Exhibit 10.7
SECURITY AND PLEDGE AGREEMENT
THIS AGREEMENT, dated January 1, 2008, made by NexHorizon Communica-
tions, Inc. ("Pledgor") to Chula Vista Cable, Ltd. ("Lender").
PRELIMINARY STATEMENTS:
Lender has entered into a Note dated as of even date herewith (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Loan Agreement," the terms defined therein and not otherwise
defined herein being used herein as therein defined) with the Pledgor. It is a
condition precedent to the making of the Loan by Lender under the Convertible
Promissory Note that Pledgor shall have made the pledge contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lender to make a Loan under the Loan Agreement, Pledgor hereby agrees as
follows:
SECTION 1. Pledge. Pledgor hereby pledges, transfers and assigns to
Lender and any assigns and grants to Lender a security interest in, the
following (the "Pledged Collateral"):
1,487,500 shares of Series A Convertible Preferred Stock.
SECTION 2. Security for Obligations. This Agreement secures the payment
of all obligations present or future, direct or indirect, absolute or
contingent, matured or not, of Pledgor to Lender under that certain Convertible
Promissory Note, the note evidencing the loan made thereunder (the "Note"),
whether for principal, interest, fees, expenses or otherwise, and all
obligations present or future, direct or indirect, absolute or contingent,
matured or not of Pledgor to Lender under this Agreement and Note (all such
obligations of Pledgor being the "Obligations").
SECTION 3. Delivery of Pledged Collateral.
(a) All certificates or instruments representing or evidencing any
Pledged Collateral (including without limitation the Pledged Shares upon the
purchase thereof by Pledgor) shall be delivered to and held by or on behalf of
Lender pursuant hereto and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to Lender. Lender shall have
the right, at any time in its discretion and without notice to Pledgor, to
transfer to or to register in the name of Lender or any of its nominees any or
all of the Pledged Collateral, subject only to the revocable rights specified in
Section 7(a). In addition, Lender shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
Certificates or instruments of smaller or larger denominations.
(b) Pledgor shall upon the request of Lender deliver, or cause to be
delivered to Lender any or all of the Pledged Collateral not referred to in
Section 3(a) or (b) if Lender determines in its sole discretion that such
delivery will enhance, protect, maintain, create or otherwise aid Lender in the
perfection or maintenance of the security interests created hereby.
SECTION 4. Perfecting Security Interest.
(a) Pledgor shall cause a UCC-1 to be filed with the Secretary of State
of California evidencing the pledge of all of Pledgor's assets as listed herein,
and Pledgor shall cause any other filings to be made and assist Lender in giving
any notice as may be required to perfect or maintain Lender's security interest
in Pledgor's Series A Preferred Shares.
SECTION 5. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Pledgor is the full and legal owner of the Pledged Shares, and no
other person has or will have any superior right, title, interest or claim in or
to the Pledged Shares or to the proceeds thereof, or any part thereof. The
Pledged Shares have been duly authorized and validly issued and are fully paid
and nonassessable.
(b) Pledgor is, and as to the Pledged Collateral acquired after the
date hereof, will be, the legal and beneficial owner of the Pledged Collateral
free and clear of any lien, security interest, option or other charge or
encumbrance, except for the security interest created by this Agreement.
(c) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral securing the payment of the Obligations.
(d) Pledgor is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power, capacity and authority (i) to own, lease and operate its
assets, properties and business and to carry on its business as now being
conducted, and (ii) to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement, the Loan
Agreement and the Promissory Note and the consummation of the transactions
contemplated hereby and therein have been duly authorized by all necessary
corporate action by Pledgor.
(e) The execution, delivery and performance by Pledgor of this
Agreement do not and will not violate or conflict with or result in a breach of
or constitute (or with notice or lapse of time or both constitute) a default
under (a) the incorporating documents or by-laws, (b) any indenture, mortgage,
bond, license, permit or loan or credit agreement or any other agreement or
instrument to which Pledgor is a party or by which Pledgor or any of its
properties may be bound or affected or (c) any statute or law or judgment,
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decree, order, writ, injunction, regulation or rule of any court or governmental
authority of any state or of the United States or any political subdivision of
the foregoing. The execution, performance and delivery by Pledgor of this
Agreement will not result in the creation of any lien with respect to the assets
of Pledgor except for the lien created hereby with respect to the Pledged
Collateral.
(f) This Agreement constitutes a legal, valid and binding obligation of
Pledgor enforceable against Pledgor in accordance with its terms except as
enforceability may be limited by (i) any applicable bankruptcy, insolvency,
reorganization, winding up, moratorium or other similar laws now or hereafter in
effect relating to the enforcement of creditors' rights and (ii) general
equitable principles including rules governing the granting of specific
performance and injunctive relief, which are within the discretion of the court
having jurisdiction.
(g) No authorization, consent, validation, approval, license,
qualification or forma exemption from, and no filing, declaration or
registration with, any court, governmental agency or regulatory authority or any
securities exchange or any other person, whether located in the United States or
elsewhere, is required (i) in connection with the authorization, execution,
delivery or performance by Pledgor of this Agreement, the Note and the
transactions contemplated thereby other than the Regulatory Approvals or the
Consulting Agreement, (ii) for the pledge by Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance by
Pledgor of this Agreement, the Loan Agreement and Promissory Note (ii) for the
pledge by Pledgor of the Collateral pursuant to this Agreement or for the
execution, delivery or performance of the Note by Pledgor or (iii) for the
exercise by Lender of the voting or other rights provided for in this Agreement
or the remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with such disposition by laws affecting
the offering and sale of securities generally).
(h) Complete and correct copies of the incorporating documents and
by-laws of Pledgor as of the date hereof have been provided to the Lender on or
prior to the date hereof and are in full force and effect.
(i) Except as disclosed herein there is no action, suit, inquiry,
litigation, arbitration or administrative or legal proceeding presently pending
or, to the best knowledge of Pledgor, threatened against Pledgor before any
court or administrative agency of any country or subdivision thereof.
(j) Neither Pledgor nor any portion of Pledgor's property is immune or
exempt from the exercise of jurisdiction, whether arising through service or
notice of judicial process, attachment or seizure prior to judgment, attachment
or seizure in aid of execution following judgment or otherwise, by the courts of
the State of California or any other state, province, country, nation or other
territorial jurisdiction in which any portion of Pledgor's property is located
or business is conducted except to the extent, if any, that jurisdiction may be
limited by bankruptcy, insolvency, reorganization and other similar laws now or
hereinafter in effect relating to the enforcement of creditors' rights
generally.
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(k) Pledgor (i) is not an "investment company" as that term is defined
in the Investment Company Act of 1940, as amended, (ii) does not directly or
indirectly control and is not controlled by a company which is an "investment
company" as that term is defined in such Act and (iii) is not otherwise subject
to regulation under such Act.
(l) The representations and warranties set forth herein hereof shall
survive the execution of this Agreement and shall continue as long as there
shall be any Indebtedness outstanding under this Agreement as if repeated and
given again to Lender on each day during the term hereof.
SECTION 6. Further Assurances. Pledgor agree that at any time and from
time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that Lender may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Lender to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral, including without limitation filing one or
more UCC-1s to protect Lender's security interest in Pledgor Rights and making
any filing statement or appearance before or with any insurance commission or
other regulatory authority. Pledgor authorizes Lender to file, in jurisdictions
where this authorization will be given effect, a financing statement signed only
by Lender covering the Pledged Collateral. Pledgor will join Lender at its
request in executing all financial statements in form satisfactory to Lender and
Pledgor will pay the cost of filing or recording any such financial statement or
of this Agreement if it is deemed by Lender to be necessary or desirable.
SECTION 7. Transfers and Other Liens; Additional Shares.
(a) Pledgor agree that it will not (i) sell or otherwise dispose of, or
grant any option with respect to, any of the Pledged collateral, or (ii) create
or permit to exist any lien, security interest or other charge or encumbrance
upon or with respect to any of the Pledged Collateral, except for the security
interest under this Agreement.
(b) Pledgor agree that it will (i) cause the issuer of the Pledged
Shares not to issue any stock or other securities in addition to or in
substitution for the pledged Shares issued by such issuer, except to Pledgor and
(ii) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of the
issuer of the Pledged Shares.
SECTION 8. Lender Appointed Attorney-in-Fact. Pledgor hereby appoint
Lender as Pledgor's attorney-in-fact, with full authority in the place and stead
of Pledgor and in the name of Pledgor or otherwise, from time to time in
Lender's discretion to take any action and to execute any instrument which
Lender may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect all
instrument made payable to Pledgor representing any dividend or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.
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SECTION 9. Lender May Perform. If Pledgor fail to perform any agreement
contained herein, Lender may itself perform, or cause performance of, such
agreement, and the expenses of Lender incurred in connection therewith shall be
payable by Pledgor under Section 13.
SECTION 10. Reasonable Care. Lender shall exercise reasonable care in
the custody of the Pledged Collateral in its possession or control hereunder at
any time. Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which
lender accords its own property, it being understood that Lender shall not have
any responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not Lender has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against any
parties with respect to any Pledged Collateral.
SECTION 11. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
(a) Lender may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code (the "Code") in effect in the State of California,
except as required by mandatory provisions of law and except to the extent that
the validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by the
laws of a jurisdiction other than the State of California, at that time, and
Lender may also, without notice except as specified below, exercise any voting
or other consensual rights with respect to the Pledged Collateral, sell the
Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of Lender's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as Lender may deem commercially reasonable. Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Lender shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash held by Lender as Pledged Collateral and all cash proceeds
received by Lender in respect of any sale of, collection from or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of Lender, be held by Lender as collateral for, and then or at any
time thereafter applied (after payment of any amounts payable to Lender pursuant
to Section 13) in whole or in part by Lender against, all or any part of the
Obligations in such order as Lender shall elect. Any surplus of such cash or
cash proceeds and interest accrued thereon, if any, held by Lender and remaining
after payment in full of all the Obligations shall be paid over to Pledgor or to
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whomsoever may be lawfully entitled to receive such surplus, provided that
Lender shall have no obligation to invest or otherwise pay interest on any
amounts held by it in connection with or pursuant to this Agreement.
(c) All rights and remedies of Lender expressed herein are in addition
to all other rights and remedies possessed by Lender in the Loan Agreement, all
third party guaranties and any other agreement or instrument relating to the
Obligations.
SECTION 12. Expenses. Pledgor will upon demand pay to Lender the amount
of any and all reasonable expenses, including the reasonable fees and expenses
of its counsel and of any experts and agents, which Lender may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Lender hereunder of (iv) the failure by Pledgor to perform or observe
any of the provisions hereof.
SECTION 13. Security Interest Absolute. All rights of Lender and secur-
ity interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Promissory
Note, or any other agreement or instrument relating thereto;
(ii) any change in the time, manner, place or terms of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Promissory Note;
(iii) any sale, exchange, release, surrender or nonperfection
of any other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations or any setoff
against all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a third-party Pledgor.
SECTION 14. Amendments, etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 15. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic
communication), mailed or telegraphed or delivered to it, addressed to it at
such party's address specified in the Loan Agreement; or as to either party at
such other address as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications shall, when mailed or telegraphed,
respectively, be effective when deposited in the mails or delivered to the
telegraph company, respectively, addressed as aforesaid.
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SECTION 16. Continuing Security Interest; Transfer of Note. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) remain in full force and effect until payment in full of the
Obligations, (ii) be binding upon Pledgor, its successors and assigns and (iii)
inure to the benefit of Lender and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), Lender may assign
or otherwise transfer the Note to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in respect
thereof granted to Lender herein or otherwise. Upon the payment in full of the
Obligations, Pledgor shall be entitled to the return, upon its request and at
its expense, of such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
SECTION 17. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by the
laws of a jurisdiction other than the State of California. Unless otherwise
defined herein or in the Note, terms defined in the Uniform Commercial Code in
the State of California are used herein as therein defined.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NEXHORIZON COMMUNICATIONS, INC.,
a Delaware corporation
by:
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Xxxxxx X. Xxxxxx, Xx., President
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