SECURITY INTEREST AND PLEDGE AGREEMENT
SECURITY INTEREST AND PLEDGE AGREEMENT ("Pledge Agreement"), dated as of
March 16, 2006, by and among American United Global, Inc., a Delaware
corporation (the "Secured Party"), Xxxxx Xx., a Hungarian corporation (the
"Company" or the "Debtor"), and Zoltan Kiss (the "Pledgor").
RECITALS
A. Reference is made to that certain Promissory Note of even date
herewith (the "Note" or "Bridge Loan Agreement") to which the Company and the
Secured Party are parties. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Bridge Loan Agreement.
B. Pursuant to the Bridge Loan Agreement, the Debtor has certain
obligations to the Secured Party (the "Obligations"), including, but not limited
to, obligations to pay principal and interest of the Note on the Maturity Date.
The obligations of the Company under the Note are referred to as the "Note
Obligations".
C. To secure the Note Obligations, the Pledgor has agreed to pledge
certain ordinary shares of the Company held by the Pledgor to the Secured Party
as security for the performance of the Note Obligations.
D. The Pledgor is a principal shareholder of the Debtor and has
determined that it is in the Pledgor's best interests to provide the pledge
referred to herein.
E. The Secured Party is willing to enter into the Bridge Loan Agreement
only upon receiving Pledgor's pledge of certain stock of the Company, as set
forth in this Pledge Agreement.
F. The Pledged Shares pledged pursuant to this Pledge Agreement shall
be in addition to the ordinary shares pledged pursuant to that certain Pledge
Agreement dated September 28, 2005 entered by and between the Secured Party, the
Company and the Pledgor.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
conditions 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:
1. Grant of Security Interest.
(a) To secure the Note Obligations of Debtor, the Pledgor hereby
pledges to the Secured Party all of the registered ordinary shares set forth on
the attached Schedule 1 of this Agreement (the "Pledged Shares"). Unless
otherwise set forth on Schedule 1 of this Agreement, the Pledgor is the
beneficial and record owner of the Pledged Shares set forth opposite such
Pledgor's name on such Schedule. Such Pledged Shares shall include, but not be
limited to, all the Pledgor's right, title and interest in and to the Pledged
Shares, together with the proceeds of any sale, exchange, liquidation or other
disposition, whether voluntary or involuntary, and including but not limited to
any securities, instruments, and all benefits and entitlements evidenced by or
arising out of the Pledged Shares and all other securities, instruments and
other property (whether real or personal, tangible or intangible) issued or
accepted in substitution for, or in addition to, the foregoing, and all
dividends, interest, cash, instruments, distributions, income, securities and
any other property (whether real or personal, tangible or intangible) at any
time received, receivable or otherwise distributed in respect of, or in exchange
for, the foregoing, whether now owned or hereafter acquired, and any and all
improvements, additions, replacements, substitutions and any and all proceeds
arising out of or derived from the foregoing. Such Pledged Shares, together with
any substitutes therefor, or proceeds thereof, are hereinafter referred to
collectively as the "Collateral".
(b) The Company represents and warrants to the Secured Party that
the Pledged Shares are duly authorized, validly issued, fully paid and
non-assessable and that it will not permit the transfer of the Pledged Shares
except in accordance with this Pledge Agreement while the same is in effect.
(c) (i) The Company will record on its books the existence of
such security interest with respect to the Pledged Shares, and except upon such
instructions of the Secured Party or until written notice is given by the
Secured Party that such security interest has been released to the Pledgor in
whole or in part, to not allow a transfer of the shares representing any part of
the Collateral or to replace the certificates representing the Collateral.
(ii) The Pledgor hereby consents to the provisions of the
preceding subparagraph (i).
2. Obligations Secured. During the term hereof, the Collateral shall
secure the performance by the Company of the Note Obligations.
3. Intentionally Left Blank.
4. Assignment. Only in connection with the transfer of the rights under
the Note in accordance with their terms, a Secured Party may assign or transfer
the whole or any part of its security interest granted hereunder, and may
transfer as collateral security the whole or any part of Secured Party's
security interest in the Collateral. Any transferee of the Collateral shall be
vested with all of the rights and powers of the assigning Secured Party
hereunder with respect to the Collateral.
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5. Pledgor's Warranty. The Pledgor represents and warrants hereby to
the Secured Party as follows with respect to the Pledged Shares set forth
opposite such Pledgor's name on Schedule 1 to this Agreement:
A. With respect to title to the Pledge Shares
(i) upon the occurrence of an Event of Default, the Pledgor,
as contemplated herein, shall have the Pledged Shares transferred to the Secured
Party so that the Secured Party will have good title (both record and
beneficial) to the Pledged Shares;
(ii) that there are no restrictions upon transfer and pledge
of the Pledged Shares pursuant to the provisions of this Agreement except the
restrictions imposed by Rule 144 under the Securities Act of 1933;
(iii) that the Pledged Shares are free and clear of any
encumbrances of every nature whatsoever, such Pledgor is the sole owner of the
Pledged Shares, and such shares are duly authorized, validly issued, fully paid
and non-assessable,
(iv) that such Pledgor has owned the Pledged Shares since the
date specified on Schedule 1 to this Agreement and that such shares were fully
paid for,
(v) that such Pledgor agrees not to grant or create, any
security interest, claim, lien, pledge or other encumbrance with respect to such
Pledgor's Pledged Shares or attempt to sell, transfer or otherwise dispose of
any of such shares until the Note has been paid in full or this Agreement has
terminated; and
B. With respect to certain other matters:
(i) that such Pledgor has made necessary inquiries of the
Company and believes that the Company fully intends to fulfill and has the
capability of fulfilling the Note Obligations to be performed by the Company in
accordance with the terms of the Note,
(ii) that the Pledgor is not acting, and has not agreed to
act, in any plan to sell or dispose of the Pledged Shares in a manner intended
to circumvent the registration requirements of the Securities Act of 1933, as
amended, or any applicable state law,
(iii) that Pledgor has been advised by counsel of the elements
of a bona-fide pledge for purposes of Rule 144(d)(3)(iv) under the Securities
Act of 1933, as amended, including the relevant SEC interpretations and affirms
the pledge of shares by such Pledgor pursuant to this Pledge Agreement will
constitute a bona-fide pledge of such shares for purposes of such Rule, and
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(iv) that this Pledge Agreement constitutes a legal, valid
and binding obligation of such Pledgor enforceable in accordance with its terms
(except as the enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, and similar laws, now or
hereafter in effect).
6. Collection of Dividends and Interest. During the term of this Pledge
Agreement and so long as the Debtor is not default under the Note and the
Pledgor is not in default under the Guarantee, Pledgor is authorized to collect
all dividends, distributions, interest payments, and other amounts that may be,
or may become, due on the Collateral.
7. Voting Rights. During the term of this Pledge Agreement and until
such time as this Pledge Agreement has terminated or Secured Party has exercised
its rights under this Pledge Agreement to foreclose its security interest in the
Collateral, Pledgor shall have the right to exercise any voting rights evidenced
by, or relating to, the Collateral.
8. Warrants and Options. In the event that, during the term of this
Pledge Agreement, subscription, warrants, dividends, or any other rights or
option shall be issued in connection with the Collateral, such warrants,
dividends, rights and options shall be immediately delivered to Secured Party to
be held under the terms hereof in the same manner as the Collateral.
9. Preservation of the Value of the Collateral and Reimbursement of
Secured Party. Pledgor shall pay all taxes, charges, and assessments against the
Collateral and do all acts necessary to preserve and maintain the value thereof.
On failure of Pledgor so to do, Secured Party may make such payments on account
thereof as (in Secured Party's discretion) is deemed desirable, and Pledgor
shall reimburse Secured Party immediately on demand for any and all such
payments expended by Secured Party in enforcing, collecting, and exercising its
remedies hereunder.
10. Default and Remedies.
(a) For purposes of this Agreement, "Event of Default" shall mean
(i) any default in the performance by the Company or the Pledgor
of any of the Note Obligations, as the case may be, after the expiration,
without cure, of the cure period (but only if any such period is specifically
provided in the Note; it being specifically acknowledged by the Company and the
Pledgor that all payment obligations are time of the essence obligations, with
no cure periods provided) and
(ii) a breach by a Pledgor of any of such Pledgor's
representations, warranties, covenants or agreements in this Pledge Agreement.
(b) During the term of this Pledge Agreement, the Secured Party shall
have the following rights after any Event of Default and for so long as the Note
is not satisfied in full:
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(i) the rights and remedies provided by the Uniform Commercial Code
as adopted by the State of New York (as said law may at any time be
amended), except that the Secured Party waives any right to a
deficiency pursuant to Section 9-608 thereof or otherwise;
(ii) the right to receive and retain all dividends, payments and
other distributions of any kind upon any or all of the Pledged
Shares as additional Collateral;
(iii) the right to cause any or all of the Pledged Shares and all
additional Collateral to be transferred to its own name and have
such transfer recorded in any place or places deemed appropriate by
Secured Party; and
(iv) the right to sell, at a public or private sale, the Collateral
or any part thereof for cash, upon credit or for future delivery,
and at such price or prices in accordance with the Uniform
Commercial Code (as such law may be amended from time to time); it
being understood that one or more of the Secured Parties may, but
shall not be required to, take such actions jointly. Upon any such
sale, Secured Party shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Secured
Party shall give the Pledgor not less than ten (10) days written
notice of its intention to make any such sale. Any such sale shall
be held at such time or times during ordinary business hours and at
such place or places as Secured Party may fix in the notice of such
sale. Secured Party may adjourn or cancel any sale or cause the same
to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of
all or any part of the Collateral upon terms calling for payments in
the future, any Collateral so sold may be retained by Secured Party
until the selling price is paid by the purchaser thereof, but
Secured Party shall incur no liability in the case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in
the case of such failure, such Collateral may again be sold upon
like notice. Secured Party, however, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or suits at
law or in equity to foreclose the security interest and sell the
Collateral, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction, the Pledgor having been
given due notice of all such action. Secured Party shall incur no
liability as a result of a sale of the Collateral or any part
thereof.
11. Waiver. Each of the Debtor and the Pledgor waives any right that it
may have to require Secured Party to proceed against any other person, or
proceed against or exhaust any other security, or pursue any other remedy
Secured Party may have.
12. Term of Agreement. This Pledge Agreement shall continue in full
force and effect until the earlier of the payment in full of the Notes. If the
Notes are paid in full, the security interests in the relevant Collateral shall
be deemed released, and any portion of the Collateral not transferred to or sold
by any one or more Secured Parties shall be returned to the Pledgor. Upon
termination of this Pledge Agreement, the relevant Collateral shall be returned
within five (5) Trading Days to Debtor or to the Pledgor, as contemplated above.
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13. General Provisions:
13.1 Binding Agreement; No Modification of Note. This Pledge Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective parties hereto. Except to the extent specifically
provided herein, nothing in this Pledge Agreement shall limit or modify any
provision of any of the Note.
13.2 Captions. The headings used in this Pledge Agreement are inserted
for reference purposes only and shall not be deemed to define, limit, extend,
describe, or affect in any way the meaning, scope or interpretation of any of
the terms or provisions of this Pledge Agreement or the intent hereof.
13.3 Counterparts. This Pledge Agreement may be signed in any number of
counterparts with the same effect as if the signatures upon any counterpart were
upon the same instrument. All signed counterparts shall be deemed to be one
original. A facsimile transmission of this signed Pledge Agreement shall be
legal and binding on all parties hereto.
13.4 Further Assurances. The parties hereto agree that, from time to time
upon the written request of any party hereto, they will execute and deliver such
further documents and do such other acts and things as such party may reasonably
request in order fully to effect the purposes of this Pledge Agreement. The
Transfer Agent Instructions annexed hereto are deemed an integral part of this
Pledge Agreement.
13.5 Waiver of Breach. Any waiver by either party of any breach of any
kind or character whatsoever by the other, whether such be direct or implied,
shall not be construed as a continuing waiver of or consent to any subsequent
breach of this Pledge Agreement.
13.6 Cumulative Remedies. The rights and remedies of the parties hereto
shall be construed cumulatively, and none of such rights and remedies shall be
exclusive of, or in lieu or limitation of any other right, remedy, or priority
allowed by applicable law.
13.7 Amendment. This Pledge Agreement may be modified only in a written
document that refers to this Pledge Agreement and is executed by Secured Party,
the Pledgor and the Debtor.
13.8 Interpretation. This Pledge Agreement shall be interpreted,
construed, and enforced according to the substantive laws of the State of New
York.
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13.9 Governing Law. This Pledge Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Each of the
parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the County of New York or the state courts of the State of
New York sitting in the County of New York in connection with any dispute
arising under this Pledge Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions.
13.10 WAIVER OF JURY TRIAL. The parties to this Pledge Agreement hereby
waive a trial by jury in any action, proceeding or counterclaim brought by any
of them against any other in respect of any matter arising out or in connection
with this Pledge Agreement.
13.11 Notice. Any notice or other communication required or permitted to
be given hereunder shall be effective upon receipt. Such notices may be sent (i)
in the United States mail, postage prepaid and certified, (ii) by express
courier with receipt, (iii) by facsimile transmission, with a copy subsequently
delivered as in (i) or (ii) above. Any such notice shall be addressed or
transmitted as follows:
If to Pledgor, to:
Zoltan Kiss
T
F
If to the Debtor or to the Secured Party, to the addresses set forth on
the signature page.
Any party may change its address by notice similarly given to the other
parties.
14.12 Acknowledgement by Debtor and Pledgor. In the event that any
provision of the Note or this Pledge Agreement as applied to
any party or circumstances shall be adjudged by a court to be
invalid or unenforceable, each of the Debtor or the Pledgor,
as the case may be, acknowledges and agrees that this Pledge
Agreement shall remain valid and enforceable in all respects
against the Debtor and the Pledgor.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.
THE SIGNATURES OF THE PARTIES ARE ON THE NEXT PAGE.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day, month and year first above written.
SECURED PARTY
AMERICAN UNITED GLOBAL, INC.
By: /s/Xxxxxx Xxxxx
--------------------------
Name: Xxxxxx Xxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxxxx - #000
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxx, CEO
Fax No.: (000) 000-0000
DEBTOR:
XXXXX XX.
By: /s/Zoltan Kiss
--------------------------
Name: Zoltan Kiss
Title: Director
PLEDGOR:
/s/Zoltan Kiss
------------------------------
Zoltan Kiss
Address:
SCHEDULE 1
The following shares are pledged hereunder as the Pledged Shares, each
certificate in the name of:
Holder's Name No. of Ordinary Shares
Zoltan Kiss 1,000
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Total: 1,000 shares
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