SECURITY AGREEMENT -STOCK PLEDGE
This SECURITY AGREEMENT - STOCK PLEDGE (as may hereafter be amended,
supplemented or restated from time-to-time in accordance with the terms hereof,
this "Agreement"), dated as of May 18, 2004 is entered into by and among
Millenium Merchant Services, Inc. and Xxxx Xxxxxxx (collectively, "Pledgor") and
Pipeline Data, Inc. (the "Secured Party"), in light of the following facts:
RECITALS
A. Pursuant to that certain Non-Negotiable Secured Promissory Note (the
"Note"), dated as of May 18, 2004, made by Pledgor to Secured Party,
Pledgor has certain obligations to Secured Party.
B. Pledgor in consideration for the receipt of loan proceeds has entered into
the Note;
C. Pursuant to the terms of the Note, Pledgor and Secured Party are entering
into this Agreement as security for the Secured Obligations (as defined
herein).
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth and for other
good and valuable consideration, the parties hereto mutually agree as follows:
1. Definitions and Construction.
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1.1 Definitions. All initially capitalized terms used but not defined in
this Agreement shall have the meanings assigned to such terms in the Note. In
addition, the following terms, as used in this Agreement, have the following
meanings:
"Code" means the Delaware Uniform Commercial Code, as amended and
supplemented from time to time, and any successor statute.
"Collateral" means the Pledged Shares.
"Event of Default" has the meaning given to such term in Section 5.
"Pledged Shares" means shares of common stock of Secured Party
securing Pledgor's obligations under the Note pursuant to Section 3 of
the Note.
"Secured Obligations" means any and all obligations, indebtedness and
liability of every kind and character, owed to the Secured Party,
pursuant to the terms and conditions of the Note.
2. Pledge. As security for the prompt and complete payment and performance
of the Secured Obligations, Pledgor hereby delivers, pledges, and grants to
Secured Party a continuing security interest in the Collateral. All certificates
or instruments representing or evidencing the Collateral shall be delivered
promptly to and held by the Secured Party and shall be held in suitable form for
transfer or assignment in blank, all in form and substance reasonably
satisfactory to Secured Party.
3. Further Assurances. Pledgor agrees that it shall cooperate with Secured
Party and shall execute and deliver, or cause to be executed and delivered, to
Secured Party all stock powers, proxies, assignments, financing statements,
instruments, and other documents, and shall take all further action, at the
expense of Pledgor, from time to time requested by Secured Party, in order to
maintain a continuing, first-priority, perfected security interest in the
Collateral in favor of Secured Party, and to enable Secured Party to exercise
and enforce its rights and remedies hereunder with respect to the Collateral,
and Pledgor agrees that it shall execute and deliver to Secured Party at Secured
Party's request any further applications, agreements, documents and instruments,
and shall perform any and all acts deemed necessary by Secured Party to carry
into effect the terms, conditions, and provisions of this Agreement and the
transactions connected herewith.
4. Voting Rights; Dividends; Etc. During the term of this Agreement and so
long as there is no uncured "Event of Default":
4.1 Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to any of the Pledged Shares.
4.2 Pledgor shall be entitled to receive and retain any and all dividends
and distributions paid in respect of any of the Pledged Shares.
5. Event of Default. The Failure to repay the Secured Obligations when due
or an Event of Default of the terms of the Note shall constitute an event of
default ("Event of Default") under this Agreement.
6. Remedies Upon Default. Upon the occurrence and continuance of an Event
of Default, Secured Party shall have, in addition to any other rights given by
law or in this Agreement, the Note, or in any other agreement between Secured
Party, on the one hand, and Pledgor, on the other hand, all of the rights and
remedies with respect to the Collateral of a secured party under the Code, and
also shall have, without limitation, the following rights, which Pledgor hereby
agrees to be commercially reasonable:
6.1 to transfer all or any part of the Collateral into the Secured Party's
name or the name of its nominee or nominees;
6.2 all rights of Pledgor to exercise the voting and other consensual
rights that it would otherwise be entitled to exercise pursuant to
Section 4.1 and to receive the dividends and distributions that it
would otherwise be authorized to receive and retain pursuant to
Section 4.2 shall, at Secured Party's option, cease, and all such
rights shall, at Secured Party's option, thereupon become vested in
Secured Party, and Secured Party shall, at its option, thereupon have
the sole right to exercise such voting and other consensual rights and
to receive and hold as Collateral such dividends and distributions.
Any payments received by Pledgor contrary to the provisions of this
Section shall be held in trust by Pledgor or the benefit of Secured
Party, shall be segregated from other funds of Pledgor, and shall be
promptly paid over to Secured Party, with any necessary endorsement;
6.3 to vote the Pledged Shares (whether or not transferred into the name
of the Secured Party), and give all consents, waivers and
ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof; PLEDGOR
HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS SECURED PARTY THE PROXY
AND ATTORNEY-IN-FACT OF PLEDGOR, COUPLED WITH AN INTEREST, WITH FULL
POWER OF SUBSTITUTION TO DO SO; SUCH PROXY SHALL CONTINUE IN FULL
FORCE AND EFFECT AND TERMINATE UPON THE INDEFEASIBLE PAYMENT IN FULL
OF THE SECURED OBLIGATIONS.
6.4 at any time or from time to time, to sell, assign and deliver, or
grant Options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the
time or place of sale or adjournment thereof or to redeem or otherwise
(all of which are hereby waived by Pledgor), for cash, on credit or
for other property, for immediate or future delivery without any
assumption of credit risk, and for such price or prices and on such
terms as the Secured Party in its absolute discretion may determine;
provided, that at least five days notice of the time and place of any
such sale shall be given to Pledgor. Secured Party shall not be
obligated to make any such sale of Collateral regardless of whether
any such notice of sale has therefore been given. Pledgor hereby
waives any other requirement of notice, demand, or advertisement for
sale, to the extent permitted by law. Pledgor hereby waives and
releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after
sale hereunder, and all rights, if any, of marshaling the Collateral
and any other security for the Secured Obligations or otherwise. At
any such sale, unless prohibited by applicable law, Secured Party may
bid for and purchase all or any part of the Collateral so sold free
from any such right or equity of redemption. Secured Party shall not
be liable for failure to collect or realize upon any or all of the
Collateral or for any delay in so doing nor shall Secured Party be
under any obligation to take any action whatsoever with regard
thereto;
6.5 to buy the Collateral, in its own name, or in the name of a designee
or nominee. Secured Party shall have the right to execute any document
or form, in its name or in the name of the Pledgor, that may be
necessary or desirable in connection with such sale of the Collateral.
6.6 to sell the Collateral by a private placement, restricting bidders and
prospective purchasers to those who will represent and agree that they
are purchasing for investment only and not for distribution. In so
doing, Secured Party may solicit offers to buy the Collateral, or any
part of it for cash, from a limited number of investors deemed by
Secured Party, in its reasonable credit judgment, to be responsible
parties who might be interested in purchasing the Collateral. If
Secured Party shall solicit such offers from not less than four such
investors, then the acceptance by Secured Party of the highest offer
obtained therefore shall be deemed to be a commercially reasonable
method of disposition of such Collateral, even though the sales price
established and/or obtained may be substantially less than the price
that would be obtained pursuant to a public offering.
7. Secured Party as Pledgor's Attorney-in Fact. Pledgor hereby irrevocably
appoints Secured Party as its attorney-in-fact to arrange for the transfer, at
any time after the occurrence and during the continuance of an Event of Default,
of the Collateral on the books of Company to the name of Secured Party or to the
name of Secured Party's nominee. Pledgor further authorizes Secured Party to
perform any and all acts which Secured Party reasonably deems necessary, after
the occurrence and during the continuance of an Event of Default, for the
protection and preservation of the Collateral or of the value of Secured Party's
security interest therein, including but not limited to receiving income thereon
as additional security hereunder, all at Pledgor's expense, and Pledgor agrees
to repay Secured Party promptly upon demand any amounts expended hereunder by
Secured Party, together with interest thereon. Pledgor further grants to Secured
Party a power of attorney coupled with an interest to execute all agreements,
forms, applications, documents and instruments and to take all actions and do
all things as could be executed, taken, or done by Pledgor in connection with
the protection and preservation of the Collateral or this Agreement if Pledgor
does not timely do so. This power of attorney is irrevocable and coupled with an
interest, and authorizes Secured Party to act for Pledgor in connection with the
matters described herein without notice to or demand upon Pledgor.
8. General Provisions.
8.1 No Implied Waivers. No act, failure, or delay by Secured Party shall
constitute a waiver of any of its or the Secured Party's rights and
remedies. No single or partial waiver by Secured Party of any
provision of this Agreement, or of a breach or default hereunder or
thereunder, or of any right or remedy which the Secured Party may
have, shall operate as a waiver of any other provision, breach,
default, right, or remedy or of the same provision, breach, default,
right, or remedy on a future occasion. No waiver by Secured Party
shall affect its rights to require strict performance of this
Agreement.
8.2 Amendments in Writing. This Agreement cannot be changed or terminated
orally, but only by a writing signed by each party hereto. All prior
agreements, understandings, representations, warranties, and
negotiations, if any, are merged into this Agreement.
8.3 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this
Agreement. Any party delivering an executed counterpart of this
Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually
executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.
8.4 Termination By Secured Party. After termination of the Note and when
Secured Party has received payment and performance, in full, of the
Secured Obligations, Secured Party shall execute and deliver Pledgor
such Uniform Commercial Code termination statements and other
documents as shall be reasonably requested by Pledgor to effect the
termination of all of the security interests granted by Pledgor
hereunder and, to the extent that the Collateral has not been disposed
of in accordance with this Agreement and subject to any rights of
third parties superior to Pledgor, Secured Party shall forthwith cause
to be assigned, transferred and delivered, any remaining Collateral
and money received in respect thereof to, or to the order of, Pledgor.
8.5 Governing Law; Severability of Provisions. This Agreement is made and
entered into under the laws of the State of Delaware, and the laws of
that State (without giving effects to the principles of conflicts of
laws thereof) shall govern the validity and interpretation hereof and
the performance by the parties hereto of their respective duties and
obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
Millenium Merchant Services, Inc.
By: /s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx, President
/s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx
Pipeline Data, Inc.
By: /s/ XxxXxxxxxxx Xxxxx
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XxxXxxxxxxx Xxxxx, President
