INDEMNIFICATION AND PLEDGE AGREEMENT
INDEMNIFICATION
AND PLEDGE AGREEMENT
Indemnification and Pledge Agreement
(this “Agreement”) dated as
of July 20, 2009, by and among Qnective, Inc., a Nevada corporation ("Qnective" or the
“Corporation”),
Capella IV LLC, a Nevis limited liability company with an address at X.X. Xxx
000 Xxxx Building, Prince Xxxxxxx Street, Charleston, Nevis (“Capella”), Connwards
Management, Inc., a Belize corporation with an address c/o Xxxxxxx Xxxx, 0000
Xxxxx Xxxxx, Xxxxxxxxx, XX X0X-0X0 Xxxxxx (“Connwards”) and Xxxx
Xxxxx-Xx (a/k/a Xxxxxxx Xxxx), an individual with an address at 0000 Xxxxx
Xxxxx, Xxxxxxxxx, XX X0X-0X0 Canada(“Kang”).
WHEREAS, the Corporation
entered into an Amended Shareholders Agreement dated as of October 1, 2008 (the
“Shareholders
Agreement”);
WHEREAS, pursuant to the
Shareholders Agreement Capella made a capital contribution to the Corporation of
30,550,000 shares of common stock, $.001 par value per share of the Corporation
(the “Common
Stock”), however, Capella only delivered to the Corporation a share
certificate representing 2,000,000 shares of Common Stock;
WHEREAS, Capella was
previously issued share certificate No. 502 representing 31,000,000 shares of
Common Stock (“Certificate No.
502”), but Capella has indicated that Certificate No. 502 has been lost,
misplaced or destroyed and cannot be located;
WHEREAS, Capella has executed
and delivered to the Corporation’s transfer agent an Affidavit of Loss and
Agreement of Indemnity, but Capella has not posted a bond to indemnify
Continental Stock Transfer & Trust Co., the Corporation’s transfer agent and
registrar (the “Transfer Agent”)
against any claims resulting from Certificate No. 502 and has represented to the
Corporation that it is financially unable to post the bond;
WHEREAS, Capella requested
that the Corporation, on behalf of Capella, indemnify and hold harmless the
Transfer Agent from all damages, claims, liabilities and attorneys’ fees
incurred by the Transfer Agent arising from the replacement of Certificate No.
502 (the “Transfer
Agent Indemnification”);
WHEREAS, the Corporation has
determined that it is in the best interests of the Corporation to undertake the
Transfer Agent Indemnification, if Capella, Connwards and Kang agree to
indemnify and hold harmless the Corporation from any and all damages, claims,
liabilities, fees and expenses incurred by the Corporation arising from the
Transfer Agent Indemnification and the ownership of Certificate No. 502, and
furthermore, each of Capella, Connwards and Kang agree to pledge their shares of
Common Stock to the Corporation as security for any payment of their obligations
under this Agreement.
NOW, THEREFORE, in
consideration of the foregoing covenants and other good and valuable
consideration the receipt of which is hereby acknowledged, the parties agree as
follows:
1. Indemnification of Transfer
Agent. The Corporation agrees to indemnify and hold harmless
the Transfer Agent from all damages, claims, liabilities and attorneys’ fees
incurred by the Transfer Agent arising from the replacement of Certificate No.
502.
2. Indemnification of
Corporation. Each of Capella, Connwards and Kang agrees to jointly and
severally indemnify and hold harmless the Corporation, its officers, directors,
employees and agents from any and all damages, claims, liabilities, fees and
expenses incurred by the Corporation arising from:(i) the Indemnification of the
Transfer Agent by the Corporation under Section 1 herein, and (ii) the
replacement or ownership of Certificate No. 502.
3. Grant of Security
Interest.
(a)
To secure
the prompt payment and full and timely performance of all of the Obligations (as
defined below) to the Corporation, each of Capella, Connwards and Kang (each a
“Pledgor” and collectively, the “Pledgors”) hereby grants to the Corporation a
security interest in and to:
(i) all of
the shares of Common Stock beneficially owned by such Pledgor on the date
hereof, including but not limited to those set forth on Schedule 1 attached
hereto, and any shares of Common Stock acquired by any Pledgor after the date
hereof (collectively, the “Shares”);
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(ii) distributions,
dividends or return of capital upon or in respect of the Shares, all additional
interests or percentages resulting from a split-up, revision, reclassification
or other like change of the Shares and any subscription, warrants, rights, or
options issued to the holders of, or otherwise in respect of, the Shares and all
rights evidenced thereby which any Pledgor might receive during the term of this
Agreement;
(iii) any newly
issued or newly acquired shares of stock of any subsidiary, affiliate, successor
or assign of the Corporation which any Pledgor might receive during the term of
this Agreement;
(iv) any
shares or other equity or debt interests issued or issuable as a result of the
merger, reorganization, liquidation, consolidation or other structural change in
the Corporation which any Pledgor might receive during the term of this
Agreement; and
(v) all
books, records, ledger sheets and other records relating to the foregoing, and
all of each Pledgor’s rights to all proceeds, products, offspring, rents and
profits of the foregoing, including, without limitation, proceeds of insurance
therefrom which any Pledgor might receive during the term of this Agreement
(collectively, the “Collateral”).
(b) As
used herein, “Obligations” shall
mean the joint and several obligations of each Pledgor to the Corporation
arising under or in connection with each Pledgor’s indemnification of the
Corporation under this Agreement.
(c) Each
Pledgor shall also execute the Collateral Assignment of the Shares in the form
of Exhibit A
attached hereto, and shall deliver to the Corporation on the date hereof stock
certificates representing the Shares to hold as Collateral.
4. General Duties of each
Pledgor. Each Pledgor will:
(a) not
sell, assign, transfer any Shares or assets of the Corporation;
(b) permit no
other Lien (as defined herein) to attach to the Collateral;
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(c) pay all
costs necessary to obtain, preserve, and enforce this security interest and
preserve the Collateral, including (but not limited to) taxes, assessments,
insurance premiums, repairs, reasonable attorneys’ fees and legal expenses,
rent, storage costs, and expenses of sale;
(d) furnish
the Corporation with any information on the Collateral, the Obligations, the
financial condition of each Pledgor and any information relating to the purchase
of the Shares reasonably requested by the Corporation;
(e) allow the
Corporation to copy all records relating to the Collateral and the Obligations
at all reasonable times upon reasonable notice;
(f) sign any
papers furnished by the Corporation which are necessary to obtain and maintain
this security interest and hereby appoints each of the President, the Chief
Executive Officer and the Secretary of the Corporation, individually, as
attorney-in-fact to sign such papers on behalf of such Pledgor;
(g) promptly
deliver to the Corporation stock certificates representing:(1) the Shares not
previously delivered pursuant to Section 3(c),and (2) any securities of the
Corporation acquired by the Pledgor after the date of this Agreement;
and
(h) promptly
notify the Corporation of any loss, damage or other such change in or to the
Collateral, or in any fact or circumstance warranted or represented by each
Pledgor in this Agreement or furnished to the Corporation, or if any Event of
Default (as defined herein) occurs.
5. Pledgor’s Address.
Each Pledgor’s principal place of business and chief executive offices, its
financial books and records relating to the Collateral, are located at the
address set forth in the first paragraph of this Agreement. Each Pledgor will
not move its principal place of business, its chief executive offices, or its
financial books and records relating to the Collateral from said location
without prior written notice to the Corporation and shall do all things
reasonably requested to maintain a fully perfected security interest in favor of
the Corporation.
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6. Representations and
Warranties of each Pledgor. Each Pledgor jointly and severally
represents and warrants to the Corporation as follows:
(a) Authority. The
execution, performance and delivery of this Agreement and all other agreements
and transactions contemplated hereby have been duly authorized by each
Pledgor.
(b) Enforceability. This
Agreement constitutes the legal, valid and binding obligations of each Pledgor,
enforceable in accordance with its terms.
(c) No Breach. The
execution, performance and delivery of this Agreement will not constitute a
breach of, or default under, any provision of any certificate of incorporation
or by-law, contract, agreement, mortgage, trust or other indenture to which a
Pledgor is bound by any order, rule, regulation or law of any jurisdiction
binding on such party.
(d) No Liens. There are
no other Liens attached to the Shares. Each Pledgor has retained all voting
rights to the Shares. There are no options, warrants, subscriptions or other
rights to the Shares held by any other person. The Shares are fully paid and
non-assessable.
(e) Information. All
information, agreements, and certificates, including without limitation, all
financial information, provided by each Pledgor to the Corporation is true and
correct, and each Pledgor has disclosed all material information, and not failed
to disclose any material information.
7. No Sales of
Collateral. Each Pledgor will not, without the prior written consent of
the Corporation, sell, exchange, lease or otherwise dispose of Collateral or any
interest therein, and will not permit any Lien to attach to the
Collateral.
8. Rights of the
Corporation. The Corporation may, in its discretion after an Event of
Default, take any action a Pledgor is required to take or is otherwise necessary
to obtain, preserve, and enforce this security interest, and maintain and
preserve the Collateral, without notice to each Pledgor, and add the costs of
same to the Obligations (but the Corporation is under no duty to take any such
action); take control of funds generated by the Collateral, such as dividends,
interest, proceeds, or refunds from insurance, and use same to reduce any part
of the Obligations; waive any of its rights hereunder without such waiver
prohibiting the later exercise of the same or similar rights; revoke any
permission or waiver previously granted to each Pledgor.
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9. Event of Default. The
occurrence of any of the following events shall constitute an “Event of Default”, as
such term is used herein:
(a) Any
statement, representation or warranty made herein or any information furnished
pursuant hereto shall be false or breached and which is not cured within ten
(10) days after written notice thereof and opportunity to cure; or
(b) Failure
to observe or perform any other covenant or agreement herein and which is not
cured within ten (10) days after written notice and opportunity to cure (except
for the provisions of Sections 4(a) or (b) for which there shall be no cure
period).
10. Rights and Remedies Upon
Default. Upon an Event of Default, the Obligations shall become
immediately due and payable and the Corporation may:
(a) Exercise
any one or more of the remedies and shall have all the rights of a Secured Party
under the Code (as defined herein). Any requirement of the Code for reasonable
notice shall be met if such notice is mailed, postage prepaid, to each Pledgor
at its address as shown above, or as set forth on the books and records of the
Corporation, at least thirty (30) days prior to the time of the sale,
disposition or other event or thing giving rise to the requirement of
notice;
(b) Notwithstanding
anything to the contrary appearing in this Agreement, the interest hereinabove
described is granted and assigned to the Corporation by way of collateral
security only and, accordingly, the Corporation by its acceptance hereof shall
not be deemed to have assumed or become liable for any of the obligations or
liabilities of each Pledgor under the Obligations, whether provided for by the
terms thereof, arising by operation of law, or otherwise; each Pledgor hereby
acknowledging that each Pledgor remains liable thereunder to the same extent as
though this Agreement had not been made;
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(c) The
acceptance by the Corporation at any time and from time to time of part payment
on the Obligations shall not be deemed to be a waiver of any default then
existing under this Agreement or the Obligations. No waiver by the Corporation
of any default shall be deemed to be a waiver of any other then existing or
subsequent default or Event of Default, nor shall any such waiver by the
Corporation be deemed to be a continuing waiver under this Agreement or the
Obligations. No delay or omission by the Corporation exercising any right,
remedy, or privilege hereunder shall impair any such right, remedy, or
privilege, nor shall any single or partial exercise thereof, or the exercise of
any other right, remedy, or privilege of the Corporation hereunder be construed
as a waiver thereof or any acquiescence in the default or Event of Default
giving rise thereto;
(d) The
Corporation may proceed to protect and enforce this Agreement by suits or
proceedings in equity, at law or otherwise, whether for the foreclosure hereof
or for the appointment of a receiver of the property covered by this Agreement
and the Obligations or any part thereof, or for the enforcement of any other
proper, legal, or equitable remedy available under applicable law;
and
(e) Any and
all net proceeds received by the Corporation by reason of the foregoing clauses
(a) and (b) of this Section, after first deducting all legal or other costs and
expenses in affecting such realization, shall be applied to pay any or all of
the indebtedness hereby secured as the Corporation shall deem proper, any excess
to be returned to such Pledgor.
11. Successors and
Assigns. The rights and privileges of the Corporation shall inure to its
successors and assigns. All representations, warranties and agreements of each
Pledgor shall bind each Pledgor’s successors, assigns, heirs and legal
representatives, as the case may be. Upon any merger, consolidation or
reorganization, the successor shall execute an assumption agreement in form
acceptable to the Corporation. Nothing in this Section shall relieve any Pledgor
of any Obligation to the Corporation in the event of an assignment by such
Pledgor, whether or not permitted hereunder, which liability will continue until
released by the Corporation.
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12. Notice and Demand.
Each Pledgor waives presentment, demand, notice of nonpayment and protest and
all other demands or notices in connection with this Agreement. Notice mailed to
each Pledgor’s address in the first paragraph hereof or to each Pledgor’s most
recent changed address on file with the Corporation, at least fifteen (15) days
prior to the related action (or, if the Uniform Commercial Code specifies a
longer period, such longer period prior to the related action), shall be deemed
reasonable.
13. Miscellaneous. This
Agreement is in addition to and not in limitation of any other rights and
remedies the Corporation may have by virtue of any other instrument or agreement
heretofore, contemporaneously herewith, or hereafter executed by each Pledgor or
by law or otherwise. If any provision of this Agreement is contrary to
applicable law, such provision shall be deemed ineffective without invalidating
the remaining provisions hereof. If and to the extent that applicable law
confers any rights or imposes any duties inconsistent with, or in addition to,
any of the provisions of this Agreement, the affected provision shall be
considered amended to conform thereto. No provision of this Agreement may be
waived, altered or modified except in writing duly signed by the Corporation;
and the Corporation shall not by any act, delay, omission, or otherwise be
deemed to have waived any of its rights or remedies hereunder. A waiver by the
Corporation of any right or remedy hereunder on any one occasion, shall not be
construed as a bar to, or waiver of, any such right or remedy which the
Corporation would have on any future occasion nor shall the Corporation be
liable for exercising or failing to exercise any such right or
remedy.
14. Definitions.
(a) “Lien” shall mean any
mortgage, deed of trust, lien, charge, security interest or encumbrance of any
kind upon, or pledge of, any property or asset, whether now owned or hereafter
acquired, and includes the acquisition of, or agreement to acquire any property
or asset subject to any conditional sale agreement or other title retention
agreement, including a lease on terms tantamount thereto or on terms otherwise
substantially equivalent to a purchase.
(b) “Person” shall mean
and include an individual, partnership, corporation, trust, joint ventures,
associations, joint stock company, limited liability company, unincorporated
organization and a Government or any department or agency thereof.
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(c) “Code” shall mean the
Uniform Commercial Code of New York as the same may be in effect from time to
time, or any comparable law in the relevant jurisdiction regarding secured
transactions, and the granting of security interests.
15. Financing Statements.
Each Pledgor hereby authorizes the Corporation to file a financing statement
pursuant to the Uniform Commercial Code in form satisfactory to the Corporation
in all places where necessary to perfect the Corporation’s security interest in
the Collateral and in all jurisdictions where such filing is required by the
Code. Without limiting the foregoing each Pledgor agrees that whenever the Code
requires a Pledgor to sign a financing statement for filing purposes, such
Pledgor hereby appoints the Corporation or any of the Corporation’s
representatives as such Pledgor’s attorney and agent, with full power of
substitution, to sign or endorse such Pledgor’s name on any such financing
statement or other document and authorizes the Corporation to file such a
financing statement in all places where necessary to perfect the Corporation’s
security interest in the Collateral; and each Pledgor ratifies all acts of the
Corporation and said representatives and agrees to hold the Corporation and said
representatives harmless from all acts of commission or omission or any error of
judgment or mistake of fact or law pertaining thereto. A photographic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Upon full payment of all Obligations, this Agreement and
the Lien or charge created hereby or resulting herefrom shall cease to exist and
the Corporation shall file all termination statements requested by a Pledgor
necessary to accomplish this purpose.
16. Term. This
Agreement shall remain in full force and effect for a period of six(6) years
after the date of this Agreement, provided, however, the
Corporation may at any time, in its sole discretion, release some or all of the
Shares from the pledge hereunder and/or terminate this Agreement.
17. General
Provisions.
(a) This
Agreement constitutes the entire agreement among the parties and supersedes any
and all other Agreements, whether written or oral, among the
parties.
(b) This
Agreement shall be binding upon and shall inure solely to the benefit of the
parties and their respective successors, assigns, heirs, or legal
representatives, as the case may be.
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(c) This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements to be performed solely within such
State without reference to applicable rules of conflict of laws or choice of
laws.
(d) This
Agreement may be executed in any number of counterparts and each such
counterpart shall for all purposes deemed to be an original; and all such
counterparts shall together constitute but one and the same
Agreement. This Agreement may be executed by facsimile or other
electronic transmission.
(e) Any
dispute, controversy, or claim between the parties arising out of or relating to
this Agreement, including the validity, invalidity, breach, or termination
thereof, shall be resolved by arbitration before one (1) arbitrator in
accordance with the Swiss Rules of International Arbitration of the Swiss
Chamber of Commerce (the "Rules") in force on the date when the Notice of
Arbitration is submitted in accordance with the Rules. The arbitrator
will be a recognized expert in secured transactions in general, with a
particular expertise in the United States Uniform Commercial
Code. Judgment upon any award rendered by the arbitrator may be
entered in any court of competent jurisdiction and the arbitrator shall have
authority to award reasonable costs, legal fees, and disbursements to the
prevailing party. The seat of the arbitration shall be Zurich,
Switzerland. The right to fees, costs, and expenses may be enforced by a
separate plenary action. Notwithstanding the foregoing, application may be made
to any court of competent jurisdiction with respect to the enforcement of any
judgment or award. Any award rendered by the arbitrator shall be final and
binding on the parties and each party hereby waives to the fullest extent
permitted by law any right it might have otherwise under the laws of any
jurisdiction to any form of appeal or collateral attack. Any award shall be
rendered and payable in U.S. Dollars.
[signatures
appear on the following page]
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IN WITNESS WHEREOF, the parties hereto
have executed this agreement as of the date first above written.
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By:
/s/ Xxxxxx
Xxxxx
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Xxxxxx
Xxxxx
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Chief
Executive Office
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CONNWARDS
MANAGEMENT, INC.
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By:
/s/ Xxxxxxx
Xxxx
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Xxxxxxx
Xxxx
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President
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By:
/s/ Xxxxxxx
Xxxx
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Xxxxxxx
Xxxx
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Sole
Shareholder
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CAPELLA
IV LLC
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By:
/s/ Xxxxxxx
Xxxx
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Xxxxxxx
Xxxx
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Manager
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By:
/s/ Xxxxxxx
Xxxx
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Xxxxxxx
Xxxx
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Sole
Member, Capella IV LLC
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/s/
Xxxx Xxxxx-Xx
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XXXX
XXXXX-XX
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11
Schedule
1
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Owner
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Certificate
Number
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No.# of
Shares
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|||
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Capella
IV LLC
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QN
0035
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2,000,000 | |||
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Capella
IV LLC
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QN
0033
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450,000 | |||
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Connwards
Management, Inc.
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QN
0037
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900,000 | |||
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Connwards
Management, Inc.
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QN
0036
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625,000 | |||
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Connwards
Management, Inc.
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QN
0034
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625,000 | |||
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Xxxx
Xxxxx-Xx
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QN
0039
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6,807,250 | |||
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Total
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11,407,250 | ||||
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EXHIBIT
A
COLLATERAL ASSIGNMENT OF
CERTIFICATE
The undersigned,__________, hereby
sells, assigns, sets over and delivers to Qnective, Inc., a Nevada corporation
(the “Transferee”),[ _____]
shares of common stock, $.001 par value per share (the “Shares”) of the
Transferee registered in its name, free and clear of all liens, claims, security
interests and encumbrances. The Shares are being transferred for collateral
purposes only and the transfer to the Transferee shall only occur, if at all,
upon transfer of the Shares pursuant to the terms of the Agreement (the “Agreement”) dated as
of July 20, 2009 by and among the Transferee, Capella IV LLC, Connwards
Management, Inc. and Xxxx Xxxxx-Xx.
The Shares are identified as
follows:
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Owner
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Certificate
Number
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Number of
Shares
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[___]
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[___]
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[____]
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This
Assignment may also be updated from time to time based upon the delivery of
additional Shares as contemplated by the Agreement.
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DATED:__________
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[____________________]
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By:
__________________
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Name:
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Title:
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