PLEDGE AND SECURITY AGREEMENT
THIS
PLEDGE AND SECURITY AGREEMENT (the "Agreement") is
made
this 5th day of September, 2007, by and between CORPORACION
DELINC S.A. de C.V, a Mexican corporation with a place of business at
Xxxxxxxxxx, Xxxxxxx, 00000, Xxxxxxxxxx, XXXXXX (the “Mexican
Subsidiary”)
and
JMC VENTURE PARTNERS LLC, with a place of business at 0 Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (the "Lender").
RECITALS
WHEREAS,
on the date hereof Lender loaned to DEL-INC ACQUISITION LLC (the “Borrower”)
a
total of two million seven hundred and fifty thousand dollars ($2,750,000)
pursuant to that certain (i) $2,750,000 Secured Promissory Note, dated as of
the
date hereof, from Borrower in favor of Lender (as the same may be amended from
time to time the “Note”),
(ii)
Secured Promissory Note Loan, Pledge and Security Agreement, dated as of the
date hereof (as the same may be amended from time to time the “Loan
Agreement”),
and
(iii) other related loan and collateral security documents which are described
and defined in the Loan Agreement (as the same may be amended from time to
time,
together with the foregoing collectively the “Loan
Documents”).
WHEREAS,
in partial consideration for, and as an inducement to the Lender to extend
credit under the Note, the Mexican Subsidiary executed that certain Guaranty
Agreement, dated as of the date hereof (the “Mexican
Guaranty”)
pursuant to which the Mexican Subsidiary guaranteed all Indebtedness due the
Lender under the Loan Documents.
WHEREAS,
the Mexican Subsidiary owns the Mexican Collateral, and agrees to pledge such
Collateral to secure its obligations under the Mexican Guaranty.
WHEREAS,
the Mexican Subsidiary shall receive substantial benefits from Lender’s
extension of credit to Borrower under the Loan Documents, and acknowledges
that
Lender would not have made loans to Borrower and entered into the Loan Documents
but for Mexican Subsidiary’s execution of the Mexican Guaranty and this
Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises of this Agreement, and
intending to be legally bound hereby, the parties hereto agree as
follows:
1
SECTION
1
DEFINITIONS
1.1 Definitions.
Capitalized terms that are not otherwise defined herein shall have the meaning
set forth in the Loan Agreement. If there is a conflict between a definition
herein and a definition in the Loan Agreement the definition in the Loan
Agreement shall control.
SECTION
2
PLEDGE
OF SECURITIES and
GRANT
OF SECURITY INTEREST
2.1 As
security for the payment and performance of any and all of debts, indebtedness,
obligations, agreements, claims, charges, fees, expenses and amounts due under
the Mexican Guaranty,
including without limitation all amounts due under the Note, the Loan Agreement
and all other Loan Documents,
and the
performance of all other obligations and covenants of the Mexican Subsidiary
hereunder and under the Loan Documents, certain or contingent, now existing
or
hereafter arising, which are now, or may at any time or times hereafter be
owing
by the Borrower to Lender (the
“Secured
Indebtedness”),
the
Mexican Subsidiary hereby pledges to Lender and grants Lender a continuing
security interest in and general Lien upon and right of set-off against, all
right, title and interests of the Mexican Subsidiary in and to all of Mexican
Subsidiary’s assets,
including without limitation all Mexican Subsidiary Collateral, whether
now owned or hereafter acquired by the Mexican Subsidiary,
together
with all proceeds and substitutions thereof, all cash, stock and other moneys
and property paid thereon, all rights to subscribe for securities declared
or
granted in connection therewith, and all other cash and noncash proceeds of
the
foregoing (all hereinafter called the “Pledged
Collateral”).
The
Mexican Subsidiary further grants the Lender a right of set-off against the
Mexican Subsidiary’s property held by the Lender, now or hereinafter in the
possession, custody or control or in transit to the Lender.
2.2 Upon
the
occurrence and continuation of an Event of Default under this Agreement, the
Mexican Guaranty or any of the other Loan Documents, the Lender may effect
the
transfer of any securities included in the Pledged Collateral into the name
of
Lender and cause new certificates representing such securities to be issued
in
the name of Lender. The Mexican Subsidiary will execute and deliver such
documents, and take or cause to be taken such actions, as Lender may reasonably
request to perfect or continue the perfection of Lender’s security interest in
the Pledged Collateral.
2
SECTION
3
REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1 The
Mexican Subsidiary represents and warrants to and covenants with Lender
that:
(a) The
Pledged Collateral is owned by the Mexican Subsidiary, and all such Pledged
Collateral is free and clear of any security interests, liens or
encumbrances;
(b) The
Mexican Subsidiary has full power and authority to create a first lien on the
Pledged Collateral in favor of Lender;
(c) No
disability or contractual obligation exists which would prohibit each the
Mexican Subsidiary from pledging the Pledged Collateral pursuant to this
Agreement;
(d) The
Mexican Subsidiary will not assign, create or permit to exist any other claim
to, lien or encumbrance upon, or security interest in any of the Pledged
Collateral;
(e) The
Pledged Collateral is not the subject of any present or to the Mexican
Subsidiary’s knowledge threatened suit, action, arbitration, administrative or
other proceeding, and the Mexican Subsidiary does not know of any reasonable
grounds for the in the institution of any such proceedings.
3.2 All
the
above representations, warranties and covenants shall survive the making of
this
Agreement.
SECTION
4
RIGHTS
PRIOR TO DEFAULT
4.1 Voting
Prior to Default.
Unless
an Event of Default under the Mexican Guaranty or any of the Loan Documents
shall have occurred and be continuing, the Mexican Subsidiary shall be entitled
to exercise any voting rights with respect to the Pledged Collateral and to
give
consents, waivers and ratifications in respect thereof, provided
that no
vote shall be cast or consent, waiver or ratification given or action taken
which would be inconsistent with any of the terms of this Agreement or which
would constitute or create any violation of any of such terms.
4.2 Dividends
and Payments.
Unless
the Lender agrees, in advance, in writing, the Mexican Subsidiary shall not
be
entitled to receive any dividends, distributions, stock splits, options,
warrants, phantom stock or other form of remuneration paid to, on account of
or
on behalf of an owner or holder of the Pledged Collateral (collectively
"Distributions").
All
Distributions shall be paid to Lender, and Borrower shall agree to turnover
to
Lender all Distributions received by Borrower. If the Mexican Subsidiary
receives a Distribution that is to be paid to Lender, the Mexican Subsidiary
shall segregate such Distribution, not commingle it with its other assets,
hold
such Distribution in constructive Mexican Subsidiary for the benefit of Lender
and immediately transfer and turnover such Distribution to Lender.
3
SECTION
5
EVENTS
OF DEFAULT
5.1 Events
of Default.
An
Event of Default under any of the Loan Documents shall constitute an event
of
default under this Agreement, including without limitation the breach of any
representation, warranty or covenant by the Mexican Subsidiary or the failure
by
the Mexican Subsidiary to observe or perform any of the material provisions
of
this Agreement.
SECTION
6
REMEDIES
6.1 Lender’s
Remedies Upon Default.
Upon
the occurrence and during the continuance of an Event of Default, Lender shall
have the right to exercise all such rights as a secured party under applicable
Mexican law and the Uniform Commercial Code of the Commonwealth of Massachusetts
as it, in its sole judgment, shall deem necessary or appropriate, including
the
right to sell all or any part of the Pledged Collateral at one or more public
or
private sales upon ten (10) days’ written notice to the Mexican Subsidiary. Any
such sale or sales may be made for cash, upon credit, or for future delivery,
and in connection therewith, Lender may grant options, provided that any such
terms or options shall, in the best judgment of Lender, be extended only in
order to obtain the best possible price.
6.2 The
Mexican Subsidiary recognizes that Lender may be unable to effect a public
sale
of all or a part of the Pledged Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the “Act”),
so
that Lender may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire the Pledged Collateral for their own account, for investment and
without a view to the distribution or resale thereof. The Mexican Subsidiary
understands that private sales so made may be at prices and on other terms
less
favorable to the seller than if the Pledged Collateral were sold at public
sales, and agrees that Lender has no obligation to delay the sale of any of
the
Pledged Collateral for the period of time necessary (even if Lender would
agree), to register such securities for sale under the Act. Mexican Subsidiary
agrees that private sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner.
6.3 After
the
sale of any of the Pledged Collateral, Lender may deduct all reasonable fees
and
expenses, including without limitation reasonable attorney’s fees, for
preserving, collecting, selling and delivering the Pledged Collateral, and
for
enforcing its rights with respect to the Secured Indebtedness, and shall apply
the residue of the proceeds to the Secured Indebtedness in such manner as Lender
in its reasonable discretion shall determine, and shall pay the balance, if
any
to Mexican Subsidiary.
4
SECTION
7
MISCELLANEOUS
PROVISIONS
7.1 Continuing
Obligation to Cooperate.
The
Mexican Subsidiary agrees to execute and deliver to the Lender all such other
and further instruments and documents and take or cause to be taken all such
other and further action as the Lender may reasonably request in order to effect
and confirm or vest more securely in the Lender all rights contemplated in
this
Agreement.
7.2 Amendments.
This
Agreement may be amended only by an instrument in writing and duly signed by
an
authorized officer of Mexican Subsidiary and an authorized officer of the
Lender.
7.3 Enforceability.
If any
provisions of this Agreement shall be held to be illegal or unenforceable,
such
illegality or unenforceability shall relate solely to such provision and shall
not affect the remainder of this Agreement.
7.4 Venue.
The
Mexican Subsidiary and Lender agree that any action or proceeding to enforce
or
arising out of this Loan Agreement may be commenced in any court of the
Commonwealth of Massachusetts sitting in the county of Suffolk.
7.5 Service
of Process.
Mexican
Subsidiary waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and confers personal jurisdiction if served by registered or certified
mail to each Mexican Subsidiary, or as otherwise provided by the laws of the
Commonwealth of Massachusetts or the United States of America.
7.6 No
Waiver, Remedies Cumulative.
No
failure on the part of Lender to exercise, and no delay in exercising, any
right
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. All rights
and remedies herein provided are cumulative and are in addition to any other
remedies provided by law, any Loan Document or otherwise.
7.7 Survival
of Representations.
All
representations, warranties and covenants made herein shall survive the making
of the Loan under the Loan Documents and the delivery of the Loan Documents,
and
shall continue in full force and effect so long as any Indebtedness is
outstanding, there exists any commitment by Lender to the Borrower, and until
this Agreement is formally terminated.
5
7.8 Indemnity
By Mexican Subsidiary.
In
addition to all other Indebtedness, the Mexican Subsidiary agrees to defend,
protect, indemnify and hold harmless the Lender, and all of its respective
Affiliates, Subsidiaries, officers, directors, employees, attorneys,
accountants, consultants, agents and any controlling Persons (collectively
the
“Indemnified
Parties”)
from
and against any and all losses, claims, damages, liabilities, obligations,
penalties, fees, costs, expenses and settlement agreements, joint and several
(including, without limitation, attorneys’ and paralegals’ fees, costs and
expenses) incurred by any of the Indemnified Parties, whether prior to or from
and after the date hereof, as a result of or arising from or relating to (i)
the
Commitment Letter, (ii) any due diligence effort (including, without limitation,
public record search, recording fees, examinations and investigations of the
properties of the Borrower, a Mexican Subsidiary, Borrower’s operations, the
Collateral and the Leased Premises), negotiation, preparation, execution and/or
performance of any of the Loan Documents or of any document executed in
connection with the transactions contemplated thereby and the perfection of
Lender ’s Liens in the Collateral and Pledged Collateral, maintenance of all
loans by the Lender to the Borrower, and any and all amendments, modifications,
and supplements of any of the Loan Documents or restructuring of the
Indebtedness, (iii) any suit, investigation, action or proceeding by any Person,
whether threatened or initiated, asserting a claim for any legal or equitable
remedy against any Person under any statute, regulation or common law principle,
arising from or in connection with any of the Loan Documents and/or Lender
’s
furnishing of funds to the Borrower under this Loan Agreement, (iv) the Lender’s
preservation, administration and enforcement of its rights under the Loan
Documents and applicable law, including the reasonable fees of the outstanding
Indebtedness as attorneys fees if collected by or through an attorney at law
and
disbursements of counsel for Lender in connection therewith, whether suit be
brought or not and whether incurred at trial or on appeal, and all costs of
repossession, storage, disposition, protection and collection of Collateral,
(v)
periodic field exams, audits and appraisals performed by Lender; and/or (vi)
any
matter relating to the financing transactions contemplated by the Loan Documents
or by any document executed in connection with the transactions contemplated
thereby, other than for such loss, damage, liability, obligation, penalty,
fee,
cost or expense, any of which arise from an Indemnified Parties’ gross
negligence or willful misconduct, as determined by a final order of a court
of
competent jurisdiction. No Indemnified Party shall by liable for any direct
or
consequential damages that arise from or are related to the Commitment Letter,
this Loan Agreement or any of the Loan Documents. Mexican Subsidiary’s
obligation for indemnification for all of the foregoing losses, damages,
liabilities, obligations, penalties, fees, costs and expenses shall be part
of
the indebtedness under the Guaranty and secured by the Pledged Collateral.
The
indemnity herein shall survive the termination of this Agreement.
6
7.9 Tax
Obligations.
If
Mexican Subsidiary should fail to pay any tax or other amount required by this
Agreement, or applicable law to be paid or which may be reasonably necessary
to
protect or preserve any Pledged Collateral, Lender may make such payment and
the
amount thereof shall be payable on demand, shall bear interest at the Default
Rate from the date of payment by the Lender until paid and shall be deemed
to be
Indebtedness entitled to the benefit and security of the Loan Documents, the
Mexican Guaranty and this Agreement. The Mexican Subsidiary agrees to pay and
save Lender harmless against any liability for payment of any state documentary
stamp taxes, intangible taxes or similar taxes (including interest or penalties,
if any) which may now or hereafter be determined to be payable in respect to
the
execution, delivery or recording of any Guaranty or this Agreement, whether
originally thought to be due or not, and regardless of any mistake of fact
or
law on the part of Lender, Borrower or Mexican Subsidiary with respect to the
applicability of such tax. The agreement herein shall survive the termination
of
this Agreement.
7.10 Reinstatement.
Notwithstanding anything herein to the contrary, this Agreement shall continue
to be effective or be reinstated, as the case may be, if at any time any amount
received by the Lender in respect of the Indebtedness is rescinded or must
otherwise be restored or returned by the Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or Mexican
Subsidiary, or upon the appointment of any receiver, assignee, intervener or
conservator of, or Mexican Subsidiary or similar official for, the Borrower,
Mexican Subsidiary or any substantial part of their respective properties,
or
otherwise, all as though such payments had not been made.
7.11 Notices.
Any
notice or other communication hereunder to any party hereto or thereto shall
be
by hand delivery, overnight delivery, facsimile, telegram, telex or registered
or certified mail and unless otherwise provided herein shall be deemed to have
been given or made when delivered, telegraphed, telexed, faxed or three (3)
Business Days after having been deposited in the mails, postage prepaid,
addressed to the party at its address specified in Exhibit
A.
7.12 Governing
Law.
This
Agreement shall be deemed contracts made under the laws of the Commonwealth
of
Massachusetts, and shall be governed by and construed in accordance with the
laws of said state (excluding its conflict of laws provisions if such provisions
would require application of the laws of another jurisdiction).
7.13 Successors.
This
Loan Agreement shall be binding upon and shall inure to the benefit of the
Mexican Subsidiary and the Lender, and their respective heirs, successors and
assigns.
7.14 Assignment.
The
Mexican Subsidiary may not assign any of its rights, obligations, covenants,
representations, warranties, duties or responsibilities hereunder. Any such
assignment shall be void. The Lender may assign all or part of its rights
hereunder and under the Loan Documents, at any time.
7
7.15 Counterparts.
This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original and all of which when taken together shall
constitute but one and the same instrument.
7.16 Exhibits.
The
exhibits annexed hereto are
the
only exhibits to be annexed to this Agreement, and the material contained
therein shall be incorporated herein.
7.17 Captions.
The
captions herein contained are inserted as a matter of convenience only and
such
captions do not form a part of this Loan Agreement and shall not be utilized
in
the construction hereof.
7.18 Powers.
All
powers of attorney granted to Lender are coupled with an interest and are
irrevocable.
7.19 Approvals.
If this
Agreement calls for the approval or consent of Lender, such approval or consent
may be given or withheld in the discretion of Lender unless otherwise specified
herein.
7.20 No
Punitive Damages.
Each
party agrees that it shall not have a remedy of punitive or exemplary damages
against the other and hereby waives any right or claim to punitive or exemplary
damages it may have now or which may arise in the future in connection with
any
Dispute.
7.21 Waiver
of Jury Trial.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS LOAN AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.21.
7.22 Participations.
Lender
shall have the right to enter into one or more participation agreements with
other lenders with respect to the Indebtedness. Upon prior notice to the Mexican
Subsidiary of such participation, Mexican Subsidiary shall thereafter furnish
to
such participant any information furnished by the Mexican Subsidiary to Lender
pursuant to the terms of the Mexican Guaranty and this Agreement. Nothing in
this Agreement or any other Loan Document shall prohibit Lender from pledging
or
assigning this Agreement and Lender’s rights under any of the other Loan
Documents, including collateral therefore, to any Federal Reserve Lender in
accordance with applicable law.
8
7.23 Joint
and Several Obligations.
All
Indebtedness, representations, warranties, covenants and indemnities set forth
herein and in the Loan Documents shall be joint and several among all the
Borrower, Mexican Subsidiary and the remaining Corporate Guarantors. Lender
shall have the right to deal with Mexican Subsidiary or any other Mexican
Subsidiary with regard to all matters concerning the rights and obligations
of
Lender hereunder and pursuant to applicable law with regard to the transactions
contemplated under the Loan Documents. All actions or inactions of the Mexican
Subsidiary with regard to the transactions contemplated under the Loan Documents
shall be deemed with full authority and binding upon the Mexican Subsidiary.
The
foregoing is a material inducement to the agreement of Lender to enter into
the
terms hereof and to consummate the transactions contemplated hereby.
7.24 Waiver
of Certain Defenses.
All
rights of Lender and all obligations of the Mexican Subsidiary hereunder and
under the Loan Documents shall be absolute and unconditional irrespective of
(i)
any change in the time, manner or place of payment of, or any other term of,
all
or any of the Indebtedness, or any other amendment or waiver of or any consent
to any departure from any provision of the Loan Documents, (ii) any exchange,
release or non-perfection of any other collateral given as security for the
Indebtedness, or any release or amendment or waiver of or consent to departure
from any guaranty for all or any of the Indebtedness, or (iii) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of the Mexican Subsidiary, or the Borrower, or any third party, other
than payment and performance in full of the Indebtedness.
7.25 Terms
Generally.
The
definitions of terms herein shall apply equally to the singular and plural
forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed
to
include such Person’s successors and assigns, (c) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to
this Loan Agreement in its entirety and not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules shall
be
construed to refer to Articles and Sections of, and Exhibits and Schedules
to,
this Loan Agreement and (e) the word “asset” shall be construed to the have the
same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract
rights.
9
[Remainder
of the page is blank. Signatures are on the following page.]
10
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed as of the day
and
year first above written.
|
WITNESSED
|
CORPORACION
DELINC S.A. de CV
|
|
______________________
|
__________________________________
|
|
By:
Xxxx Xxxxxxxx
|
|
|
Its:
Sole Administrator
|
|
|
Duly
Authorized
|
|
|
WITNESSED
|
JMC
VENTURE PARTNERS LLC
|
|
______________________
|
__________________________________
|
|
By:
G. Xxxxxxxx Xxxx
|
|
|
Its:
Treasurer
|
|
|
Duly
Authorized
|
[Signature
page to Security Agreement/Corporacion Delinc]
11
EXHIBIT
A
Notice
Addresses
If
to
the Lender:
G.
Xxxxxxxx Xxxx
0
Xxxxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
o:
(000)
000-0000
f:
(000)
000-0000
With
a
Copy to:
Xxxxxx
Xxxxxx, Esq.
Gesmer
Xxxxxxxxx LLP
00
Xxxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
o:
(000)
000-0000
f:
(000)
000-0000
If
to
the Mexican Subsidiary:
Corporacion
Delinc S.A. DE CV
c/o
Solomon Technologies, Inc.
0000
Xxxx
Xxxxxx
Xxxxxxxx
“B”
East
Berlin, Connecticut 06023
Attn:
President
With
a
copy to:
Xxxx
X.
Xxxxxxx, Esq.
Pepe
& Hazard LLP
000
Xxxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
o:
(000)
000-0000
f:
(000)
000-0000
12
