Lease Amendment of even date herewith (collectively, the
"Amended Lease").
H. On October 13, 2003, Secured Party and Shareholder entered
into an Employment Agreement (the "Employment Agreement"), and Secured
Party and Shareholder have entered into a consulting agreement of even
date herewith that, among other things, terminated the Employment
Agreement (the "Consulting Agreement").
AGREEMENT
NOW, THEREFORE, Shareholder and Secured Party agree as follows:
Section 1. Termination of Original Pledge Agreement. The Original
Pledge Agreement is hereby terminated and shall cease to be of any further or
effect and simultaneously this Amended and Restated Pledge Agreement shall now
govern the security interest being granted by Shareholder in favor of Secured
Party under the Stock Purchase Agreement, as amended by Amendment No. 1
(collectively referred to as the "Amended Stock Purchase Agreement").
Section 2. Pledge and Grant of Security Interest. As absolute and
unconditional security for the payment promptly when due by Shareholder of its
obligations under the Restated Promissory Note, the Amended Stock Purchase
Agreement, the Corporate Stock Purchase Agreement, as amended by Corporate
Amendment No. 1 (collectively, the Amended Corporate Stock Purchase Agreement"),
the Amended Lease and the Consulting Agreement, including, without limitation,
payment of all principal, interest, costs of collection and attorneys' fees
(collectively, the "Obligations"), Shareholder hereby pledges, assigns and
transfers to Secured Party and grants to Secured Party a security interest in
and to: (a) all the shares of the common capital stock of Total New York sold to
Shareholder under the Amended Stock Purchase Agreement (the "Shares"); (b) all
the shares of the common capital stock of Total New York sold to Shareholder
under the Amended Corporate Stock Purchase Agreement (the "Corporate Shares"
and, together with the Shares, the "Pledged Shares") and (ii) all share
dividends, liquidating dividends, shares resulting from stock splits,
reclassifications, warrants, options, non-cash distributions, rights to
subscribe and other rights and distributions on or with respect to the Pledged
Shares (other than dividends or other distributions paid in cash, if at the time
of payment Shareholder is not in default with respect to any of its Obligations
under the Restated Promissory Note) (collectively, the "Collateral").
Section 3. Mechanics of Pledge. All the Collateral shall be held in
escrow by Shapiro, Rosenbaum, Liebschultz & Xxxxxx, LLP, counsel to Secured
Party (the "Escrow Agent"), pursuant to the terms of an escrow agreement of even
date herewith (the "Escrow Agreement"), under which the Escrow Agent will hold
the Collateral in escrow pending (a) a default under this Agreement, in which
event the Collateral shall be delivered to Secured Party or (b) payment in full
of the Obligations, in which event the Collateral shall be delivered to
Shareholder, all as provided in the Escrow Agreement. In furtherance thereof,
the Escrow Agent hereby acknowledges receipt of: (i) the stock certificates
representing the Pledged Shares, and (ii) executed stock powers with respect to
the Pledged Shares, endorsed in blank. Shareholder authorizes Secured Party to
file in the appropriate UCC filing offices UCC-1 financing statements with
respect to the security interest created under this Agreement, showing
Shareholder as Debtor and Secured Party as secured party and executed by
Shareholder.
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Section 4. Covenants. (a) It is the intent of Shareholder and Secured
Party that Secured Party shall retain a security interest in and to the
Collateral and, for so long as the Obligations remain outstanding, in and to at
least 51% of the issued and outstanding shares of common capital stock of Total
New York. Accordingly, (i) prior to payment in full of the Obligations under the
Amended Corporate Stock Purchase Agreement, Total New York shall not issue any
additional shares of its capital stock without the prior written consent of
Secured Party and Shareholder, and, thereafter (ii) in the event that Total New
York issues additional shares of common capital stock, or securities having
voting rights or securities convertible into common capital stock of Total New
York, additional securities of Total New York shall be issued to the Shareholder
and pledged hereunder to the extent necessary so that Secured Party retains a
security interest in and to at least 51% of the issued and outstanding shares of
voting capital stock of Total New York on a fully diluted basis. Any such
additional shares shall be deemed "Collateral" within the meaning of this
Agreement.
(b) At such time, if any, as all or a portion of the Pledged
Shares are delivered by the Escrow Agent to Secured Party under the Escrow
Agreement, Shareholder shall deliver to Secured Party (or an agent designated by
Secured Party), promptly upon request of Secured Party, such proxies and other
documents as may be necessary to allow Secured Party to exercise the voting
power with respect to any Pledged Shares or other capital shares owned by
Shareholder included in the Collateral. In the absence of delivery of the
Pledged Shares to Secured Party under the Escrow Agreement, Shareholder shall be
entitled to exercise all voting rights attendant to the Pledged Shares.
Section 5. Representations and Warranties of Shareholder. Shareholder
hereby represents and warrants to Secured Party as follows:
(a) Capacity. Shareholder has full legal right and capacity to
execute, deliver and perform this Agreement, and this Agreement
constitutes a valid and binding obligation of Shareholder, enforceable
against Shareholder in accordance with its terms.
(b) Ownership of Collateral. Shareholder is and will continue
to be the lawful owner of the Pledged Shares, which is and shall at all
times remain free and clear of all security interests, liens,
encumbrances, claims and rights of others, except as otherwise
permitted under this Agreement.
(c) No Violation. The execution, delivery and performance by
Shareholder of this Agreement does not violate, conflict with, result
in a breach of any provisions of, constitute a default (or an event
which, with or without due notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate
the performance required by, or (except as contemplated hereby) result
in the creation of any security interest, lien, or other encumbrance
upon any of the properties or assets of Shareholder under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or loan agreement or other
agreement, instrument or obligation to which Shareholder is a party, or
by which Shareholder or any of its properties or assets may be bound or
affected.
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(d) Creation of Valid Security Interest. Upon the delivery to
Secured Party of the certificate or certificates representing the
Pledged Shares, accompanied by stock powers endorsed in blank, Secured
Party shall have a valid first perfected security interest in the
Pledged Shares, subject to the terms of this Agreement.
Section 6. Events of Default. (a) The following shall constitute Events
of Default under this Agreement:
(i) Any default by Shareholder under the Amended Stock
Purchase Agreement.
(ii) Any default by Shareholder under the Amended Corporate
Stock Purchase Agreement.
(iii) Any default by Shareholder under the Restated Note.
(iv) Any default by Total Identity Systems Corp., a New York
corporation, in its obligation to pay "rent," as provided in a certain
Lease dated October 13, 2003, by and between TISC and 0000 Xxxxxxxx
Xxxx Corporation, as amended by Lease Amendment of even date herewith.
(v) Any default by Shareholder in its obligation to pay
consulting fees and/or health benefits to Secured Party, as provided in
a certain Consulting Agreement between Shareholder and Secured Party of
even date herewith.
Upon the occurrence of an Event of Default, following the expiration of
all applicable grace periods, Secured Party shall notify the Escrow Agent of
such occurrence, and the provisions of the Escrow Agreement shall govern
disposition of the Collateral to Shareholder and/or Secured Party. In the event
that all or a portion of the Collateral is delivered to Secured Party by the
Escrow Agent, Secured Party shall thereupon be entitled to retain the Collateral
or shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code as in effect in the State of Florida and under any other
applicable law, together with all rights and remedies provided in this Agreement
with respect to all of the Collateral subject to this Agreement. Any
notification required by law of intended disposition by Secured Party of any of
the Collateral shall be deemed reasonably and properly given if given at least
10 days before such disposition and Secured Party agrees to provide such written
notice of intended disposition to Shareholder. At any bona fide public sale,
Secured Party shall be free to purchase all or any part of the Collateral. Out
of the proceeds of any sale, Secured Party shall be entitled to retain an amount
sufficient to satisfy Shareholder's Obligations to Secured Party, plus the
amount of the expenses of the sale and related attorneys' fees incurred by
Secured Party, and shall pay any balance of such proceeds to Shareholder. In any
Notice of Default sent by the Secured Party to the Escrow Agent under the terms
of the Escrow Agreement, said Notice shall specify whether the Secured Party
intends to retain the Collateral or to sell the Collateral by bona fide public
or private sale. In the event Secured Party elects to retain the Collateral as
set forth in such Notice, as a condition to retaining the Collateral, Secured
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Party shall pay or cause to be paid to Shareholder, within thirty (30) days
following the date the Collateral is released from escrow by the Escrow Agent,
all amounts theretofore paid by Shareholder to Total New York under the Amended
Corporate Stock Purchase Agreement, and by Shareholder to Secured Party under
the Restated Promissory Note, less the expenses incurred by Secured Party in
recovering the Collateral and any related attorneys' fees incurred by Secured
Party (the "Shareholder Repayment"). In the event that Shareholder Repayment is
not received by Shareholder prior to the expiration of the said thirty (30) day
period, then retention of the Collateral by Secured Party shall not be an
available remedy to Secured Party, and Secured Party shall sell the Collateral
at a bona fide public or private sale in accordance with this Agreement and the
applicable provisions of Article 9 of the Uniform Commercial Code then in
effect.
(b) Without limitation on the rights provided to Secured Party
hereinabove set forth, upon delivery of the Collateral to Secured Party by the
Escrow Agent, Secured Party may take from time to time, all or any of the
following actions (and Shareholder hereby appoints Secured Party and Secured
Party's successors and assigns as such Shareholder's true and lawful attorney to
take such actions, irrevocably and with full power of substitution, in the name
of Shareholder or otherwise):
(i) to collect by legal proceedings or otherwise, receive and
receipt for all dividends, interest, principal payments and other sums
now or hereafter payable upon or on account of the Collateral and to
endorse any checks, other instruments or orders in connection
therewith;
(ii) to enter into any extension, reorganization, deposit,
merger, or consolidation agreement, or any agreement in any way
relating to or affecting the Collateral, and in connection therewith,
to deposit or surrender control of such Collateral thereunder, accept
other property in exchange for such Collateral and do and perform such
acts and things as Secured Party may deem proper, and any money or
property received in exchange for such Collateral shall be held by
Secured Party pursuant to the provisions of this Agreement;
(iii) to vote the Pledged Shares;
(iv) make any compromise or settlement Secured Party deems
desirable or proper with reference to the Collateral;
(v) to cause all or any part of the Collateral to be
transferred to Secured Party's name or to the name of a nominee
designated by Secured Party;
(vi) to date and otherwise complete to the extent Secured
Party deems necessary the undated stock powers delivered upon the
signing of this Agreement; and
(vii) to file any claims or take any actions or institute any
proceedings which Secured Party deems necessary or advisable in its
sole and complete discretion and to compromise, litigate or settle the
same.
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(c) Shareholder acknowledges that compliance with the Federal
securities laws, applicable blue sky or other state securities laws or similar
laws analogous in purpose or effect may strictly limit the course of conduct of
Secured Party if Secured Party attempts to dispose of all or any part of the
Collateral and may also limit the extent to which or the manner in which any
subsequent transferee of the Collateral may dispose of the same. Accordingly,
SHAREHOLDER AGREES THAT IF ANY COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE SALE,
SECURED PARTY MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER
ASSURANCES, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO SECURED PARTY,
RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE FEDERAL SECURITIES ACT OF
1933, AS AMENDED, AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED
COMMERCIALLY REASONABLE. Without limiting the generality of the foregoing, the
provisions of this paragraph would apply if, for example, Secured Party were to
place all or any part of the Collateral for private placement by an investment
banking firm, or if such investment banking firm purchased all or any part of
the Collateral for its own account, or if Secured Party placed all or any part
of the Collateral privately with a purchaser or purchasers.
Section 7. Return of Collateral. At such time as the Obligations have
been paid in full, Secured Party shall join with Shareholder in directing the
Escrow Agent to return the Collateral then its possession to Shareholder.
Section 8. Obligations Not Affected. (a) The obligations of Shareholder
under this Agreement shall remain in full force and effect without regard to,
and shall not be impaired or affected by:
(i) any amendment, modification, addition, supplement,
extension, increase or substitution to or for the Obligations, or any
other instrument executed in connection with any of the Obligations, or
any assignment or transfer thereof;
(ii) any exercise, non-exercise or waiver by Secured Party of
any right, remedy, power or privilege under or in respect of the
Obligations, this Agreement or any instrument executed pursuant to it;
(iii) any waiver, consent, extension, indulgence, delay, or
other action or inaction in respect of, the Obligations, this Agreement
or any instrument executed pursuant to such or any assignment or
transfer thereof;
(iv) the disposition, impairment, release, surrender,
substitution, or modification of any other collateral securing the
Obligations or any failure to perfect a security interest in any such
collateral;
(v) any release (including adjudication or discharge in
bankruptcy) or settlement with any person primarily or secondarily
liable for the Obligations (including, without limitation, any maker,
indorser, guarantor or surety);
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(vi) any delay, omission, waiver, or forbearance in
exercising any right or power with respect to the Obligations or this
Agreement;
(vii) any defense arising from the enforceability or
validity of the Obligations or this Agreement or any part thereof, or
the genuineness, enforceability or validity of any agreement relating
thereto;
(viii) any other act or omission which might constitute a
legal or equitable discharge of Shareholder;
(ix) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation, or the like, of
Shareholder or any other person, whether or not by notice or knowledge
of any of the foregoing.
(b) Shareholder hereby waives all defenses based on suretyship or
impairment of collateral, presentment, protest, demand for payment, any right of
set-off, notice of dishonor or default, notice of acceptance of this guaranty,
notice of the incurring of any of the Obligations and notice of any other kind
in connection with the Obligations or this Agreement.
Section 9. Protection of Collateral. Secured Party may, upon ten days'
prior written notice to Shareholder, perform, from time to time, at its option,
any act which Shareholder has agreed under this Agreement to perform and which
Shareholder has failed to perform which Secured Party deems necessary for the
maintenance, preservation or protection of any of the Collateral or of Secured
Party's security interest therein. Shareholder shall, upon demand, repay to
Secured Party all moneys advanced by Secured Party in respect to its Collateral
in connection with the foregoing, together with interest at a rate (or any
maximum lesser rate permitted by applicable law) per annum equal to the interest
rate on the Promissory Note.
Section 10. Reasonable Care. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral in its possession if it takes such action for that purpose as
Shareholder requests in writing with respect to its Collateral, but failure of
Secured Party to comply with any such request shall not in itself be deemed a
failure to exercise reasonable care, and no failure by Secured Party to do any
act with respect to the preservation of any Collateral not so requested by
Shareholder shall be deemed a failure to exercise reasonable care in the custody
and preservation of such Collateral.
Section 11. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by courier, mail or hand
delivery, and will be deemed to have been delivered upon receipt. The addresses
for such communications shall be:
To Shareholder at: Total Identity Corp.
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
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With a copy to: Xxxxxxxxx Xxxxxxxxxx LLP
Suite 108
0000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
To Secured Party at: Xxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
With a copy to: Shapiro, Rosenbaum, Liebschutz & Xxxxxx, LLP
0000 Xxxxxxxxxx Xxxxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telephone (000) 000-0000
Each party shall provide three days prior written notice to the other party of
any change in address, telephone number or facsimile number. Written
confirmation of receipt (a) given by the recipient of such notice, consent,
waiver or other communication, or (b) provided by a nationally recognized
overnight delivery service, shall be rebuttable evidence of personal service or
receipt from a nationally recognized overnight delivery service.
Section 12. Remedies Cumulative. No remedy herein conferred is intended
to be exclusive of any other remedy, but every such remedy shall be cumulative
and in addition to every other remedy conferred in this Agreement, or conferred
on Secured Party by any other agreement, instrument or security, or now or
hereafter existing at law or in equity or by statute.
Section 13. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, and, without limiting the foregoing, all rights and powers under this
Agreement or with respect to Secured Party may be exercised by any successor or
assign of Secured Party.
Section 14. Governing Law; Arbitration. This agreement shall be
governed by and interpreted in accordance with the laws of the state of Florida
without regard to the principles of conflict of laws. Each of the parties
irrevocably and unconditionally agrees that any suit, action or legal proceeding
arising out of or relating to this Agreement shall be settled by binding
arbitration conducted in accordance with the Commercial Rules of Arbitration of
the American Arbitration Association ("AAA"). The arbitration shall take place
at such location as the AAA determines, and shall be heard by three arbitrators
selected in accordance with AAA Rules of Commercial Arbitration. The Arbitrators
shall render a reasoned award and such award shall be signed and dated. Any
witness residing outside of the state in which the arbitration is heard may
testify by affidavit, and such affidavit shall be admissible at any arbitration
hearing. The decision of the arbitrators shall be final and binding upon the
parties, and the arbitration award may be entered in any court of competent
jurisdiction. Initially, each of the parties shall pay one-half of the fees of
the AAA (other than filing fees), including without limitation hearing and
arbitrators' fees, and the parties' obligation to pay such fees shall be
enforceable in any court of competent jurisdiction. The parties to any
arbitration hereunder agree to submit for determination by the arbitrators, the
amount of fees and expenses, including reasonable attorney's fees, to be borne
by each party.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first above written.
"Shareholder"
TOTAL IDENTITY CORP., a Florida corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxxxx
President
"Secured Party"
/s/ Xxxxxx Xxxxx
-----------------------------------------
Xxxxxx Xxxxx
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STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ the _____________________ (_____) common shares of
Total Identity Systems Corp., a New York corporation (the "Corporation"),
standing in the name of the undersigned on the books of the corporation and
represented by Certificate(s) Nos. _______ herewith, and does hereby irrevocably
constitute and appoint ___________________ attorney to transfer the shares on
the books of the corporation, with full power of substitution in the premises.
------------------------------------------
Dated: ____________________ Xxxxxx X. Xxxxxxxxx, as President of Total
Identity Systems Corp., a Florida
corporation
