EXHIBIT B
SECURITIES PLEDGE AND CONTROL AGREEMENT
This Securities Pledge and Control Agreement ("Agreement") entered into
the 30 day of December, 2002, by and between the Xxxxxxx Xxxxxxx Trust
("Pledgor"), a Trust crested and existing under the laws of the state of Nevada;
The CIT Group/Equipment Financing, Inc. ("CIT"), a Delaware Corporation.
WITNESSETH
WHEREAS, CIT has agreed to extend credit to C5, LLC, a Nevada limited
liability company ("Debtor") on certain terms and conditions; and
WHEREAS, Vestin Group, Inc. a Delaware Corporation. ("Vestin) has
guarantied payment and performance on the indebtedness of Debtor to CIT; and
WHEREAS, the parties to the transaction have agreed to release the
guaranty of Vestin provided Pledgor secures his guaranty of the indebtedness to
CIT by pledging his stock in Vestin such that, at all times the value of the
stock shall be equal to or exceed 125% of the then outstanding indebtedness of
Debtor to CIT; and
WHEREAS, one condition to CIT's release of Vestin's Guaranty is that
CIT must be provided a first priority perfected security interest in those
certain securities owned by Pledgor, evidencing Five Hundred Fifty Thousand
(550,000) shares of the outstanding common capital stock of Vestin together with
any substitutions therefor and additions thereto (the "Pledged Securities");
NOW, THEREFORE, as an inducement to cause CIT to extend credit to
Debtor, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, it is agreed as follows:
1. Definitions.
(a) The following definitions have the meaning set opposite
them below:
"Issuer" shall mean Vestin Group, Inc. ("Vestin"), a Delaware
corporation.
"Secured Indebtedness" shall mean the obligations of C5, LLC (the
"Debtor") to CIT; guarantied by Pledgor, and all obligations of Pledgor
set forth in Pledgor's guaranty. Such obligations are evidenced in part
by that certain Promissory Note in the original principal amount of
Three Million Two Hundred Twenty-Two Thousand ($3,222,000.00) Dollars,
dated June 5, 2002 made by Debtor in favor of CIT. Collectively, all
obligations secured by the guaranty are referred to as the "Secured
Indebtedness";
2. Pledge of Securities. To secure the payment of the Secured
Indebtedness, Pledgor
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hereby pledges to CIT and grants CIT a security interest in the securities
described in Exhibit A attached hereto, together with all interest, dividends
and other distributions arising therefrom, all substitutions therefore and
proceeds thereof, including any cash and/or deposit accounts received from
[ILLEGIBLE] sale, trade or substitution of the securities (collectively the
"Pledged Securities").
3. Perfection. CIT's security interest in the Pledged Securities
shall be perfected by CIT's possession of all original certificates to the
extent such are issued evidencing the same and CIT shall also be provided with
transfer powers executed in blank by Pledgor. Alternatively, if the Pledged
Securities are uncertificated shares of Vestin, Pledgor and CIT shall mutually
appoint a Securities Agent, whose powers and duties are more fully described
hereinbelow. Pledgor shall transfer the Pledged Securities to be held in a
separate account (the "Control Account") for the benefit of Pledgor and CIT upon
such terms and conditions set out hereinbelow. Pledgor certifies that upon
execution of this Agreement, that the pledge of the Pledged Securities will be
appropriately recorded in the corporate records of Vestin. Securities Agent
joins in this agreement for the sole purpose of agreeing to the creation of the
Control Account and compliance with the instructions of CIT and/or Pledgor as
more specifically set forth below.
4. Powers and Duties of Securities Agent. The Pledgor and CIT do
hereby authorize the Securities Agent to keep and preserve the Pledged
Securities and to deliver them as follows:
(a) Except following an Event of Default as set forth below and the
expiration of any applicable cure or grace period, Securities Agent shall have
the full power and authority, upon instructions from the Pledgor, to sell all or
any part of the Pledged Securities for cash, provided the proceeds of such sale
are held by the Securities Agent in a separately designated deposit account In
such event, this Agreement shall constitute a control agreement with respect to
such deposit account to the benefit of CIT and all sums deposited therein shall
be deemed held in trust for the benefit of Pledgor and CIT in accordance with
the terms hereof subject to no claims, encumbrances or security interests of
Securities Agent or any third party.
(b) Provided no event of default has occurred, following the written
consent of CIT, which consent shall not be unreasonably withheld, Pledgor may
sell all or any part of the Pledged Securities and purchase (or use cash
proceeds of the Pledged Securities to purchase) other securities, provided such
are publicly traded, fully paid and subject to no restrictions on transfer,
pledge or otherwise and represent shares listed and traded daily on the NASDAQ
or New York Stock Exchange, the prices of which are published in newspapers of
general circulation during each day which the NASDAQ or New York Stock Exchange
are open for trading.
(c) If the Securities Agent receives written notice from CIT that the
Pledgor has defaulted, subject to any applicable cure or grace period, the
Securities Agent shall immediately cease accepting directions from the Pledgor
as to the disposition of the Pledged Securities. Upon written notice from CIT,
the Securities Agent shall follow the directions set forth in the notice
including, but not limited to: (i) Sale of all or any part of the Pledged
Securities; (ii) Conversion of the Pledged Securities to stock in New York Stock
Exchange companies comprising the stocks
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utilized in determining the Dow Industrial Average; (iii) Designation of CIT as
record owner for all or any part of the Pledged Securities; and/or (iv) a
combination of (i), (ii) and/or (iii) above. CIT may further request that the
Securities Agent pay some of all of the proceeds from the sale or other
disposition of the Pledged Securities to the Pledgor. Pledgor specifically
consents to the above disposition and hereby grants to CIT his power of attorney
which is coupled with an interest and is irrevocable by Pledgor. In the event
following a default and the expiration of any applicable cure or grace period,
the Pledgor shall deem it advisable to sell some or all of the Pledged
Securities, the Pledgor may direct CIT to sell such for cash. In any event,
following a default and the expiration of any applicable cure or grace period,
the Securities Agent shall follow only the written instructions of CIT until CIT
revokes in writing its ability to provide such instructions.
(d) When the Secured Indebtedness has been paid in full, the Securities
Agent shall deliver the Pledged Securities and any substitutions therefore and
proceeds thereof to the Pledgor upon written notice signed by CIT. In the event
CIT fails to deliver such written notice within 10 business days of written
request of Pledgor to CIT with a copy to the Securities Agent, unless Securities
Agent receives written notice from CIT not to release the Pledged Securities,
upon confirmation of CIT's receipt of such notice, Securities Agent may act in
accordance with the instructions of Pledgor.
5. Warranties. Pledgor warrants to CIT the following:
(a) Title. Pledgor is the sole legal and equitable owner
of the Pledged Securities constituting common capital stock of Vestin, and which
consists of Pledgor's absolute title thereto and to the knowledge of Pledgor is
not the subject of any claim or challenge threatened or asserted by any third
party.
(b) Valid Securities. The Pledged Securities have been
validly issued and are fully paid for and non-assessable.
(c) No Liens or Restrictions. The Pledged Securities are
not and will not be subject to any restriction of transfer, "buy-sell"
agreement, voting agreement, redemption agreement option or other agreement
restricting disposition or pledge of the Pledged Securities.
(d) Valid Lien. This Agreement provides CIT with a valid
pledge of and a valid first priority security interest in, the Pledged
Securities.
(e) No Pending or Threatened Litigation. The Pledgor
warrants that there is no litigation pending or to the knowledge of Pledgor
threatened, or governmental or administrative proceeding pending against or
relating to Pledgor or Vesting, which, to the best of Pledgor's knowledge, if
adversely decided to Pledgor or Vestin, would have a material adverse effect
upon either the Pledgor's or Vestin's financial condition or materially effect
the value of Vestin common stock.
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(f) Compliance with all Applicable Laws. The Pledgor
warrants that to the knowledge Pledgor, Pledgor is in compliance with all
applicable laws, both State and Federal, and that the Pledgor has no federal,
state, or local tax liability, other than for the current year or for prior
years that are not delinquent. Pledgor shall furnish CIT such financial
information and statements, both audited and unaudited, as CIT may request from
time to time.
(g) Pledgor warrants and agrees that the current
financial statements of Vestin are certified as true and accurate and that CIT
will be promptly notified, in writing, of any material adverse change in the
Pledgor's or Vestin's financial condition, business or affairs.
(h) Continuing Warranties. The warranties set forth above
in this Paragraph shall remain true until the Secured Indebtedness is paid in
full and this Agreement is canceled by CIT.
(i) Authority. Pledgor is a ____________ Trust crested
under the laws of the State of ________________________ will full power and
authority to assign pledge and hypothecate the Pledged Securities. All duly
executed valid and current Trust Documents have been provided to CIT evidencing
the Trust and its due authority to grant the security interests contemplated by
this Agreement and to Guaranty the Secured Indebtedness. Pledgor will make no
modifications to any of the Trust documents in any respect as might affect the
full validity and enforceability of this agreement without CIT's prior written
consent.
6. Covenants. Pledgor covenants with CIT as follows:
(a) Additional Securities. Pledgor covenants that the
security to debt ratio ("Collateral Coverage Ratio") shall at all times be
maintained at 1.25:1. In the event that such Collateral Coverage Ratio falls
below the ratio of 1.25:1, the Pledgor shall transfer to the benefit of CIT,
either to the Securities Agent or by delivery of original and endorsed share
certificates or transfer to the Securities Agent additional shares of Vestin
common stock or the common stock of any Fortune 500 Company, in order to
maintain the Collateral Coverage Ratio of 1.25:1, or the Pledgor may cause a
reduction in the principal Secured Indebtedness such that the result is at all
times that the value of the Pledged Securities shall equal at least 125% of the
then outstanding balance of the Secured Indebtedness. Pledgor shall deliver any
securities received as a result of ownership of the Pledged Securities
immediately upon receipt, and such additional securities shall become part of
the Pledged Securities hereunder upon issuance.
(b) No Further Encumbrance. Pledgor shall not sell,
transfer, hypothecate, assign, or grant or suffer the attachment of any lien or
encumbrance to the Pledged Securities.
(c) Financial Covenants. Pledgor shall provide or cause
to be provided Financial Statements of Vestin prepared in accordance with
generally accepted accounting principals consisting either of such reports as
Vestin shall provide to its shareholders by applicable securities laws or
separate reports to the extent these are not publicly made available as and when
prepared/published, but not less frequently than quarterly. Such reports shall
show a minimum net worth for Vestin of not
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less than $16.0 million.
7. Voting Rights. As long as there is no default under this
Agreement, Pledgor shall be [ILLEGIBLE] to exercise all voting rights arising
from ownership of the Pledged Securities, except that prior written approval of
CIT shall be required for Pledgor to vote the Pledged Securities to authorize
Issuer to liquidate, reorganize, sell substantially all of its assets, or merge.
8. Right to Distributions. As long as there is no default under
this Agreement, Pledgor shall have the exclusive right to receive all
distributions of cash and other property made with respect to the Pledged
Securities.
9. Return of Pledged Securities. The Pledged Securities stall be
returned to Pledgor when (i) CIT acknowledges in writing the payment of the
Secured Indebtedness; and (ii) CIT has no further obligation to extend credit
to be included in the Secured Indebtedness. The return of the Pledged Securities
shall be without recourse against CIT and shall be effected without any
representation or warranty on CIT's part, notwithstanding any provision of the
Uniform Commercial Code or other law that might otherwise imply or require
representations or warranties as to title or other matters.
10. Recitals. Pledgor warrants and agrees that the recitals set
forth at the beginning of this Agreement are true and duly authorized and that
no further action by Vestin or third party is necessary to effect the terms of
this Agreement.
11. No Burdensome Agreements. Pledgor warrants that Pledgor is not
a party to any contract or agreement and is not subject to any contingent
liability that does or may impair Pledgor's ability to perform under the terms
of this Agreement. Pledgor further warrants that the execution and performance
of this Agreement will not cause a default, acceleration or other event under
any other contract or agreement to which Pledgor or any property of Pledgor is
subject, and will not result in the imposition of any charge, penalty, lien or
other encumbrance against any of Pledgor's property except in favor of CIT.
12. Legal and Binding Agreement. Pledgor warrants that the
execution and performance of this Agreement will not violate any judicial or
administrative order or governmental law or regulation, and that this Agreement
is valid, binding and enforceable in every respect according to its terms.
13. No Consent Required. Pledgor warrants that Pledgor's
execution, delivery and performance of this Agreement does not require the
consent of or the giving of notice to any third party including, but not limited
to, any other lender, governmental body or regulatory authority.
14. No Default. Pledgor warrants that, as of the execution of this
Agreement, no default exists hereunder and no condition exists which, with the
giving of notice, the passing of time, or both, would constitute such a default.
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15. Default Defined. The occurrence of any one or more of the
following events shall constitute a default under this Agreement:
(a) Monetary Default. The failure of Pledgor to timely
pay any amount due CIT under the Secured Indebtedness or under any other
obligation to CIT within 10 business days of written notice from CIT.
(b) Breach of Covenant. The failure of the Debtor or
Pledgor, or any other party, to perform or observe any obligation or covenant
made with respect to the Secured Indebtedness which with respect to Pledgor is
not cure within 20 days following written notice from CIT to Pledgor.
(c) Breach of Warranty. CIT's discovery that any
representation or warranty in connection with this Agreement or the Secured
Indebtedness is materially false.
(d) Default Under Other Document. The occurrence of a
default under the terms of any document evidencing, securing, or otherwise
pertaining to the Secured Indebtedness.
(e) Insolvency. Pledgor or Vestin becomes insolvent or
files a petition in bankruptcy, or for an arrangement, reorganization,
composition, liquidation, dissolution or similar relief, whether filed by
Pledgor or Vestin under any present or future statute, law, or regulation or any
petition which either remains undismissed for thirty days following filing or
results in an order for relief.
16. Remedies Upon Default. Upon the occurrence of default, and
expiration of any cure or grace period CIT may exercise any of the following
remedies.
(a) Record Ownership. CIT may cause any or all of the
Pledged Securities to be transferred of record into CIT's name. Pledgor hereby
appoints CIT as Pledgor's attorney-in-fact for the purpose of so transferring
record ownership of the Pledged Securities. The mere transfer of record
ownership shall not be considered a sale or disposition of the Pledged
Securities or an acquisition thereof in full or partial satisfaction of the
Secured Indebtedness unless CIT so provides in writing and in accordance with
the Uniform Commercial Code as adopted in Arizona. CIT may provide notice to the
Securities Agent to effect such a transfer on the books and records of Vestin.
(b) Receipt of Distributions. CIT shall have the
exclusive right to receive all distributions made with respect to the Pledged
Securities. CIT shall apply cash distributions to payment of the Secured
Indebtedness. CIT's right to receive such distributions shall be further
evidenced by the Irrevocable Proxy incorporated into this agreement above.
(c) Sale of Pledged Securities. CIT may sell the Pledged
Securities or any part thereof at public or private sale or at any appropriate
broker's board or securities exchange, for cash, on credit, or for future
delivery.
In addition,
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(i) CIT may be the purchaser of any or all of the
Pledged Securities sold at any public sale or, to the
extent permitted by law, at any private sale;
(ii) At any sale, CIT shall have the right to
transfer to the purchaser thereof the Pledged
Securities sold. CIT is hereby appointed Pledgor's
attorney-in-fact for the purpose of supplying any
endorsements or instructions necessary to affect such
transfer. Each purchaser at any such sale (including,
without limitation, CIT) shall hold the property sold
free from any claim or right of any kind, including
any equity or rights of redemption of Pledgor which
hereby specifically waives all rights of redemption,
stay or appraisal which Pledgor has or may have under
any rule of law or statute now existing or hereafter
adopted;
(iii) At any sale, the Pledged Securities may be sold
in one lot as an entirety or in separate portions, as
CIT may reasonably determine;
(iv) CIT shall not be obligated to make any sale
pursuant to any notice given and may, without notice
or publication, adjourn any public or private 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 resumed at any time and
place to which the same may be so adjourned; and
(e) Application of Proceeds. All amounts received by CIT
for Pledgor's account by exercise of its remedies hereunder shall be applied as
follows. First, to the payment of all expenses incurred by CIT in exercising
its rights hereunder, including reasonable attorney's fees and any other
expenses due CIT from. Pledgor, second, to the payment of all interest included
in the Secured Indebtedness, in such order as CIT may elect; third, to the
payment of all principal included in the Secured Indebtedness, in such order as
CIT may elect; and fourth, surplus to Pledgor or other party entitled thereto.
17. Notice. Any notices required to be given hereunder shall be
deemed effective in accordance herewith upon the occurrence of any two (2) of
the following events: (i) CIT obtains a facsimile confirmation that the
party(ies) entitled to receive the notice have received the notice; (ii) CIT
E-mails the notice; or (iii) one (1) business day has expired following CIT's
deposit by overnight delivery or express mail of a certified letter containing
the notice. Any notice provided as set forth above shall be deemed valid when
delivered if sent to the name, address, facsimile number and/or e-mail address
provided herein and the name of the party to receive notice must always be
included.
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Secured Party: CIT Group/ Equipment Financing, Inc.
0000 Xxxxxxxxxxxx Xxxxxxx
Xxxxx, Xxxxxxx 00000
Attn:_______________________________
(480)_______________________________(facsimile)
_______________________________(E-mail address)
Pledgor: Xxxxxxx Xxxxxxx Trust
Attn: Xxxxxxx V, Shustek, Trustee
0000 Xx Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
000-000-0000 (facsimile)
xxxxx@xxxxxxxxxxxxxx.xxx (E-mail address)
Securities Agent:_______________________________
________________________________________________
_______________________________(facsimile)
_______________________________(E-mail address)
18. Release of Guaranty of Vestin. Upon execution of this
Agreement by all parties hereto, and the delivery of the Pledge Securities to
CIT, either by delivery of endorsed certificated securities constituting the
Pledged Securities or by transfer of the Pledged Securities to the Control
Account maintained by the Securities Agent in accordance with this agreement,
and confirmation by the Securities Agent that a separate control account has
been created, CIT shall release the guaranty of Vestin by appropriately noting
the release thereof on the Guaranty Agreement and return of the Guaranty
Agreement to Vestin.
19. Incorporation of Exhibits. All Exhibits referred to in this
Agreement are incorporated herein by this reference.
20. Indulgence Not Waiver. CIT's indulgence in the existence of a
default hereunder or any other departure from the terms of this Agreement shall
not prejudice CIT's rights to declare a default or otherwise demand strict
compliance with this Agreement, nor shall a course of performance or dealing be
established.
21. Cumulative Remedies. The remedies provided CIT in this
Agreement are not exclusive of any other remedies that may be available to CIT
under any other document or at law or in equity.
22. Amendment and Waiver in Writing. No provision of this
Agreement can be amended or waived, except by a statement in writing signed by
the party against which enforcement of the amendment or waiver is sought.
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23. Assignment. This Agreement shall be binding upon and inure to
the benefit of the respective heirs, successors and assigns of Pledgor and CIT,
except that Pledgor shall not assign any rights or delegate any obligations
arising hereunder without the prior written consent of CIT. Any [ILLEGIBLE]
assignment or delegation by Pledgor without the required prior consent shall be
void.
24. Entire Agreement. This Agreement and the other written
agreements between Pledgor and CIT represent the entire agreement between the
parties concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed contemporaneously herewith with
respect to the Secured Indebtedness, the provision most favorable to CIT shall
control.
25. Severability. Should any provision of this Agreement be
invalid or unenforceable for any reason, the remaining provisions hereof shall
remain in full effect.
26. Time of Essence. Time is of the essence of this Agreement, and
all dates and time periods specified herein shall be strictly observed, except
that CIT may permit specific deviations therefrom by its written consent.
27. Applicable Law. The validity, construction and enforcement of
this Agreement and all other documents executed with respect to the Secured
Indebtedness shall be determined according to the laws of Arizona applicable to
contracts executed and performed entirely within that state, in which state this
Agreement has been executed and delivered.
28. Gender and Number. Words used herein indicating gender or
number shall be read as context may require.
29. Captions Not Controlling. Captions and headings have been
included in this Agreement for the convenience of the parties, and shall not be
construed as affecting the content of the respective paragraphs.
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A
THOROUGH UNDERSTANDING OF THE TERMS
OF THIS AGREEMENT AND AGREE TO BE
BOUND THEREBY:
THE CIT GROUP/EQUIPMENT FINANCING,
INC.
By: /s/ Xxxxx X. Xxxxx
----------------------------
Xxxxx X. Xxxxx
Title: Sr. Vice President
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XXXXXXX XXXXXXX TRUST
BY: /s/ Xxxxxxx Xxxxxxx
--------------------------------
XXXXXXX XXXXXXX, TRUSTEE
SECURITIES AGENT:
___________________________________
Name Printed: _____________________
Title: ____________________________
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