PLEDGE AGREEMENT
PLEDGE
AGREEMENT (this
“Agreement”),
dated
as of July 7, 2008, made by each entity listed as a pledgor on the signature
pages hereto (the “Pledgor”),
in
favor of DRIFTWOOD
VENTURES, INC.,
a
Delaware corporation (the "Buyer").
WITNESSETH:
WHEREAS,
the Pledgor and Buyer are parties to the Securities Purchase Agreement, dated
as
of even date herewith (as amended, restated or otherwise modified from time
to
time, the "Securities
Purchase Agreement"),
pursuant to which the Pledgor shall be required to sell, and the Buyer shall
purchase or have the right to purchase, the “Secured Notes” (as defined
therein);
WHEREAS,
it is a condition precedent to the Buyer entering into the Securities Purchase
Agreement that the Pledgor shall have executed and delivered to the Buyer
this
Agreement to secure all of its obligations under the Securities Purchase
Agreement, the Secured Notes issued pursuant thereto (as such Secured Notes
may
be amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the “Notes”)
and the
“Transaction Documents” (as defined in the Securities Purchase Agreement, the
“Transaction
Documents”);
and
WHEREAS,
the Pledgor has determined that the execution, delivery and performance of
this
Agreement directly benefits, and is in the best interest of, the
Pledgor.
NOW,
THEREFORE, in consideration of the premises and the agreements herein and
in
order to induce the Buyer to perform under the Securities Purchase Agreement,
the Pledgor agrees with the Buyer as follows:
SECTION
1. Definitions
and Rules of Interpretation.
(a) Definitions.
Reference is made to the Securities Purchase Agreement and the Notes for
a
statement of terms thereof. All terms used in this Agreement which are defined
in the Securities Purchase Agreement or in Article 8 or Article 9 of the
Uniform
Commercial Code as in effect from time to time in the State of New York (the
“Code”),
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth therein; provided,
that
terms used herein which are defined in the Code as in effect in the State
of New
York on the date hereof shall continue to have the same meaning notwithstanding
any replacement or amendment of such statute except as the Buyer may otherwise
determine. In the event that any such term is defined in both the Securities
Purchase Agreement and the Code, the definition of such term in the Securities
Purchase Agreement shall control.
(b) Rules
of Interpretation .
Except
as otherwise expressly provided in this Agreement, the following rules of
interpretation apply to this Agreement: (i) the singular includes the plural
and
the plural includes the singular; (ii) “or” and “any” are not exclusive and
“include” and “including” are not limiting; (iii) a reference to any agreement
or other contract includes permitted supplements and amendments; (iv) a
reference to a law includes any amendment or modification to such law and
any
rules or regulations issued thereunder; (v) a reference to a person includes
its
permitted successors and assigns; and (vi) a reference in this Agreement
to an
Article, Section, Annex, Exhibit or Schedule is to the Article, Section,
Annex,
Exhibit or Schedule of this Agreement.
SECTION
2. Pledge
and Grant of Security Interest. As collateral security for all of the
Obligations (as defined in Section 3 hereof), the Pledgor hereby pledges
and
assigns and grants to the Buyer a continuing security interest in, and Lien
on,
all of the Pledgor’s right, title and interest in and to the following
(collectively, the “Collateral”):
(a) all
present, as set forth in Schedule
I,
and all
future, issued and outstanding shares of capital stock, or other equity or
investment securities of, or partnership, membership, or joint venture interests
in, each Subsidiary (as defined in the Securities Purchase Agreement), whether
now owned or hereafter acquired by the Pledgor and whether or not evidenced
or
represented by any stock certificate, certificated security or other instrument,
together with the certificates representing such equity interests, all options
and other rights, contractual or otherwise, in respect thereof and all
dividends, distributions, cash, instruments, investment property and any
other
property (including, but not limited to, any stock dividend and any distribution
in connection with a stock split) from time to time received, receivable
or
otherwise distributed in respect of or in exchange for any or all of the
foregoing and all cash and noncash proceeds thereof (collectively, the
“Pledged
Shares”);
(b) all
present and future increases, profits, combinations, reclassifications, and
substitutes and replacements for all or part of the foregoing Collateral
heretofore described;
(c) all
investment property, financial assets, securities, capital stock, other equity
interests, stock options and commodity contracts of the Pledgor, all,
debentures, bonds, promissory notes or other evidences of indebtedness payable
or owing to the Pledgor, and all other assets now or hereafter received or
receivable with respect to the foregoing;
(d) all
securities entitlements of the Pledgor in any and all of the foregoing;
and
(e) all
proceeds (including proceeds of proceeds) of any and all of the
foregoing;
in
each
case, whether now owned or hereafter acquired by the Pledgor and howsoever
its
interest therein may arise or appear (whether by ownership, security interest,
Lien, claim or otherwise).
SECTION
3. Security
for Obligations. The security interest created hereby in the Collateral
constitutes continuing collateral security for all of the following obligations,
whether now existing or hereafter incurred (the “Obligations”):
(a) the
payment by the Pledgor, as and when due and payable (by scheduled maturity,
required prepayment, acceleration, demand or otherwise), of all amounts from
time to time owing by it in respect of the Securities Purchase Agreement,
the
Notes and the other Transaction Documents, (including, without limitation,
all
interest that accrues after the commencement of any bankruptcy proceeding
of the
Pledgor, whether or not the payment of such interest is unenforceable or
is not
allowable due to the existence of such bankruptcy proceeding), and (B) all
fees,
commissions, expense reimbursements, indemnifications and all other amounts
due
or to become due under any of the Transaction Documents; and
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(b) the
due
performance and observance by the Pledgor of all of its other obligations
from
time to time existing in respect of any of the Transaction Documents for
so long
as the Notes are outstanding.
SECTION
4. Delivery
of the Collateral.
(a) All
certificates currently representing the Pledged Shares shall be delivered
to the
Buyer on or prior to the execution and delivery of this Agreement. All other
promissory notes, certificates and instruments constituting Collateral from
time
to time or required to be pledged to the Buyer pursuant to the terms of this
Agreement or the Securities Purchase Agreement (the “Additional
Collateral”)
shall
be delivered to the Buyer promptly upon receipt thereof by or on behalf of
the
Pledgor. All such promissory notes, certificates and instruments shall be
held
by the Buyer pursuant hereto and shall be delivered in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments
of
transfer or assignment or undated stock powers executed in blank, all in
form
and substance reasonably satisfactory to the Buyer. If any Collateral consists
of uncertificated securities, unless the immediately following sentence is
applicable thereto, at the request of Buyer, the Pledgor shall cause the
Buyer
(or its designated custodian, nominee or other designee) to become the
registered holder thereof, or cause each issuer of such securities to agree
that
it will comply with instructions originated by the Buyer (or its designated
custodian, nominee or other designee) with respect to such securities without
further consent by the Pledgor. If any Collateral consists of securities
entitlements, the Pledgor shall transfer such securities entitlements to
the
Buyer (or its designated custodian, nominee or other designee) or cause the
applicable securities intermediary to agree that it will comply with entitlement
orders by the Buyer (or its designated custodian, nominee or other designee)
without further consent by the Pledgor.
(b) Promptly
upon the receipt by the Pledgor of any Additional Collateral, a Pledge
Amendment, duly executed by the Pledgor, in substantially the form of
Annex
I
hereto
(a “Pledge
Amendment”),
shall
be delivered to the Buyer, in respect of the Additional Collateral which
is or
are to be pledged pursuant to this Agreement and the Securities Purchase
Agreement, which Pledge Amendment shall from and after delivery thereof
constitute part of Schedule
I
hereto.
Each Pledgor hereby authorizes the Buyer to attach each Pledge Amendment
to this
Agreement and agrees that all certificates or instruments listed on any Pledge
Amendment shall for all purposes hereunder constitute Collateral and the
Pledgor
shall be deemed upon delivery thereof to have made the representations and
warranties set forth in Section
5
with
respect to such Additional Collateral.
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(c) If
the
Pledgor shall receive, by virtue of the Pledgor’s being or having been an owner
of any Collateral, any (i) stock certificate (including, without limitation,
any
certificate representing a stock dividend or distribution in connection with
any
increase or reduction of capital, reclassification, merger, consolidation,
sale
of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be
retained by the Pledgor pursuant to Section
7
hereof)
or in securities or other property or (iv) dividends, distributions, cash,
instruments, investment property and other property in connection with a
partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, the Pledgor shall receive such
stock certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of the Buyer, shall segregate it from
the
Pledgor’s other property and shall deliver it forthwith to the Buyer in the
exact form received, with any necessary endorsement and/or appropriate stock
powers duly executed in blank, to be held by the Buyer as Collateral and
as
further collateral security for the Obligations.
SECTION
5. Representations
and Warranties. The Pledgor represents and warrants as follows:
(a) The
Pledgor, (i) is a corporation, limited liability company or limited partnership
duly organized, validly existing and in good standing under the laws of the
state or jurisdiction of its organization, and (ii) has all requisite power
and
authority to execute, deliver and perform this Agreement.
(b) The
execution, delivery and performance by the Pledgor of this Agreement (i)
have
been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or bylaws, or any applicable law or any contractual
restriction binding on or affecting it or any of its properties, and (iii)
do
not and will not result in or require the creation of any Lien upon or with
respect to any of its properties other than pursuant to this
Agreement.
(c) The
issuers of the Pledged Shares set forth in Schedule
I
hereto
are the
Pledgor’ only Subsidiaries existing on the date hereof. The Pledged Shares have
been duly authorized and validly issued, are fully paid and nonassessable
and
the holders thereof are not entitled to any preemptive first refusal or other
similar rights. Except as noted in Schedule
I
hereto,
the Pledged Shares constitute 100% of the issued shares of capital stock,
partnership interests or membership or other equity interests, as applicable,
of
the Subsidiaries. All other shares of stock constituting Collateral will
be,
when issued, duly authorized and validly issued, fully paid and
nonassessable.
(d) The
Pledgor is and will be at all times the legal and beneficial owner of the
Collateral free and clear of any Lien, security interest, option or other
charge
or encumbrance except for the security interest and Lien created by this
Agreement or any Permitted Liens.
(e) The
exercise by the Buyer of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or affecting
the
Pledgor or any of the properties of the Pledgor and will not result in or
require the creation of any Lien, security interest or other charge or
encumbrance upon or with respect to any of the properties of the Pledgor
other
than pursuant to this Agreement and the other Transaction
Documents.
4
(f) No
authorization or approval or other action by, and no notice to or filing
with,
any governmental authority is required to be obtained or made by the Pledgor
for
(i) the due execution, delivery and performance by the Pledgor of this
Agreement, (ii) the grant by the Pledgor, or the perfection, of the security
interest and Lien purported to be created hereby in the Collateral or (iii)
the
exercise by the Buyer of any of its rights and remedies hereunder, except
as may
be required in connection with any sale of any Collateral by laws affecting
the
offering and sale of securities generally.
(g) This
Agreement creates a valid security interest and Lien in favor of the Buyer
in
the Collateral, as security for the Obligations. The Buyer’s having possession
of the promissory notes evidencing the Collateral, the certificates representing
the Pledged Shares and all other certificates, instruments and cash constituting
Collateral from time to time results in the perfection of such security interest
and Lien. Such security interest and Lien is, or in the case of Collateral
in
which the Pledgor obtains rights after the date hereof, will be, a perfected
Lien. All action necessary or desirable to perfect and protect such security
interest and Lien has been duly taken, except for the Buyer’s having possession
of certificates, instruments and cash constituting Collateral after the date
hereof.
SECTION
6. Covenants
as to the Collateral. So long as any Obligations shall remain outstanding
and the Securities Purchase Agreement and the other Transaction Documents
shall
not have been terminated, the Pledgor will, unless the Buyer shall otherwise
consent in writing:
(a) keep
adequate records concerning the Collateral and permit the Buyer, or any
designees or representatives thereof at any time or from time to time to
examine
and make copies of and abstracts from such records;
(b) at
the
Pledgor’s expense, promptly deliver to the Buyer a copy of each material notice
or other material communication received by the Pledgor in respect of the
Collateral;
(c) at
the
Pledgor’s expense, defend the Buyer’s right, title and security interest in and
to the Collateral against the claims of any Person;
(d) at
the
Pledgor’s expense, at any time and from time to time, promptly execute and
deliver all further instruments and documents and take all further action
that
may be necessary or desirable or that the Buyer may reasonably request in
order
to (i) perfect and protect, or maintain the perfection of, the security
interest and Lien purported to be created hereby, (ii) enable the Buyer to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral or (iii) otherwise effect the purposes of this Agreement, including,
without limitation, delivering to the Buyer irrevocable proxies in respect
of
the Collateral;
(e) not
sell,
assign (by operation of law or otherwise), exchange or otherwise dispose
of any
Collateral or any interest therein except as expressly permitted by the
Securities Purchase Agreement;
5
(f) not
create or suffer to exist any Lien, upon or with respect to any Collateral
except for the Lien created hereby or for any Permitted Lien;
(g) not
make
or consent to any amendment or other modification or waiver with respect
to any
Collateral or enter into any agreement or permit to exist any restriction
with
respect to any Collateral other than pursuant to the Transaction
Documents;
(h) except
as
expressly permitted by the Securities Purchase Agreement, not permit the
issuance of (i) any additional shares of any class of capital stock, partnership
interests, member interests or other equity of any Subsidiary, (ii) any
securities convertible voluntarily by the holder thereof or automatically
upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such shares of capital stock or (iii) any warrants, options, contracts
or other commitments entitling any Person to purchase or otherwise acquire
any
such shares of capital stock;
(i) not
issue
any stock certificate, certificated security or other instrument to evidence
or
represent any shares of capital stock, any partnership interest or membership
interest described in Schedule
I
hereto;
and
(j) not
take
or fail to take any action which would in any manner impair the validity
or
enforceability of the Buyer’s security interest in and Lien on any Collateral.
SECTION
7. Voting
Rights, Dividends, Etc. in Respect of the Collateral.
(a) So
long
as no Event of Default (as defined in the Notes) (an “Event
of Default”) shall
have occurred and be continuing:
(i) the
Pledgor may exercise any and all voting and other consensual rights pertaining
to any Collateral for any purpose not inconsistent with the terms of this
Agreement, the Securities Purchase Agreement or the other Transaction Documents;
provided,
however,
that
(A) Pledgor will not exercise nor refrain from exercising any such right,
as the case may be, if the Buyer gives it notice that, in the Buyer’s judgment,
such action (or inaction) is reasonably likely to have a Material Adverse
Effect
and (B) the Pledgor will give the Buyer at least five (5) Business Days’
notice of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any such right which is reasonably likely to
have a
Material Adverse Effect;
(ii) the
Pledgor may receive and retain any and all dividends, interest or other
distributions paid in respect of the Collateral to the extent permitted by
the
Securities Purchase Agreement; provided,
however,
that
any and all (A) dividends and interest 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, any Collateral, (B) dividends
and
other distributions paid or payable in cash in respect of any Collateral
in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in surplus, and (C)
cash
paid, payable or otherwise distributed in redemption of, or in exchange for,
any
Collateral, together with any dividend, distribution, interest or other payment
which at the time of such dividend, distribution, interest or other payment
was
not permitted by the Securities Purchase Agreement, shall be, and shall
forthwith be delivered to the Buyer to hold as, Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of the Buyer,
shall be segregated from the other property or funds of the Pledgor, and
shall
be forthwith delivered to the Buyer in the exact form received with any
necessary indorsement and/or appropriate stock powers duly executed in blank,
to
be held by the Buyer as Collateral and as further collateral security for
the
Obligations; and
6
(iii) the
Buyer
will 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 rights
which it is entitled to exercise pursuant to paragraph (i) of this Section
7(a)
and to
receive the dividends, distributions, interest and other payments which it
is
authorized to receive and retain pursuant to paragraph (ii) of this Section
7(a),
in each
case, to the extent that the Buyer has possession of such
Collateral.
(b) Upon
the
occurrence and during the continuance of an Event of Default:
(i) all
rights of the Pledgor to exercise the voting and other consensual rights
which
it would otherwise be entitled to exercise pursuant to paragraph (i) of
subsection (a) of this Section
7,
and to
receive the dividends, distributions, interest and other payments which it
would
otherwise be authorized to receive and retain pursuant to paragraph (ii) of
subsection (a) of this Section 7,
shall
cease, and all such rights shall thereupon become vested in the Buyer which
shall thereupon have the sole right to exercise such voting and other consensual
rights and to receive and hold as Collateral such dividends, distributions,
interest and other payments;
(ii) without
limiting the generality of the foregoing, the Buyer may at its option exercise
any and all rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Collateral as if it were the
absolute owner thereof, including, without limitation, the right to exchange,
in
its discretion, any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other adjustment of any issuer of the
Collateral or upon the exercise by any issuer of the Collateral of any right,
privilege or option pertaining to any Collateral, and, in connection therewith,
to deposit and deliver any and all of the Collateral with any committee,
depository, registrar or other designated agent upon such terms and conditions
as it may determine; and
(iii) all
dividends, distributions, interest and other payments which are received
by the
Pledgor contrary to the provisions of paragraph (i) of this Section
7(b)
shall be
received in trust for the benefit of the Buyer, shall be segregated from
other
funds of the Pledgor, and shall be forthwith paid over to the Buyer as
Collateral in the exact form received with any necessary indorsement and/or
appropriate stock powers duly executed in blank, to be held by the Buyer
as
Collateral and as further collateral security for the Obligations.
7
SECTION
8. Additional
Provisions Concerning the Collateral.
(a) The
Pledgor hereby (i) authorizes the Buyer to file one or more financing or
continuation statements, and amendments thereto, relating to the Collateral,
without the signature of the Pledgor where permitted by law, (ii) ratifies
such
authorization to the extent that the Buyer has filed any such financing or
continuation statements, or amendments thereto, without the signature of
the
Pledgor prior to the date hereof and (iii) authorizes the Buyer to execute
any
agreements, instruments or other documents in the Pledgor’s name and to file
such agreements, instruments or other documents that are related to the security
interest and Lien of the Buyer in the Collateral or as provided under Article
8
or Article 9 of the UCC in any appropriate filing office.
(b) The
Pledgor hereby irrevocably appoints the Buyer as its attorney-in-fact and
proxy,
with full authority in the place and stead and in its name or otherwise,
from
time to time in the Buyer’s discretion to take any action and to execute any
instrument which the Buyer may deem necessary or advisable to accomplish
the
purposes of this Agreement (subject to the rights of the Pledgor under
Section
7(a)
hereof),
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any dividend, interest payment or
other
distribution in respect of any Collateral and to give full discharge for
the
same. This power is coupled with an interest and is irrevocable until the
termination of this Agreement in accordance with Section 13(e)
hereof.
(c) If
the
Pledgor fails to perform any agreement or obligation contained herein, the
Buyer
itself may perform, or cause performance of, such agreement or obligation,
and
the expenses of the Buyer incurred in connection therewith shall be payable
by
the Pledgor pursuant to Section
10
hereof
and shall be secured by the Collateral.
(d) Other
than the exercise of reasonable care to assure the safe custody of the
Collateral while held hereunder, the Buyer shall have no duty or liability
to
preserve rights pertaining thereto and shall be relieved of all responsibility
for the Collateral upon surrendering it or tendering surrender of it to the
Pledgor. The Buyer shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Buyer accords
its
own property, it being understood that the Buyer shall not have responsibility
for (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Collateral,
whether or not the Buyer has or is deemed to have knowledge of such matters,
or
(ii) taking any necessary steps to preserve rights against any parties with
respect to any Collateral.
(e) The
powers conferred on the Buyer hereunder are solely to protect its interest
in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
the
accounting for monies actually received by it hereunder, the Buyer shall
have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral.
8
(f) Upon
the
occurrence and during the continuation of any Default or Event of Default,
the
Buyer may at any time in its discretion (i) without notice to the Pledgor,
transfer or register in the name of the Buyer or any of its nominees any
or all
of the Collateral, subject only to the revocable rights of the Pledgor under
Section
7(a)
hereof,
and (ii) exchange certificates or instruments constituting Collateral for
certificates or instruments of smaller or larger denominations.
SECTION
9. Remedies
Upon Default. If any Event of Default shall have occurred and be
continuing:
(a) The
Buyer
may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all of the rights
and
remedies of a secured party on default under the Code then in effect in the
State of New York; and without limiting the generality of the foregoing and
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange
or
broker’s board or elsewhere, at such price or prices and on such other terms as
the Buyer may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten (10) 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
Buyer shall not be obligated to make any sale of Collateral regardless of
notice
of sale having been given. The Buyer 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) The
Pledgor recognizes that it may be impracticable to effect a public sale of
all
or any part of the Pledged Shares or any other securities constituting
Collateral and that the Buyer may, therefore, determine to make one or more
private sales of any such securities to a restricted group of purchasers
who
will be obligated to agree, among other things, to acquire such securities
for
its own account, for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such private sale may be
at
prices and on terms less favorable to the seller than the prices and other
terms
which might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sales shall be deemed to have been made
in a
commercially reasonable manner and that the Buyer shall have no obligation
to
delay sale of any such securities for the period of time necessary to permit
the
issuer of such securities to register such securities for public sale under
the
Securities Act of 1933, as amended (the “Securities
Act”).
The
Pledgor further acknowledges and agrees that any offer to sell such securities
which has been (i) publicly advertised on a bona fide basis in a newspaper
or
other publication of general circulation in the financial community of New
York,
New York (to the extent that such an offer may be so advertised without prior
registration under the Securities Act) or (ii) made privately in the manner
described above to not less than fifteen (15) bona fide
offerees
shall be deemed to involve a “public disposition” for the purposes of Section
9-610 of the Code (or any successor or similar, applicable statutory provision)
as then in effect in the State of New York, notwithstanding that such sale
may
not constitute a “public offering” under the Securities Act, and that the Buyer
may, in such event, bid for the purchase of such securities.
9
(c) Any
cash
held by the Buyer as Collateral and all cash proceeds received by the Buyer
in
respect of any sale of, collection from, or other realization upon, all or
any
part of the Collateral may, in the discretion of the Buyer, be held by the
Buyer
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Buyer pursuant to Section
10
hereof)
in whole or in part by the Buyer against, all or any part of the Obligations
in
such order as the Buyer shall elect consistent with the provisions of the
Securities Purchase Agreement.
(d) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Buyer is legally entitled, the
Pledgor shall be jointly and severally liable for the deficiency, together
with
interest thereon at the highest rate specified in the Securities Purchase
Agreement for interest on overdue principal thereof or such other rate as
shall
be fixed by applicable law, together with the costs of collection and the
reasonable fees, costs and expenses of any attorneys employed by the Buyer
to
collect such deficiency.
SECTION
10. Indemnity
and Expenses.
(a) The
Pledgor, hereby agrees to indemnify and hold the Buyer (and all of its officers,
directors, employees, attorneys, consultants) harmless from and against any
and
all claims, damages, losses, liabilities, obligations, penalties, fees, costs
and expenses (including, without limitation, reasonable legal fees and
disbursements of counsel) to the extent that they arise out of or otherwise
result from this Agreement (including, without limitation, enforcement of
this
Agreement), except claims, losses or liabilities arising or resulting directly
from such Person’s gross negligence or willful misconduct as determined by a
court of competent jurisdiction.
(b) The
Pledgor shall be obligated for, and will upon demand pay to the Buyer the
reasonable amount of any and all out-of-pocket costs and expenses, including
the
reasonable fees and disbursements of the Buyer’s counsel and of any experts
which the Buyer may incur in connection with (i) the preparation, negotiation,
execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon,
any Collateral, (iii) the exercise or enforcement of any of the rights of
the
Buyer hereunder, or (iv) the failure by the Pledgor to perform or observe
any of
the provisions hereof.
SECTION
11. Notices,
Etc. All notices and other communications provided for hereunder shall be
in
writing and shall be mailed (by certified mail, postage prepaid and return
receipt requested), sent by Federal Express or other recognized courier service
(return receipt requested), telecopied or delivered, if to the Pledgor, to
it at
the address specified for the Pledgor in the Securities Purchase Agreement
or if
to the Buyer, to it at the address specified in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying
as
to delivery with the terms of this Section 11. All such notices and other
communications shall be effective (i) if sent by certified mail, postage
prepaid, return receipt requested, when received or three (3) Business Days
after mailing, whichever first occurs, (ii) if telecopied, when transmitted
and
confirmation is received, provided same is on a Business Day and, if not,
on the next Business Day or (iii) if delivered or sent by Federal Express
or
other recognized courier service (return receipt requested), upon delivery,
provided same is on a Business Day and, if not, on the next Business Day.
10
SECTION
12. Security
Interest Absolute. All rights of the Buyer, all Liens and all obligations of
the Pledgor hereunder shall be absolute and unconditional irrespective of:
(i)
any lack of validity or enforceability of the Securities Purchase Agreement
or
any other agreement or instrument relating thereto, (ii) any change in the
time,
manner or place of payment of, or in any other term in respect of, all or
any of
the Obligations, or any other amendment or waiver of or consent to any departure
from the Securities Purchase Agreement or any other Transaction Document,
(iii)
any exchange or release of, or non-perfection of any Lien on any Collateral,
or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Obligations, or (iv) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, the Pledgor
in
respect of the Obligations (other than the payment in full of the Obligations).
All authorizations and agencies contained herein with respect to any of the
Collateral are irrevocable and powers coupled with an interest.
SECTION
13. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it
is in
writing and signed by the Pledgor and the Buyer, and no waiver of any provision
of this Agreement, and no consent to any departure by the Pledgor therefrom,
shall be effective unless it is in writing and signed by the Buyer, and then
such waiver or consent shall be effective only in the specific instance and
for
the specific purpose for which given.
(b) No
failure on the part of the Buyer to exercise, and no delay in exercising,
any
right hereunder or under any other Transaction Document shall operate as
a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Buyer provided herein and in the other
Transaction Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights of the Buyer under
any
Transaction Document against any party thereto are not conditional or contingent
on any attempt by the Buyer to exercise any of its rights under any other
Transaction Document against such party or against any other
Person.
(c) Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
(d) This
Agreement shall create a continuing security interest in and Lien on the
Collateral and shall (i) remain in full force and effect until the termination
of this Agreement in accordance with Section 13 (e) hereof and (ii) be
binding on the Pledgor and their respective successors and assigns and shall
inure, together with all rights and remedies of the Buyer, to the benefit
of the
Buyer and its successors, transferees and assigns. Without limiting the
generality of clause (ii) of the immediately preceding sentence, the Buyer
may
assign or otherwise transfer its rights and obligations under this Agreement
and
any other Transaction Document to any other Person pursuant to the terms
of the
Securities Purchase Agreement, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Buyer herein
or otherwise. Upon any such assignment or transfer, all references in this
Agreement to the Buyer shall mean the assignee of the Buyer. None of the
rights
or obligations of the Pledgor hereunder may be assigned or otherwise transferred
without the prior written consent of the Buyer, and any such assignment or
transfer shall be null and void.
11
(e) Notwithstanding
anything to the contrary in this Agreement, (i) this Agreement (along with
all
powers of attorney granted hereunder) and the security interests and Lien
created hereby shall terminate and all rights to the Collateral shall revert
to
the Pledgor upon the repayment in full and /or complete conversion to equity
securities of the Pledgor of all indebtedness obligations owed by the Pledgor
to
the Buyer under the Notes (including, without limitation, all principal,
interest and fees related to the Notes), and (ii) the Buyer will, upon the
Pledgor’s request and at the Pledgor’s expense, (A) return to the Pledgor such
of the Collateral (to the extent delivered to the Buyer) as shall not have
been
sold or otherwise disposed of or applied pursuant to the terms hereof, and
(B)
execute and deliver to the Pledgor, without recourse, representation or
warranty, such documents as the Pledgor shall reasonably request to evidence
such termination.
(f) The
internal laws, and not the laws of conflicts, of New York shall govern the
enforceability and validity of this agreement, the construction of its terms
and
the interpretation of the rights and duties of the parties, except as required
by mandatory provisions of law and except to the extent that the validity
and
perfection or the perfection and the effect of perfection or non-perfection
of
the security interest and Lien created hereby, or remedies hereunder, in
respect
of any particular Collateral are governed by the law of a jurisdiction other
than the State of Delaware.
(g) Each
party to this agreement hereby irrevocably and unconditionally submits, for
itself and its property, to the exclusive jurisdiction of the united states
district court for the southern district of New York sitting in Manhattan
or the
commercial division, civil branch of the supreme court of the State of Yew
York
sitting in New York county in connection with any suit, action or proceeding
directly or indirectly arising out of, under or in connection with the
Transaction Documents or the transactions contemplated thereby. No party
to this
agreement may move to (i) transfer any such suit, action or proceeding brought
in such New York court or federal court to another jurisdiction, (ii)
consolidate any such suit, action or proceeding brought in such New York
court
or federal court with a suit, action or proceeding in another jurisdiction
or
(iii) dismiss any such suit, action or proceeding brought in such New York
court
or federal court for the purpose of bringing the same in another jurisdiction.
Each party to this agreement agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
Each party to this agreement hereby irrevocably and unconditionally waives,
to
the fullest extent it may legally and effectively do so, any objection which
it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to the transaction documents or the
shares
in any New York court sitting in the county of New York or any federal court
sitting in the southern district of New York. Each party to this agreement
hereby consents to the service of process in any such suit, action or proceeding
by notice in the manner specified in Section
11.
12
(h) The
Pledgor irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Pledgor at its address provided herein, such service
to
become effective when received or 10 days after such mailing, whichever first
occurs.
(i) Nothing
contained herein shall affect the right of the Buyer to serve process in
any
other manner permitted by law or commence legal proceedings or otherwise
proceed
against the Pledgor or
any
property of the Pledgor in
any
other jurisdiction.
(j) The
Pledgor irrevocably and unconditionally waives any right it may have to claim
or
recover in any legal action, suit or proceeding referred to in this Section
any
special, exemplary, punitive or consequential damages.
(k) EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH
THIS AGREEMENT OR OTHER TRANSACTION DOCUMENTS.
(l) The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(m) This
Agreement may be executed in any number of counterparts and by different
parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
[Signature
Page Follows]
13
In
Witness Whereof,
the
Pledgor has caused this Agreement to be executed and delivered by its officer
thereunto duly authorized, as of the date first above written.
GREEN
SCREEN INTERACTIVE SOFTWARE, INC.
By:
/s/
Xxx Xxxxxxxxxx
Name:
Xxx
Xxxxxxxxxx
Title:
Chief Executive Officer
Address:
000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
ACCEPTED
BY:
By:
/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxx
Xxxxx
Title:
Chief
Financial Officer
ANNEX
I
TO
PLEDGE
AMENDMENT
This
Pledge Amendment, dated July ●, 2008, is delivered pursuant to Section
4
of the
Pledge Agreement referred to below. The undersigned hereby agrees that this
Pledge Amendment may be attached to the Pledge Agreement, dated as of July
7,
2008, made by [Pledgor] in favor of Driftwood Ventures, Inc., (the "Collateral
Agent") as it may heretofore have been or hereafter may be amended or otherwise
modified or supplemented from time to time and that the promissory notes
[and/or] shares or other equity interests listed on this Pledge Amendment
shall
be hereby pledged and assigned to the Collateral Agent and become part of
the
Collateral referred to in such Pledge Agreement and shall secure all of the
obligations referred to in such Pledge Agreement.
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Shares
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Pledgor
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Name
of Issuer
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Number
of Shares or Other
Equity Interests
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Class
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Certificate
No(s)
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| [PLEDGOR] | ||
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| By: | ||
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Name:
Title:
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