SECURITY INTEREST AND PLEDGE AGREEMENT
SECURITY
INTEREST AND PLEDGE AGREEMENT (“Pledge Agreement”) dated as July 30, 2009, by
and among OmniReliant Holdings, Inc. (“Secured Party”), Beyond Commerce, Inc. a
Nevada corporation with its principal business address at 0000 Xxxxx Xxxxx,
Xxxxx 0000, Xxxxxxxxx, XX 00000 (the “Company” or the “Debtor”), and Beyond
Commerce, Inc., as pledgor (the “Pledgor”).
RECITALS
A. Reference
is made to (i) that certain Purchase Agreement of even date herewith (the
“Purchase Agreement”) to which the Company and the Secured Party are parties,
and (ii) the Transaction Agreements (as that term is defined in the Loan
Agreement), including, without limitation, the Debenture. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the relevant Transaction Agreements.
B. Pursuant
to the Transaction Agreements, the Debtor has certain obligations to the Secured
Party (all such obligations, the “Obligations”), including, but not limited to,
obligations to pay principal and interest of the Debenture, which was issued in
the original aggregate principal amount of $641,663, on the Maturity
Date. The Debenture Obligations and the Warrant Obligations are
secured by the pledge of certain stock of the Company. The
obligations of the Company and of the Pledgor, if any, under the Debenture are
referred to collectively as the “Note Obligations.” The obligations
of the Company and of the Pledgor, if any, under the Warrant are referred to
collectively as the “Warrant Obligations.”
C.
To secure the Debenture Obligations and the
Warrant Obligations, the Pledgor has agreed to pledge certain shares of treasury
Common Stock of the Company and to issue the certificate in the name of the
Secured Party as security for the performance of the Debenture Obligations and
the Warrant Obligations.
D.
The Pledgor are shareholders, subsidiaries and/or affiliates of the Debtor
and have determined that it is in the Pledgor’ best interests, including to the
benefit of the other interests of the Pledgor in the Company, to provide the
pledge referred to herein.
E. The
Secured Party is willing to enter into the Purchase Agreement and the other
Transaction Agreements only upon receiving the Pledgor’ pledge of certain stock
of the Company, as set forth in this Pledge Agreement.
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and conditions
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1.
Grant of
Security Interest.
(a) To
secure the Debenture Obligations and the Warrant Obligations of Debtor, the
Pledgor hereby pledge to the Secured Party (i) all of the shares of Common Stock
(the “Pledged Shares”) set forth on the attached Schedule 2 of this
Agreement. Unless otherwise set forth on Schedule 2 of this
Agreement, the Pledgor are the beneficial and record owner of the Pledged Shares
set forth opposite the Pledgor’s name on such Schedule. Such Pledged
Shares are hereinafter referred to as the “Collateral.”
(b) The
Company represents and warrants to the Secured Party that the Pledged Shares are
duly authorized, validly issued, fully paid and non-assessable and that it will
not permit the transfer of the Pledged Shares except in accordance with this
Pledge Agreement while the same is in effect.
(c) (i) The
Company has given written notice to the Transfer Agent instructing
the issuance of the Pledged Shares in the name of the Secured Party to be held
as collateral; and
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(ii) The
Pledgor hereby consent to the provisions of the preceding subparagraph (i) and
authorizes the Company to provide such notice and instructions to the Transfer
Agent.
2. Obligations
Secured. During the term hereof, the Collateral shall secure
the following:
(a) The
performance by the Company of the Debenture Obligations and the Warrant
Obligations; and
(b) The
payment of all fees and the delivery of all stock other than principal and
interest under the Debenture.
(c) The
performance by the Pledgor of their obligations, covenants, and agreements under
this Agreement.
The
obligations, covenants and agreements described in clauses (a), (b) and (c) are
the “Obligations.”
3.
Perfection of Security
Interests. Upon execution of this Pledge Agreement by the
Debtor and the Pledgor, the Pledgor shall deliver and transfer possession of the
stock certificates identified opposite the Pledgor’s name on Schedule 2 of this
Agreement together with stock transfer powers duly executed in blank by the
registered owner of the shares represented by such Certificates, with
appropriate Medallion signature guaranty (“Stock Powers”), to the Secured
Party.
The
Collateral will be held by the Secured Party or the Brokerage Firm, to perfect
the security interest of the Secured Party, until the earlier of
(i) the
payment in full of all amounts due under the Debenture, or
(ii)
foreclosure of Secured Party's security interests as provided
herein.
(c) The
Debtor and the Pledgor hereby appoint the Secured Party, as attorney-in-fact
with powers of substitution, to execute all documents and perform all acts in
order to perfect and maintain a valid security interest for Secured Party in the
Collateral.
4.
Reserved.
5.
Pledgors’
Warranty. The Pledgor represents and warrants hereby to the
Secured Party as follows with respect to the Pledged Shares set forth opposite
the Pledgor’s name on Schedule 2 to this Agreement:
A. With respect to title to the
Transferred Shares
(i) that
upon transfer by the Pledgor of the Pledgor’s Certificates and Stock Powers to
Secured Party pursuant to this Agreement at such time, if any, as contemplated
hereby upon the occurrence of an Event of Default, the purchaser of the Pledged
Shares or the Secured Party, as contemplated herein, as the case may be, will
have good title (both record and beneficial) to the relevant Pledged
Shares;
(ii) that
there are no restrictions upon transfer and pledge of the Pledged Shares
pursuant to the provisions of this Agreement except the restrictions, to the
extent applicable, imposed by Rule 144 under the Securities Act of
1933;
(iii) that
the Pledged Shares are free and clear of any encumbrances of every nature
whatsoever, the Pledgor is the sole owner of the Pledged Shares, and such shares
are duly authorized, validly issued, fully paid and non-assessable;
(iv) that
the Pledgor has owned the Pledged Shares since the date specified on Schedule 2
to this Agreement and that such shares were fully paid for as of such specified
date; and
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(v) that
the Pledgor agrees not to grant or create, any security interest, claim, lien,
pledge or other encumbrance with respect to the Pledgor’s Pledged Shares or
attempt to sell, transfer or otherwise dispose of any of such shares until the
Obligations have been paid in full or this Agreement has
terminated.
B. With respect to certain
other matters:
(i) that
the Pledgor has made necessary inquiries of the Company and believes that the
Company fully intends to fulfill and has the capability of fulfilling the
Obligations to be performed by the Company in accordance with the terms of the
Transaction Agreements;
(ii) that
the Pledgor is not acting, and has not agreed to act, in any plan to sell or
dispose of the Pledged Shares in a manner intended to circumvent the
registration requirements of the Securities Act of 1933, as amended, or any
applicable state law;
(iii) that
Pledgor has been advised by counsel of the elements of a bona-fide pledge for
purposes of Rule 144(d)(3)(iv) under the Securities Act of 1933, as amended,
including the relevant SEC interpretations and affirms the pledge of shares by
the Pledgor pursuant to this Pledge Agreement will constitute a bona-fide pledge
of such shares for purposes of such Rule;
(iv) that
this Pledge Agreement constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms (except as the enforcement
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and similar laws, now or hereafter in effect);
and
(v) that
the Pledgor’s address is as provided under the Pledgor’s signature on the
signature page hereof.
6.
Reports
under Securities Act and Exchange Act. With a view to making
available to Secured Party the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Secured Party to sell securities of the Company to the public
without Registration (“Rule 144”), the Company agrees to:
(i) make
and keep public information available, as those terms are understood and defined
in Rule 144;
(ii) file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(iii) until
the date when the Secured Party may sell all Registrable Securities
under Rule 144 without volume or other restrictions or limits (the “Unrestricted
Sale Date”), furnish to the Secured Party so long as the Secured Party owns or
has a security interest in the Pledged Shares (a “Holder”), promptly upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) if not available on the SEC’s XXXXX system, a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (iii) such other information as may be reasonably
requested to permit the Secured Party to sell such securities pursuant to Rule
144 without registration; and
(d) at
the request of any Holder, give its Transfer Agent instructions (supported by an
opinion of the Company’s counsel, if required or requested by the Transfer
Agent) to the effect that, upon the Transfer Agent’s receipt from such Holder
of
(i) a
certificate (a “Rule 144 Certificate”) certifying (A) that the Holder’s holding
period (as determined in accordance with the provisions of Rule 144) for the
Pledged Shares which the Holder proposes to sell (the “Securities Being Sold”)
is not less than (6) six months and (B) as to such other matters as may be
appropriate in accordance with Rule 144 under the Securities Act,
and
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(ii) an
opinion of counsel acceptable to the Company (for which purposes it is agreed
that Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP shall be deemed acceptable if not given
by the Company’s counsel) that, based on the Rule 144 Certificate, Securities
Being Sold may be sold pursuant to the provisions of Rule 144, even in the
absence of an effective Registration Statement,
the
Transfer Agent is to effect the transfer of the Securities Being Sold and issue
to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent’s books and records (except to the
extent any such legend or restriction results from facts other than the identity
of the Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Holder). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
7. Voting
Rights. Unless and until the Secured Party has exercised its
rights under this Pledge Agreement to foreclose its security interest in the
Collateral, the Pledgor shall have the right to exercise any voting rights
evidenced by, or relating to, the Collateral.
8. Warrants and
Options. In the event that, during the term of this Pledge
Agreement, subscription, warrants, dividends, or any other rights or option
shall be issued in connection with the Collateral, such warrants, dividends,
rights and options shall be immediately delivered to Secured Party to be held
under the terms hereof in the same manner as the Collateral.
9. Preservation of the Value of
the Collateral and Reimbursement of Secured Party. Pledgor
shall pay all taxes, charges, and assessments against the Collateral and do all
acts necessary to preserve and maintain the value thereof. On failure
of Pledgor so to do, Secured Party may make such payments on account thereof as
(in Secured Party's discretion) is deemed desirable, and Pledgor shall reimburse
Secured Party immediately on demand for any and all such payments expended by
Secured Party in enforcing, collecting, and exercising its remedies
hereunder.
10. Default and
Remedies.
(a) For
purposes of this Agreement, “Event of Default” shall mean any one or more of the
following events:
(i) any
default in the performance by the Company or any Pledgor of any of the Debenture
Obligations, after the expiration, without cure, of the cure period (but only if
any such cure period is specifically provided in the Transaction Agreements and
without any regard to any cure period if no such cure period is provided; it
being specifically acknowledged by the Company and the Pledgor that all payment
obligations are time of the essence obligations, with no cure periods provided),
or
(ii) a
breach by the Company or Pledgor of any of the its respective
representations, warranties, covenants or agreements in this Pledge Agreement,
subject to applicable cure periods.
(b) During
the term of this Pledge Agreement, the Secured Party shall have the following
rights after any Event of Default and for so long as the Obligations are not
satisfied in full:
(i) the
rights and remedies provided by the Uniform Commercial Code as adopted by the
State of New York (as said law may at any time be amended), except that the
Secured Party waives any right to a deficiency pursuant to Section 9-608 thereof
or otherwise;
(ii) the
right to receive and retain all dividends, payments and other distributions of
any kind upon any or all of the Pledged Shares as additional Collateral;
and
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(iii) the
right to sell, at a public or private sale, the Collateral or any part thereof
for cash, upon credit or for future delivery, and at such price or prices in
accordance with the Uniform Commercial Code (as such law may be amended from
time to time); it being understood that one or more of the Secured Party may,
but shall not be required to, take such actions jointly. Upon any
such sale, Secured Party shall have the right to deliver, assign and transfer to
the purchaser thereof the Collateral so sold. Secured Party shall
give the Pledgor not less than ten (10) days written notice of its intention to
make any such sale. Any such sale shall be held at such time or times
during ordinary business hours and at such place or places as Secured Party may
fix in the notice of such sale. Secured Party may adjourn or cancel
any sale or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of
all or any part of the Collateral upon terms calling for payments in the future,
any Collateral so sold may be retained by Secured Party until the selling price
is paid by the purchaser thereof, but Secured Party shall incur no liability in
the case of the failure of such purchaser to take up and pay for the Collateral
so sold and, in the case of such failure, such Collateral may again be sold upon
like notice. Secured Party, however, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the security interest and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction, the Pledgor having been given due notice of all such
action. Secured Party shall incur no liability as a result of a sale
of the Collateral or any part thereof.
(iv) in
addition to its rights and remedies under this agreement, the Debenture and all
Transaction Agreements, the Company shall have full recourse against any real,
personal, tangible or intangible assets of Pledgors, and may pursue any legal or
equitable remedies that are available to it.
11. Waiver. Each
of the Debtor and the Pledgor waives any right that it may have to require
Secured Party to proceed against any other person, or proceed against or exhaust
any other security, or pursue any other remedy Secured Party may
have.
12. Term of
Agreement. This Pledge Agreement shall continue in full force
and effect until the later of the payment in full of the Debenture, the exercise
of the Warrant in full or the expiration of the Warrant (collectively, the
“Pledge Termination Events”. Upon the last Pledge Termination Event
to occur, the security interests in the relevant Collateral shall be deemed
released, and any portion of the Collateral not transferred to or sold by any
one or more Secured Party shall be returned to the Pedgors. Upon
termination of this Pledge Agreement, the relevant Collateral shall be returned
within five (5) Trading Days to Debtor or to the Pledgor, as contemplated
above.
13. Reserved.
14. General
Provisions:
14.1 Binding Agreement; No
Modification of Transaction Agreements. This Pledge Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective parties hereto. Except to the extent
specifically provided herein, nothing in this Pledge Agreement shall limit or
modify any provision of any of the Transaction Agreements
14.2 Captions. The
headings used in this Pledge Agreement are inserted for reference purposes only
and shall not be deemed to define, limit, extend, describe, or affect in any way
the meaning, scope or interpretation of any of the terms or provisions of this
Pledge Agreement or the intent hereof.
14.3 Counterparts. This
Pledge Agreement may be signed in any number of counterparts with the same
effect as if the signatures upon any counterpart were upon the same
instrument. All signed counterparts shall be deemed to be one
original. A facsimile transmission of this signed Pledge Agreement
shall be legal and binding on all parties hereto.
14.4 Further
Assurances. The parties hereto agree that, from time to time
upon the written request of any party hereto, they will execute and deliver such
further documents and do such other acts and things as such party may reasonably
request in order fully to effect the purposes of this Pledge Agreement. The
Transfer Agent Instructions annexed hereto are deemed an integral part of this
Pledge Agreement.
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14.5 Waiver of
Breach. Any waiver by either party of any breach of any kind
or character whatsoever by the other, whether such be direct or implied, shall
not be construed as a continuing waiver of or consent to any subsequent breach
of this Pledge Agreement.
14.6 Cumulative
Remedies. The rights and remedies of the parties hereto shall
be construed cumulatively, and none of such rights and remedies shall be
exclusive of, or in lieu or limitation of any other right, remedy, or priority
allowed by applicable law.
14.7 Amendment. This
Pledge Agreement may be modified only in a written document that refers to this
Pledge Agreement and is executed by Secured Party, the Pledgor and the
Debtor.
14.8 Interpretation. This
Pledge Agreement shall be interpreted, construed, and enforced according to the
substantive laws of the State of New York.
14.9 Governing
Law. This Pledge Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Each of the
parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the County of New York or the state courts of the State of
New York sitting in the County of New York in connection with any dispute
arising under this Pledge Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non coveniens, to the
bringing of any such proceeding in such jurisdictions.
14.10 WAIVER OF JURY
TRIAL. The parties to this Pledge Agreement hereby waive a
trial by jury in any action, proceeding or counterclaim brought by any of them
against any other in respect of any matter arising out or in connection with
this Pledge Agreement.
14.11 Notice. Any
notice or other communication required or permitted to be given hereunder shall
be effective upon receipt. Such notices may be sent (i) in the United
States mail, postage prepaid and certified, (ii) by express courier with
receipt, (iii) by facsimile transmission, with a copy subsequently delivered as
in (i) or (ii) above. Any such notice shall be addressed or
transmitted as follows:
If to the
Secured Party, to:
OMNI
RELIANT HOLDINGS, INC.
00000
Xxxxxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
Tel:
000-000-0000
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If to
Beyond Commerce Inc., to: Xxxx X Xxxxxx
0000
Xxxxx Xxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxx 00000
Tel: 000-000-0000
Fax: 888.311.9569
Any party
may change its address by notice similarly given to the other parties (except
that a Secured Party need not give notice to other Secured Party).
14.12 Acknowledgement by Debtor
and Pledgors. In the event that any provision of the
Transaction Agreements, the Guarantee or this Pledge Agreement as applied to any
party or circumstances shall be adjudged by a court to be invalid or
unenforceable, each of the Debtor or the Pledgor, as the case may be,
acknowledges and agrees that this Pledge Agreement shall remain valid and
enforceable in all respects against the Debtor and the Pledgor.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.
THE
SIGNATURES OF THE PARTIES ARE ON THE NEXT PAGE.]
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IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the day, month
and year first above written.
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OMNI
RELIANT HOLDINGS, INC.
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By:
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Name:
Xxxx Xxxxxxxx
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Title:
Chief Executive Officer
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BEYOND
COMMERCE, INC.
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By:
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Name:
Xxxxxx XxXxxxx
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Title:
Chief Executive Officer
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BEYOND
COMMERCE, INC., Pledgor
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By:
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Name:
Xxxxxx XxXxxxx
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Title:
Chief Executive
Officer
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SCHEDULE
2
The
following shares are pledged hereunder as the Pledged Shares, each certificate
in the name of:
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Holder's Name
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Certificate
No.
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No. of Shares
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Date of Stock
Certificate
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Date of Acquisition
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||||||||||||
| 10,802,416 | ||||||||||||||||
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Total
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10,802,416 | |||||||||||||||
*Shares
are pledged by the Pledgor and have been issued in the name of the Secured Party
to be held as collateral.
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