Exhibit 4.5
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of August 01,
2013, made by and among RED GIANT ENTERTAINMENT, INC., a Nevada corporation (the
"Company") and each holder of Company's common stock signatory hereto (the
"Pledgor" and, collectively, the "Pledgors") in favor of WHC CAPITAL, LLC (the
"Agent") and each of the holders of the Company's 12% Secured Convertible
Debentures due, unless demanded earlier pursuant to the terms therein, August
01, 2013 (collectively, the "Pledgees").
W I T N E S S E T H:
WHEREAS, Pledgees have agreed, severally and not jointly, to lend to the
Company, and the Company has agreed to borrow from the Pledgees, up to an
aggregate of $166,000.00 pursuant to the terms and conditions set forth in the
12% Secured Convertible Debentures of the Company (the "Debentures");
WHEREAS, pursuant to the provisions of the Debentures, and as a condition
to the obligation of the Pledgees to lend thereunder, the Pledgors, as
principals, employees and shareholders of the Company, have agreed to make the
pledge contemplated by this Agreement in order to induce Pledgees to perform
their obligations under the Debentures;
WHEREAS, as a condition to the obligation of the Pledgees to lend pursuant
to the Debentures, the Company agrees to undertake such action contemplated by
this Agreement in order to induce Pledgees to perform their obligations under
the Debentures;
WHEREAS, Pledgors own the shares of common stock, $0.001 par value per
share, of the Company (the "Common Stock") as set forth opposite the Pledgors'
respective names on Schedule A attached hereto;
WHEREAS, terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the Uniform Commercial Code in effect in the State of
New York at that time (whether or not the UCC applies to the affected Pledged
Collateral) (the "UCC") shall have the meanings ascribed to them in the UCC; and
NOW, THEREFORE, in consideration of the premises, covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Pledge and Security Interest. Each Pledgor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the
Pledgees, and grants to the Pledgees a continuing first priority security
interest in, a first lien upon and a right of set-off against, all of its
respective rights, titles and interests of whatsoever kind and nature in (the
"Security Interest"), and to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the obligations pursuant to
the Debentures, the following (collectively, the "Pledged Collateral"):
(a) the shares of Common Stock owned by such Pledgor and set forth on
Schedule A attached hereto (the "Pledged Shares"), 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 Shares; and
(b) all proceeds of any and all of the foregoing Pledged Collateral,
in whatever form (including, without limitation, proceeds that constitute
property of the types described above).
SECTION 2. Security for Obligations. This Agreement secures the payment and
performance of the following obligations (collectively, the "Obligations"): all
present and future indebtedness, obligations, covenants, duties and liabilities
of any kind or nature of the Company to the Pledgees now existing or hereafter
arising under or in connection with this Agreement or the Debentures
(collectively, the "Transaction Documents").
SECTION 3. Delivery of Pledged Collateral. Upon the date hereof, all
certificates representing or evidencing the Pledged Shares, in suitable form for
transfer by delivery, or accompanied by instruments of transfer or assignment
duly executed in blank, are being deposited with and delivered to the Agent, as
collateral agent for the Pledgees. The Agent shall have the right, at any time
after the occurrence of an Event of Default (as hereinafter defined) (unless
such Event of Default is waived in writing by the Pledgees), without notice to
the Pledgor, to transfer to or to register in the name of the Pledgees or their
nominees any or all of the Pledged Collateral. In addition, the Agent shall have
the right at any time after the occurrence of an Event of Default (unless such
Event of Default is waived in writing by the Pledgees), to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. Each Pledgor, severally and not
jointly with the other Pledgors, represents and warrants as follows:
(a) Except as set forth on Schedule 4(a) hereto, such Pledgor is the legal,
record and beneficial owner of the Pledged Collateral owned by such Pledgor,
free and clear of any lien, security interest, restriction, option or other
charge or encumbrance (collectively, "Liens").
(b) The pledge of the Pledged Collateral and the grant of the Security
Interest pursuant to this Agreement creates a valid and perfected first priority
security interest in the Pledged Collateral, securing payment and performance of
the Obligations.
(c) Except for the filing of financing statements pursuant to the UCC with
the proper filing and recording agencies in the jurisdictions indicated on
Schedule B attached hereto, no consent of any other person or entity and no
authorization, approval, or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required (i) for the pledge by
the Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Pledgor, (ii) for
the perfection or maintenance of the security interest created hereby, or (iii)
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for the exercise by the Agent 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 any disposition of any
portion of the Pledged Collateral by laws affecting the offering and sale of
securities generally).
(d) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(e) Effective on the date of execution of this Agreement, such Pledgor
hereby authorizes the Agent to file one or more financing statements under the
UCC with respect to the Security Interest with the proper filing and recording
agencies in the jurisdictions indicated on Schedule B attached hereto, and in
such other jurisdictions as may be requested by the Pledgees.
(f) Such Pledgor will not transfer, pledge, hypothecate, sell or otherwise
dispose of any of the Pledged Collateral without the prior written consent of
the Pledgees.
(g) Such Pledgor shall promptly execute and deliver to the Pledgees such
further assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Pledgees may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce its security interest in the
Pledged Collateral.
(h) All information heretofore, herein or hereafter supplied to the
Pledgees by or on behalf of such Pledgor with respect to the Pledged Collateral
is accurate and complete in all material respects as of the date furnished.
SECTION 5. Further Assurances. Each Pledgor, severally and not jointly with
the other Pledgors, agrees that at any time and from time to time, at the
expense of such Pledgor, the Pledgor shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent and/or the Pledgees may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent and/or Pledgees to
exercise and enforce their rights and remedies hereunder with respect to any
Pledged Collateral. The Company agrees that at any time and from time to time,
at the expense of the Company, the Company shall promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Pledgees may reasonably request.
SECTION 6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred (unless such Event
of Default is waived in writing by the Pledgees):
(i) Each 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; provided, however, that such Pledgor shall not exercise or
refrain from exercising any such right if, in the reasonable judgment of such
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Pledgees, such action would have a material adverse effect on the Security
Interest or the rights and remedies of the Pledgees hereunder; provided,
further, that such Pledgor shall give the Pledgees at least ten (10) days' prior
written notice of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any such right.
(ii) Each Pledgor shall be entitled to receive and retain any and all cash
dividends and interest paid in respect of such Pledgor's Pledged Collateral.
(b) Upon and after the occurrence of any Event of Default (unless such
Event of Default is waived in writing by the Pledgees):
(i) All rights of each Pledgor to exercise or refrain from exercising the
voting and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) and to receive the dividends and interest
payments which 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 Agent who shall thereupon have the sole right to exercise or
refrain from exercising such voting and other consensual rights and to receive
and hold as Pledged Collateral such dividends and interest payments.
(ii) All dividends and interest payments which are received by the Pledgors
contrary to the provisions of paragraph (i) of this Section 6(b) shall be
received in trust for the benefit of the Pledgees, shall be segregated from
other funds of the applicable Pledgor and shall be forthwith paid over to the
Agent as Pledged Collateral in the same form as so received (with any necessary
endorsement).
SECTION 7. Transfers and Other Liens; Additional Shares. During the term of
this Agreement, the Pledgor agrees that it shall 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 upon or with respect to any of the Pledged Collateral, except for the
security interest granted pursuant to this Agreement.
SECTION 8. Agent Appointed Attorney-in-Fact.
(a) Effective only upon an Event of Default (unless such Event of Default
is waived in writing by the Pledgees), the Pledgors hereby appoints the Agent as
the Pledgors' attorney-in-fact, with full authority in the place and stead of,
and in the name of, the Pledgors or otherwise, from time to time in the Agent's
discretion to take any action and to execute any instrument which the Agent may
deem necessary or desirable to accomplish the purposes of this Agreement,
including, without limitation, to receive, endorse and collect all instruments
made payable to the Pledgors representing any dividend, interest payment 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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(b) Each Pledgor, severally and not jointly, authorizes the Agent, and do
hereby make, constitute and appoint the Agent and its respective officers,
agents, successors or assigns with full power of substitution, as the Pledgors'
true and lawful attorney-in-fact, with power, in the name of the Pledgees or the
Pledgors, after the occurrence and during the continuance of an Event of
Default, (i) to endorse any checks, drafts, money orders or other instruments of
payment (including payments payable under or in respect of any policy of
insurance) in respect of the Pledged Collateral that may come into possession of
the Pledgees; (ii) to sign and endorse any financing statement pursuant to the
UCC or any invoice, freight or express xxxx, xxxx of lading, storage or
warehouse receipts, drafts against Pledgors, assignments, verifications and
notices in connection with accounts, and other documents relating to the Pledged
Collateral; (iii) to pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or threatened against the Pledged
Collateral; (iv) to demand, collect, receipt for, compromise, settle and xxx for
monies due in respect of the Pledged Collateral; (v) generally to do, at the
option of the Pledgees, and at the expense of the Pledgors, severally and
jointly, at any time, or from time to time, all acts and things which the
Pledgees deem necessary to protect, preserve and realize upon the Pledged
Collateral and the Security Interest granted herein in order to effect the
intent of this Agreement all as fully and effectually as the Pledgors might or
could do; and (vi) in the event of the bankruptcy of such Pledgor, to appoint a
receiver or equivalent person to xxxxxxxx such Pledgor's assets, and such
Pledgor hereby ratifies all that said attorney-in-fact shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.
(c) Each Pledgor hereby irrevocably appoints the Agent as such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor, from time to time in the Agent's discretion, to
file in its sole discretion, of one or more financing or continuation statements
and amendments thereto, relative to any of the Collateral without the signature
of such Pledgor where permitted by law.
SECTION 9. Pledgee May Perform. If any Pledgor fails to perform any
agreement contained herein, the Agent and/or Pledgees may itself perform, or
cause performance of, such agreement, and the expenses of the Agent and/or
Pledgees incurred in connection therewith shall be payable by such Pledgor under
Section 14 hereof.
SECTION 10. The Agent's Duties. The duties and rights of the Agent are as
set forth on Annex A attached hereto and incorporated herein by reference. Any
fees of the Agent for its services hereunder shall be paid by the Company. The
powers conferred on the Agent hereunder are solely to protect the interests of
the Pledgees in the Pledged Collateral and shall not impose any duty upon the
Agent to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received it
hereunder, neither the Agent nor Pledgees shall have any duty as to any Pledged
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not such party has or is to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
The Agent and Pledgees shall be deemed to have exercised reasonable care in the
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custody and preservation of any Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that which such
party accords its own property.
SECTION 11. Event of Default. The occurrence of any of the following events
shall constitute an event of default under this Agreement (each, an "Event of
Default"):
(a) The failure of any Pledgor to observe, perform or comply with any act,
duty, covenant, agreement or obligation under this Agreement, which is not cured
within ten business days following written notice by Agent to such Pledgor;
(b) If any of the representation or warranty of any Pledgor set forth in
this Agreement shall be breached or shall be untrue or incorrect in any material
respect, and is not cured within ten business days following written notice by
Agent to such Pledgor;
(c) The filing of any financing statement with regard to any of the Pledged
Collateral other than pursuant to this Agreement, or the attachment of any
additional Lien to any portion of the Pledged Collateral in favor of any Person
other than the Pledgees; or
(d) If any event of default (and expiration of any cure period) shall occur
(unless such event of default is waived in writing by the Pledgees) under any of
the other Transaction Documents.
SECTION 12. Cross-Default; Cross-Collateralization. The Pledgors
acknowledges and agrees that any default under the terms of this Agreement shall
constitute a default by the Company under the Debentures, and that any event of
default (following expiration of any applicable cure period) under the
Debentures shall constitute a default under this Agreement.
SECTION 13. Remedies upon Event of Default. Upon and after the occurrence
of any Event of Default:
(a) The Agent may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to the Agent (including, without limitation, the vesting in the Agent pursuant
to Section 6(b)(i) of the sole right to exercise voting rights pertaining to the
Pledged Collateral, including, without limitation, voting rights with respect to
the sale of assets of the issuer of such Pledged Shares), all the rights and
remedies of a secured party on default under the UCC, and may also, without
notice except as specified below and subject to the applicable securities laws,
sell the Pledged Collateral or any part thereof at public or private sale, at
any exchange, broker's board or at any of the Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the Agent
may deem commercially reasonable. Each Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten (10) days' notice to such 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 Agent shall not
be obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from time to
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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. Each Pledgor acknowledges and agrees that the Pledged Collateral
consisting of the Pledged Shares, and/or any other shares of common stock of the
Company, is of a type customarily sold on a recognized market, and accordingly
that no notice of the sale thereof need be given. In addition, Agent may
transfer all of the Pledged Collateral to Pledgees, who may hold all of such
Pledged Collateral as payment in full of the Obligations.
(b) Any cash held by the Agent or the Pledgees as Pledged Collateral and
all cash proceeds received by the Agent or the Pledgees 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 Agent or the Pledgees, be held as
collateral for, and/or then or at any time thereafter be applied (after payment
of any amounts payable pursuant to Section 14) in whole or in part against, all
or any part of the Obligations. Any surplus of such cash or cash proceeds held
by the Agent or the Pledgees and remaining after payment in full of all the
Obligations shall be paid over to the Pledgors, pro-rata, or to whomsoever may
be lawfully entitled to receive such surplus.
SECTION 14. Expenses. The Pledgors and the Company, severally and jointly,
shall upon demand pay to the Agent and/or the Pledgees the amount of any and all
reasonable expenses, including reasonable attorneys' fees and expenses and the
reasonable fees and expenses of any experts and agents, which the Agent and/or
Pledgees may incur in connection with (a) the administration of this Agreement,
(b) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (c) the exercise or enforcement
of any of the rights of the Agent and/or Pledgees hereunder or (d) the failure
by any Pledgor to perform or observe any of the provisions hereof.
SECTION 15. Continuing Security Interest; Termination. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall remain
in full force and effect until the indefeasible payment in full of the
Obligations. Upon the indefeasible payment in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to the Pledgors. Upon any such termination, the Agent
shall, at such Pledgors' expense, return, pro-rata, to the Pledgors such of the
Pledged Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof and execute and deliver to such Pledgors such documents as such
Pledgors shall reasonably request to evidence such termination.
SECTION 16. Governing Law; Terms. For the convenience of the Agent, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York, without regard to principles of conflict of laws. Each
Pledgor agrees to submit to the in personam jurisdiction of the state and
federal courts situated within the City of New York, State of New York with
regard to any controversy arising out of or relating to this Agreement. Unless
otherwise defined herein, terms defined in Article 9 of the UCC are used herein
as therein defined.
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SECTION 17. Notice. All notices and other communications hereunder shall be
in writing and shall be deemed to have been received when delivered personally
(which shall include, without limitation, via express overnight courier) or if
mailed, three (3) business days after having been mailed by registered or
certified mail, return receipt requested, postage prepaid, to the addresses of
the parties as set forth herein.
SECTION 18. Waivers.
(a) Waivers. Each Pledgor waives any right to require the Pledgees to (i)
proceed against any person, (ii) proceed against any other collateral under any
other agreement, (iii) pursue any other remedy, or (iv) make presentment,
demand, dishonor, notice of dishonor, acceleration and/or notice of non-payment.
(b) Waiver of Defense. No course of dealing between the Pledgors and the
Pledgees, nor any failure to exercise nor any delay in exercising on the part of
the Agent or Pledgees, any right, power, or privilege under this Agreement or
under any of the other Transaction Documents shall operate as a waiver. No
single or partial exercise of any right, power, or privilege under this
Agreement or under any of the other Transaction Documents shall preclude any
other or further exercise of such right, power, or privilege or the exercise of
any other right, power, or privilege.
SECTION 19. Rights Are Cumulative. All rights and remedies of the Agent and
the Pledgees with respect to the Pledged Collateral, whether established by this
Agreement, the other Transaction Documents or by law, shall be cumulative and
may be exercised concurrently or in any order.
SECTION 20. Indemnity. Each Pledgor, jointly and severally, agrees to
indemnify and hold harmless the Agent, the Pledgees and their respective heirs,
successors and assigns against and from all liabilities, losses and costs
(including, without limitation, reasonable attorneys' fees) arising out of or
relating to the taking or the failure to take action in respect of any
transaction effected under this Agreement or in connection with the lien
provided for herein, including, without limitation, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to any
of the Pledged Collateral, except to the extent resulting from their gross
negligence or intentional misconduct. The liabilities of the Pledgors under this
Section 20 shall survive the termination of this Agreement.
SECTION 21. Severability. The provisions of this Agreement are severable.
If any provision of this Agreement is held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such provision or part thereof in any other jurisdiction,
or any other provision of this Agreement in any jurisdiction.
SECTION 22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
SECTION 23. Amendments; Entire Agreement. This Agreement is subject to
modification only by a writing signed by the parties. To the extent any
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provision of this Agreement conflicts with any provision of the Debentures, the
provision giving Pledgees greater rights or remedies shall govern, it being
understood that the purpose of this Agreement is to add to, and not detract
from, the rights granted to Pledgees under the Debentures. This Agreement and
the other Transaction Documents constitute the entire agreement of the parties
with respect to the subject matter of this Agreement.
SECTION 24. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and assigns; provided, however,
that no Pledgor may, without the prior written consent of the Pledgees, assign
or delegate any rights, powers, duties or obligations hereunder, and any such
purported assignment or delegation without such consent shall be null and void.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
PLEDGORS:
/s/ Xxxxx Xxxxxx
-----------------------------
Xxxxx Xxxxxx
THE COMPANY:
RED GIANT ENTERTAINMENT, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------
Name: Xxxxx Xxxxxx
Title: CEO
AGENT:
WHC CAPITAL, LLC
By: /s/ Xxxx Xxxxxx
--------------------------
Name: Xxxx Xxxxxx
Title: Member
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SIGNATURE PAGE FOR PLEDGEES FOLLOWS]
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[PLEDGEE SIGNATURE PAGES TO CNSC PLEDGE AND SECURITY AGREEMENT]
Name of Pledgee: _________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF PLEDGEE: ____________________________
Name of Authorized Signatory: ________________________________
Title of Authorized Signatory: _______________________________
E-mail Address of Authorized Signatory: _______________________
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