EXHIBIT C
EXHIBIT B
PLEDGE AND SECURITY AGREEMENT
by and between [NAME OF PLEDGOR], as Obligor
and
THE AUGUSTINE FUND, L.P.
as Secured Party
Dated as of April 13, 1999
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") dated as of April 13,
1999, is entered into by and between __________________ (the "Obligor"), and
THE AUGUSTINE FUND, L.P. (the "Secured Party").
W I T N E S S E T H:
WHEREAS, Dauphin Technology, Inc., an Illinois corporation (the "Company")
and the Secured Party are parties to that certain Promissory Note dated as of
the date hereof (including also all Exhibits and Addenda executed by the
parties, the "Note");
WHEREAS, it is a condition precedent to Secured Party's willingness to
execute the Note and to lend the sum of $1,000,000.00 to the Company (the
"Obligations") be secured by certain free-tradingcommon stock (the "Common
Stock") of the Company owned by the Obligor, which has been registered
pursuant to an S-1 Registration Statement filed with the United States
Securities and Exchange Commission, resales of which Common Stock are not
restricted under applicable securities law.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties executing this Agreement, the parties hereto
agree as follows:
SECTION 1. Grant of Security Interest. The Obligor hereby conveys,
transfers, grants, assigns and pledges to the Secured Party a security
interest in and security title to (together with a right of setoff) the
Obligor's right, title and interest in 2,000,000 free-trading shares of
Common Stock of the Company owned by the Obligor (the "Collateral").
SECTION 2. Security for Obligations. This Agreement secures the performance
of the obligations of the Company under the Note (the "Company's
Obligations"), whether now or hereafter existing. Without limiting the
generality of the foregoing, this Agreement secures the performance of the
Company's Obligations and all amounts which would be owed by the Obligor to
the Secured Party but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Obligor.
SECTION 3. Representations and Warranties. The Obligor represents and
warrants as follows:
(a) This Agreement creates a valid security interest in the Collateral,
securing the performance of the Company's Obligations.
(b) The Collateral is not subject to any lien, security interest or
encumbrance senior to that created by this Agreement.
(c) The Collateral is not-restricted from transfer under applicable
securities law, including those transfers contemplated by Section 9 of this
Agreement. The Obligor has on or before the date hereof caused a copy of its
(or the Company's) legal counsel to deliver to the Secured Party a copy of
said counsel's legal opinion to the effect that the Collateral is not so
restricted.
SECTION 4. Further Assurances. The Obligor agrees that from time to time it
will promptly execute and deliver all further instruments and documents and
take all further action that may be necessary or that the Secured Party may
reasonably request in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to the
Collateral.
SECTION 5. Transfers of Collateral. Except as stated herein, the Obligor
shall not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, the Collateral. The Obligor
shall upon request of the Secured Party provide trade confirmations with
respect to any Common Stock sold.
SECTION 6. Secured Party Appointed Attorney-in-Fact. The Obligor hereby
irrevocably appoints the Secured Party its attorney-in-fact, with full
authority in the place and stead of the Obligor and in the name of the
Obligor or otherwise, at such time as any default has occurred in the
Company's Obligations (a "Default"), to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to ask, demand, collect, xxx for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
connection with the Collateral;
(b) to receive, endorse and collect any instruments or documents in
connection therewith; and
(c) to file any claims or take any action or institute any proceedings which
the Secured Party may deem necessary or desirable for the collection of the
Collateral or otherwise to enforce the rights of the Secured Party with
respect to the Collateral.
SECTION 7. Secured Party May Perform. If the Obligor fails to perform any
agreement contained herein, the Secured Party may itself perform or cause the
performance of such agreement, and the expenses of the Secured Party incurred
in connection therewith shall be payable by the Obligor.
SECTION 8. Secured Party's Duties. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers.
SECTION 9. Remedies. If any Default shall have occurred and until such
Default is waived by the Secured Party in writing in accordance with the
Note:
(a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party under the
Uniform Commercial Code in effect in the State of Illinois at that time or
any other applicable jurisdiction, and also may (i) without notice, except as
specified below, sell the Collateral or any part thereof at public or private
sale, at any of the Secured Party's offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as are commercially
reasonable. The Obligor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) calendar days' notice to the Obligor 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 Secured
Party shall not be obligated to make any sale of Collateral, regardless of
notice of sale having been given. The Secured Party 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) All cash proceeds received by the Secured Party 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 Secured Party, be held by the
Secured Party as collateral for, and/or then or at any time thereafter be
applied in whole or in part by the Secured Party against, all or any part of
the Company's Obligations. Any surplus of such cash or cash proceeds held by
the Secured Party and remaining after satisfaction in full of all the
Company's Obligations shall be paid over to the Obligor or to whomsoever may
be lawfully entitled to receive such surplus.
SECTION 10. Remedies Cumulative. Each right, power and remedy of the Secured
Party as provided for in this Agreement or now or hereafter existing at law
or in equity or by statute or otherwise shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for
in this Agreement or now or hereafter existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the exercise by the
Secured Party of any one or more of such rights, powers, or remedies shall
not preclude the simultaneous or later exercise by the Secured Party of any
or all such other rights, powers, or remedies.
SECTION 11. Expenses. The Obligor will upon demand pay to the Secured Party
the amount of any and all reasonable expenses, including the reasonable fees
and expenses of its legal counsel which the Secured Party may incur in
connection with the exercise or enforcement of any of the rights of the
Secured Party hereunder or the failure by the Obligor to perform or observe
any of the provisions hereof.
SECTION 12. Possession Until Default. Until a Default shall occur the
Collateral shall be held in escrow by the Escrow Agent (as defined in the
Note), subject to and upon the terms hereof, the Note and its related escrow
agreement. The Obligor shall deliver the Collateral to the Escrow Agent at or
prior to the closing of the transactions contemplated in the Note. The Escrow
Agent shall hold the Collateral in escrow and shall release the Collateral to
a party other than the Obligor only upon the following conditions. If (x) the
Note is not repaid in full in a timely manner as described in the Note, or
(y) if the closing bid price for the Common Stock falls below $.625 for more
than two (2) consecutive trading days and the Obligor (collectively with
other obligors (if any) under agreements of like tenor with this Agreement)
does not within three (3) days thereafter (the "Collateral Deadline") place
additional non-restricted shares of Common Stock with the Escrow Agent as
Collateral hereunder until the value of the Collateral is at least US
$1,500,000.00, the Secured Party shall be entitled, at its option, at any
time commencing the sixty-first day after the date of issuance of the Note
(or one (1) day after the Collateral Deadline), to convert all or a portion
of the original principal face amount of this Note into shares of common
stock in the Company, $.001 par value per share (defined hereinafter as the
"Common Stock"), at a conversion price (the "Conversion Price") for each
share of Common Stock equal to eighty-five percent (85%) of the average of
the closing bid prices for the Common Stock for the five (5) trading days
immediately preceding the Conversion Date (as hereinafter defined), as
reported on the National Association of Securities Dealers OTC Bulletin Board
Market (or on such other national securities exchange or market as the Common
Stock may trade at such time). Such conversion shall be achieved by
submitting to the Company on the Obligor's behalf the fully completed form of
conversion notice attached hereto as Exhibit I (a "Notice of Conversion"),
executed by the Secured Party evidencing the Secured Party's intention to
convert the Note or the specified portion (as herein provided) thereof.
A Notice of Conversion may be submitted via facsimile to the Company on
behalf of the Obligor at the telecopier number for the Company provided in
the Note (or at such other number as requested in advance of such conversion
in writing by the Company or the Obligor), and if so submitted the original
Notice of Conversion shall be delivered to the Company within three (3)
business days thereafter. The Company and the Secured Party shall each keep
records with respect to the portion of the Note then being converted and all
portions previously converted; upon receipt by the Secured Party of the
requisite Conversion Shares, the outstanding principal amount of the Note
shall be reduced by the amount specified in the Notice of Conversion
resulting in such Conversion Shares. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number
of shares delivered from escrow by the Escrow Agent upon a conversion shall
be rounded to the nearest whole share. Accrued interest on the converted
portion of the Note shall be payable upon conversion thereof, in cash or
Common Stock at the Conversion Price, at the Secured Party's option. The date
on which a notice of conversion is given (the "Conversion Date") shall be
deemed to be either the date on which the Company receives from the Secured
Party an original Notice of Conversion duly executed, or, if earlier, the
date set forth in such Notice of Conversion if the original Notice of
Conversion is received by the Company within three (3) business days
thereafter.
SECTION 13. Amendments; Etc. No waiver of any provision of this Agreement
shall in any event be effective unless the same shall be in writing and
signed by the Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. No amendment of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by the Secured Party
and the Obligor.
SECTION 14. Addresses for Notices. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered
(a) to the Secured Party at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000, or (b) to the Obligor at the address set forth on the
signature page hereof or, (c) as to either party, at such other address as
shall be designated by such party in a written notice to the other party.
SECTION 15. Continuing Security Interest; Assignments Under Note. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the performance in full of
the Company's Obligations, (b) be binding upon the Obligor and its successors
and assigns, and (c) inure to the benefit of and be enforceable by the
Secured Party and its successors, transferees and assigns. Upon the
performance in full of the Company's Obligations and all other amounts
payable under this Agreement, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the Obligor. The
Secured Party shall not, by any act, delay, omission or otherwise, be deemed
to have waived any of its rights or remedies hereunder unless such waiver is
in writing and signed by the Secured Party and then only to the extent
therein set forth. A waiver by the Secured Party of any right or remedy on
any occasion shall not be construed as a bar to the exercise of any such
right or remedy which the Secured Party has or would otherwise have had on
any other occasion.
SECTION 16. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without
reference to the conflict or choice of law principles thereof, except to the
extent that the validity or perfection of the security interest hereunder, or
the remedies hereunder, in respect of any particular Collateral are governed
by the laws of a jurisdiction other than the State of Illinois. Any terms
used herein which are used in the Uniform Commercial Code of the State of
Illinois shall have the same meanings herein as such terms have in said
Uniform Commercial Code.
SECTION 17. Miscellaneous.
(a) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument. A facsimile of the
signature page hereof faxed to the Escrow Agent shall be deemed acceptance of
this Agreement for all purposes, and the other party hereto may rely upon
such facsimile as if this Agreement were executed in the presence of the
party so relying.
(b) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability in such jurisdiction without invalidating the remaining
provisions hereof in such jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, the Obligor and the Secured Party have caused this
Agreement to be duly executed and delivered as of the date first above
written.
OBLIGOR
[Print Name of Obligor]
By:
(Duly Authorized Officer/Director)
Address of Obligor: _____________________
_____________________
_____________________
SECURED PARTY
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc., its General Partner
By: ______________________________________
(Duly Authorized Officer or Director)
EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Secured Party in Order to Convert the Note)
The Undersigned hereby irrevocably elects to convert $
of the Eight Percent (8%) Promissory Note Due June 13, 1999, executed by
Dauphin Technology, Inc., into shares of Common Stock of Dauphin Technology,
Inc. (the "Company"), held by the Escrow Agent according to the terms and
conditions set forth in such Note and in the Pledge and Security Agreement
between the Obligor and the Secured Party (the "Undersigned"), as of the date
written below. If securities are to be issued to a person other than the
Undersigned, the Undersigned agrees to pay all applicable transfer taxes with
respect thereto.
The Undersigned represents that it, as of this date, is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated
by the SEC under the 1933 Act.
The Undersigned also represents that the Conversion Shares are being acquired
for its own account and not as a nominee for any other party. The Obligor has
represented and warranted that resales by the Undersigned of the Conversion
Shares have been registered under the Securities Act of 1933, as amended (the
"1933 Act").
Conversion Date:*_______________________________
Applicable Conversion Price: _______________________
Holder (Print True Legal Name):
(Signature of Duly Authorized Representative of Holder)
Address of Holder: ___________________________________
___________________________________
___________________________________
___________________________________
* This original Notice of Conversion must be received by the Company by the
second business day following the Conversion Date.
