STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT dated this 31st day of August , 2004, made by and
between Pipeline Data Inc., a Delaware corporation ("Pledgor"), Laurus Master
Fund, Ltd., the holder (the "Noteholder") of (i) a Term Note (the "Note") of
even date herewith issued by the Pledgor in favor of the Noteholder in the
amount of up to $3,000,000 and (ii) a Term Note Warrant of even date herewith
issued by the Pledgor in favor of the Noteholder (the Warrant, and together with
the Note all other documents entered into by the Noteholder, the Pledgor and/or
any Subsidiary of the Pledgor in connection with the Note and the Warrant, the
"Securities").
PRELIMINARY STATEMENTS:
(1) The Pledgor has executed and delivered to the Noteholder the
Securities, which evidence the Pledgor's obligation to repay advances to be made
by Noteholder to Pledgor pursuant to that certain Securities Purchase Agreement
dated August 31, 2004 herewith by and between the Noteholder and Pledgor (the
"Securities Purchase Agreement").
(2) It is a condition of the Securities Purchase Agreement that the Pledgor
secure the payment of all of its obligations under the Securities by a pledge of
the securities held by the Pledgor in its wholly-owned subsidiary, Pipeline Data
Portfolio Acquisition, Inc., a Delaware corporation, (together, the "Pledged
Securities").
NOW, THEREFORE, in consideration of the premises and in further
consideration of the covenants contained herein, the parties hereto agree as
follows:
SECTION 1. Pledge. For the benefit of the Noteholder, the Pledgor hereby
pledges and grants a security interest in, the following (the "Pledged
Collateral"):
(a) the Pledged Securities and the certificates representing the Pledged
Securities, and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Pledged Securities; and
(b) all proceeds of any and all of the foregoing (including, without
limitation, proceeds that constitute property of the types described
above).
SECTION 2. Security for Obligations. This Agreement secures the payment of
all obligations of the Pledgor now or hereafter existing under the Securities,
whether for principal, interest, expenses or otherwise, and all obligations of
the Pledgor now or hereafter existing under this Agreement. The Noteholder shall
file appropriate financing statements at the Pledgor's expense.
SECTION 3. Delivery of Pledged Collateral. All certificates or instruments
representing or evidencing the Pledged Collateral shall be delivered to the
Noteholder no later than 30 days after the date hereof and shall be held by the
Noteholder 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 the Noteholder.
Upon the occurrence and during the continuation of an Event of Default (as
defined below), the Noteholder shall have the duty, at any time on five business
days' notice to the Pledgor, to transfer to or to register in the name of the
Noteholder or any of its nominees, any or all of the Pledged Collateral. In
addition, the Noteholder shall have the right at any such time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is and will be the sole legal, record 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.
(b) The pledge of the Pledged Collateral pursuant to this Agreement creates and
will create a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Pledgor's obligations under
the Securities.
SECTION 5. Further Assurances. At any time and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Noteholder may reasonably request, in order
to perfect and protect the security interest granted or purported to be granted
hereby or to enable the Noteholder to exercise and enforce the rights and
remedies hereunder with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default or event which, with the giving of notice or
the lapse of time, or both, would become an Event of Default shall have
occurred and be continuing:
(i) The Pledgor shall be entitled to exercise or refrain from exercising
any and all voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and distributions paid in respect of the Pledged Collateral,
provided, however, that any and all (A) dividends paid or payable
other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, Pledged Collateral, and (B) dividends and other
distributions paid or payable in cash in respect of any Pledged
Collateral in connection with a partial or total liquidation or
dissolution, shall be, and shall be forthwith delivered to the
Noteholder to hold as, Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Noteholder,
be segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Noteholder as Pledged Collateral in the
same form as so received (with any necessary indorsement or
assignment).
(iii)The Noteholder, shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments
as the Pledgor may reasonably request for the purpose of enabling the
Pledgor to exercise the voting and other consensual rights that it is
entitled to exercise pursuant to subsection (i) above and to receive
the dividends that it is authorized to receive and retain pursuant to
subsection (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default or an
event which, with the giving of notice or the lapse of time, or both, would
become an Event of Default:
(i) All rights of the Pledgor to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled
to exercise pursuant to Section 6(a)(i) and to receive the dividends
payments that it would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) shall cease, and all such rights shall
thereupon become vested in the Noteholder who shall thereupon have the
sole right to exercise or refrain from exercising such voting and
other consensual rights at the direction of the Noteholder and to
receive and hold as Pledged Collateral such dividends.
(ii) All dividends that are received by the Pledgor contrary to the
provisions of subsection (i) of this Section 6(b) shall be received in
trust for the benefit of the Noteholder, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over to the
Noteholder as Pledged Collateral in the same form as so received (with
any necessary indorsement).
(c) As used herein, "Event of Default" (i) shall have the meaning given such
term in the Note and (ii) shall mean the failure of the Pledgor to pay or
perform any of its obligations under this Agreement and the continuation of
such failure for a period of 5 (five) days.
SECTION 7. Transfers and Other Liens. The Pledgor will not (i) sell, assign
(by operation of law or otherwise) 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, option or other charge or encumbrance upon or
with respect to any of the Pledged Collateral, except for the security interest
under this Agreement.
SECTION 8. Noteholder Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Noteholder the Pledgor's attorney-in-fact, with full authority in
the place and stead of the Pledgor and in the name of the Pledgor or otherwise,
from time to time in the Noteholder's discretion to take any action and to
execute any instrument that the Noteholder may deem necessary or advisable to
accomplish the purposes of this Agreement (subject to the rights of the Pledgor
under Section 6), including, without limitation, to receive, indorse and collect
all instruments made payable to the Pledgor representing any dividend or any
part thereof and to give full discharge for the same.
SECTION 9. Noteholder May Perform. If the Pledgor fails to perform any
agreement contained herein, the Noteholder, may itself perform, or cause
performance of, such agreement, and the expenses of the Noteholder incurred in
connection therewith shall be payable by the Pledgor under Section 11.
SECTION 10. Remedies upon Event of Default. Subject to the provisions of
Section 6, if any Event of Default shall have occurred and be continuing:
(a) The Noteholder 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 in effect in the State of New York at the
time (the "Code") (whether or not the Code applies to the Pledged
Collateral), and may also, without notice except as specified below, 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 office of the
Noteholder or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Noteholder may deem commercially reasonable.
The Pledgor agrees that, to the extent notice of sale shall be required by
law, at least 5 (five) days' notice to the 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. The Noteholder shall not be
obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. The Noteholder 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 the Noteholder as Pledged Collateral and all cash proceeds
received by the Noteholder 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 the Noteholder, be held by the Noteholder as collateral
for, and/or then or at any time thereafter be applied (after payment of any
amounts payable to the Noteholder pursuant to Section 11) in whole or in
part by the Noteholder against, all or any part of the Note in such order
as the Noteholder shall be directed by the Noteholder. Any surplus of such
cash or cash proceeds held by the Noteholder and remaining after payment in
full of the Pledgor's obligations under the Note shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
Notwithstanding the remedies provided to the Noteholder in this Section 10,
Noteholder covenants that it shall use its best efforts to assign,
transfer, sell or dispose of the collateral involving the contracts and
agreements of Pipeline Data Portfolio Acquisitions, Inc. to satisfy the
Pledgor's obligations prior to seeking its remedies under this Section 10.
SECTION 11. Expenses. The Pledgor will upon demand pay to the Noteholder
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Noteholder may
incur in connection with (i) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (ii)
the exercise or enforcement of any of the rights of the Noteholder hereunder or
(iii) the failure by the Pledgor to perform or observe any of the provisions
hereof.
SECTION 12. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Pledgor herefrom, shall
in any event be effective unless the same shall be in writing and signed by each
of the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 13. Notices. All notices, request, demands and other communications
required or permitted hereunder shall be sent in accordance with Section 11.8 of
the Securities Purchase Agreement.
SECTION 14. Continuing Security Interest.
(a) This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) remain in full force and effect until the payment
in full of the Pledgor's obligations under the Note and under this
Agreement, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the Noteholder
and its successors, transferees and assigns.
(b) Upon the payment in full of the Pledgor's obligations under the Note and
under this Agreement, the security interest granted hereby shall terminate
and all rights to the Pledged Collateral shall revert to the Pledgor. Upon
any such termination, the Noteholder will, at the Pledgor's expense, return
to the Pledgor such of the Pledged Collateral as shall not have been sold
or otherwise applied pursuant to the terms hereof and execute and deliver
to the Pledgor such documents as the Pledgor shall reasonably request to
evidence such termination.
SECTION 15. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, 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 NEW YORK. ANY ACTION, SUIT OR
PROCEEDING INITIATED BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO UNDER OR
IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT
IN NEW YORK COUNTY, STATE OF NEW YORK. TO THE EXTENT IT MAY LEGALLY DO SO, EACH
PARTY HERETO SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF ANY SUCH COURT,
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY
CLAIMS OF FORUM NON CONVENIENS OR THAT THE VENUE OF ANY SUCH ACTION, SUIT OR
PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN MAY NOT BE LITIGATED IN SUCH COURT.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed and delivered as of the date first above written.
PLEDGOR:
Pipeline Data Inc.
Address for Notices:
00 Xxxx Xxxx Xxxxxx,
Xxxxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx,
Chief Financial Officer
Fax: (000) 000-0000
By: /s/ XxxXxxxxxxx Xxxxx
NOTEHOLDER:
Laurus Master Fund, Ltd.
Address for Notices:
c/o M&C Corporate Services Limited
P.O. Box 1234 GT, Xxxxxxxxxx Xxxxx,
Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Fax: 000-000-0000
By: /s/ Xxxxxx Grin
SCHEDULE I
Pledged Securities
Certificate Number
Class of Security No(s) (if any) of Shares (Units)
----------------- --------------- -----------------
Common Stock of Pipeline Data Portfolio 1 100
Acquisitions, Inc.
