STOCK PLEDGE AGREEMENT
Exhibit
10.37
THIS STOCK PLEDGE AGREEMENT (“Agreement”) is made as of this 4th day of June,
2009, by and among MAGNITUDE INFORMATION SYSTEMS, INC. a Delaware corporation
(“Magnitude”) and Discover Advisory Company, a Bahamian corporation
(“Discover”).
RECITALS:
WHEREAS, since December, 2008, Discover has provided Magnitude with emergency
bridge loan funding on a continuing basis to sustain its operations and pay for
the ongoing operations of its wholly owned subsidiary, Kiwibox Media, Inc., also
a Delaware corporation (“Kiwibox”) in the amounts of $100,000 on December 23,
2008; $150,000 on January 7, 2009; $200,000 on January 27, 2009, and; $150,000
on February 20, 2009; $50,000 on April 16, 2009, $60,000 on May 5, 2009; $60,000
on May 12, 2009, $80,000 on June 4, 2009 and continuing through the current
period;
WHEREAS, Magnitude and Discover negotiated the terms of the bridge loans and
Magnitude executed and delivered four (4) promissory notes to document the
bridge loans from Discover (the “Old Notes”) and now has prepared, negotiated
and delivered a new master note, dated the date hereof, providing for a lending
facility of up to $1,000,000 (the “Master Note”);
WHEREAS,
Magnitude secured its promise to pay the Old Notes by giving Discover a security
interest in its wholly owned subsidiary, Kiwibox Media, Inc. (“Kiwibox”) through
a Magnitude pledge of Kiwibox Certificate No. 6, representing 160 capital
shares, no par value, and representing all of the issued and outstanding shares
of Kiwibox (the “Kiwibox Shares”), and;
WHEREAS, Magnitude shall deliver the fully executed Master Note to Discover on
the date hereof, shall cancel the Old Notes and deliver this Agreement to
memorialize the security provisions in the Master Note, pledging the Kiwibox
Shares as security for the Magnitude indebtedness covered in the Master
Note.
In consideration of the foregoing, and the covenants and promises contained
herein, the parties hereto agree as follows:
1. Pledge.
Magnitude hereby pledges and grants to Discover a security interest in the
Kiwibox Shares. The security interest in the Kiwibox Shares shall be released
upon full repayment of the principal and accrued interest of the funds loaned to
Magnitude through the Master Note or if Discover exercises its option to convert
the total outstanding principal and accrued interest of the Notes into Magnitude
common shares, and such security interest shall continue until (i) Magnitude’s
obligations under the Master Note is paid or converted in full, at which time
the pledge of the Kiwibox Shares shall automatically terminate, or (ii) until an
occurrence of an Event of Default hereunder, and until such time as Discover has
exercised its rights with respect to the Kiwibox Shares as provided in Section 6
hereof.
2. Security. Said
pledge and security interest is made in order to secure the payment of principal
and accrued interest due to Discover under the Master Note.
3. Delivery of Certificate and
Stock Power. Upon execution of this Agreement, Discover thereby
confirms its receipt and possession of the certificate, representing all
outstanding Kiwibox Shares. Upon execution and delivery of this Agreement,
Magnitude shall forthwith execute and deliver a stock power in favor of Discover
for such stock certificate, signed by Magnitude, but not dated.
4. Dividends; Voting
Rights. During the term of the pledge, and so long as Magnitude is
not in default pursuant to Section 6 hereof, Magnitude shall retain all rights
associated with the Kiwibox Shares.
5. Redelivery.
Upon payment in full of Magnitude’s obligations under the Master Note, Discover
shall deliver the Kiwibox Shares to Magnitude, and this Agreement shall
terminate.
6. Default. The
happening of any one or more of the following events or conditions shall
constitute an “Event of Default” hereunder: (i) if Magnitude shall fail to pay
the principal and accrued interest under the Master Note within ten (10)
business days’ of Magnitude’s receipt of a written demand for payment from
Discover; or (ii) the breach by Magnitude of any of its obligations pursuant to
this Agreement. Upon occurrence of an Event of Default, Discover may, at any
time after such Event of Default, complete the stock power delivered herewith
and deliver the same, along with the certificate representing the Kiwibox
Shares, to Magnitude, transferring the Kiwibox Shares on the books of Magnitude
pursuant to the stock power and for the issuance of a new certificate in the
name of Discover, and Discover shall be the absolute owner of the Kiwibox
Shares.
7. Other Actions.
Each party agrees that it will execute and deliver all such other documents and
will take all such other actions as the other party may reasonably request from
time to time in order to fully effectuate the provisions and purposes
hereof.
8. Notices. All
notices, requests, demands, and other communications hereunder shall be in
writing and shall be deemed effective when delivered personally or, if delivered
by mail, twenty-four (24) hours after having been deposited in the U.S. mail,
postage prepaid, registered or certified, and addressed to the parties as
follows (or to such other address as a party shall have specified in a notice
given in accordance with this paragraph):
If to Magnitude to:
Magnitude Information Systems,
Inc.
000 Xxxx
00xx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx
Attn: Xxxxx X. Xxxxxx, Chief Financial
Officer
If to Discover to:
Discover
Advisory Company
00
Xxxxxxx Xxxxxx / P.O. Box N-341
Nassau
Bahamas
Attn:
Xxxxx Xxxxxxx, Secretary
with copy
by email to: xxxxxxxxxxxxxxxx@xxx.xxx
9. Successor. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and
assigns.
10. Governing Law.
This Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
The
parties have hereunto set their hands as of the day and year first above
written.
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Pledgor:
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Magnitude
Information Systems, Inc.
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By:
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Xxxxxx
Xxxxx, President
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Pledgee:
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Discover
Advisory Company
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By:
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Xxxxx
Xxxxxxx, Secretary
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