PLEDGE AND SECURITY AGREEMENT
PLEDGE
AND SECURITY AGREEMENT dated May __, 2008, made by SJ Electronics, Inc. (f/k/a
Acheron, Inc.), a Nevada corporation (the “Pledgor”)
and
Xxxxxx Xxxx, in favor of Tri-State Title & Escrow, LLC, in its capacity as
collateral agent (the “Collateral
Agent”)
for
and on behalf of the Noteholders (as defined below) (in such capacity, the
“Pledgee”).
W I T N E S S E T H:
WHEREAS,
Pledgor and each party listed as a "Investor" on the Schedule of Investors
attached thereto (collectively, the “Investors”,
and
together with their respective successors and permitted assigns, collectively,
the "Noteholders")
are
parties to the Note Purchase Agreement, dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof, the “Note
Purchase Agreement”),
pursuant to which the Pledgor will authorize and issue a new series of its
senior secured convertible notes (as such Notes may be amended, restated,
replaced or otherwise modified from time to time in accordance with the terms
thereof, collectively, the "Notes"),
which
Notes shall be convertible into the Pledgor’s Shares, par value $.001, in
accordance with the terms thereof;
WHEREAS,
Xxxxxx Xxxx has executed and delivered a Guaranty dated the date hereof (as
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the “Guaranty”)
for
the benefit of herself and the Noteholders, with respect to the Pledgor’s
obligations under the Note Purchase Agreement, the Notes and the other
Transaction Documents (as defined below); and
WHEREAS,
it is a condition precedent to the Noteholders purchasing the Notes pursuant
to
the Note Purchase Agreement that the Pledgor and Xxxxxx Xxxx shall have agreed
to pledge as collateral security to Pledgee, for themselves and the benefit
of
Noteholders and to the grant to Pledgee, for themselves and the benefit of
Noteholders, of a security interest in and Lien on the
Accounts Receivable of the Pledgor as defined in Section 2 (the “Accounts
Receivable”)
and
ten
million (10,000,000) shares of Common Stock, owned by Xxxxxx Xxxx, the Chairman
of the Pledgor
(the
“Pledged
Shares”)
subject to the terms and conditions hereof;
WHEREAS,
Pledgor has determined that the execution, delivery and performance of this
Agreement directly benefits, and is in the best interest of,
Pledgor;
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Investors purchase the Notes pursuant to the Note Purchase
Agreement, Pledgor hereby agrees with the Pledgee, for itself and the benefit
of
the Noteholders, as follows:
SECTION
1. Definitions.
Reference
is hereby made to the Notes for a statement of the terms thereof. All terms
used
in this Agreement which are defined in the Notes, Note Purchase Agreement or
in
Article 8 or Article 9 of the Uniform Commercial Code currently in effect in
the
State of Nevada (the
“Code”)
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth therein. If a term used, but not defined, in this Agreement shall
have
been defined in both the Notes and the Note Purchase Agreement, such term as
used in this Agreement shall have the meaning ascribed to such term in the
Notes.
SECTION
2. Pledge
and Grant of Security Interest.
As
collateral security for the prompt performance, observance and indefeasible
payment in full of all of the Obligations (as defined in Section 3 hereof),
Pledgor hereby pledges and collaterally assigns to the Pledgee, for itself
and
the benefit of the Noteholders, and grants to the Pledgee for the benefit of
itself and the Noteholders a continuing security interest in and Lien on, (A)
Xxxxxx Xxxx’x right, title and interest in and to the Pledged Shares, and, (B)
Pledgor’s right, title and interest in and to the Accounts Receivable (together
with Pledged Shares, the “Pledged
Collateral”).
“Accounts Receivable” means all
rights to payment for goods sold or leased or for services rendered, whether
or
not such rights have been earned by performance, except that all such rights
to
payment from Lite-On, Inc. are expressly excluded from Accounts
Receivable.
SECTION
3. Security
for Obligations.
The
security interest created hereby in the Pledged Collateral constitutes
continuing collateral security for all of the following obligations, whether
now
existing or hereafter incurred (the “Obligations”):
(a) all
present and future indebtedness, obligations, and liabilities of Pledgor to
Pledgee and the Noteholders under the Notes and the Guaranty, as applicable.
Without limiting the generality of the foregoing, the Obligations include the
obligation of Pledgor and Subsidary to pay principal, interest, charges,
expenses, and disbursements, indemnities and other amounts each payable by
Pledgor under the Notes and the Guaranty, as applicable, whether now existing
or
hereafter arising, whether arising before, during or after the initial or any
renewal term of the Notes or after the commencement of any case with respect
to
Pledgor under the Bankruptcy Code (as defined in the Notes) or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case);
and
(b) the
obligation of Pledgor to reimburse any amount in respect of any of the foregoing
that Pledgee or any Noteholder (in its sole discretion) may elect to pay or
advance on behalf of Pledgor; provided, that such obligation or the amount
related thereto is not being contested by Pledgor in good faith. Pledgor waives
any rights it may have under the Code to demand any filing of termination
statements (or similar filing) by Pledgee with respect to the Collateral, and
Pledgee shall not be required to deliver such termination statements to Pledgor,
or to file them with any filing office, in each case, unless and until all
of
the Obligations are paid in full and the Notes and Guaranty are terminated.
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SECTION
4. Delivery
and Registration of Pledged Collateral.
(a) Xxxxxx
Xxxx shall promptly cause the Pledged Shares to be registered or entered, as
the
case may be, in the name of the Pledgee, for the benefit of the Noteholders,
or,
upon the reasonable request of the Pledgee, otherwise cause the security
interest held by the Pledgee, for the benefit of the Noteholders, to be
perfected in accordance with the Code.
(b) The
Pledgor shall give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be
necessary or desirable (in the judgment of Pledgee) to create, preserve, perfect
or validate the security interest granted pursuant hereto or to enable Pledgee
to exercise and enforce its rights hereunder with respect to such pledge and
security interest.
(c) If
Pledgor shall receive, by virtue of the Pledgor’s being or having been an owner
of any Pledged 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), or other instrument, (ii) option or right, whether as an addition
to, substitution for, or in exchange for, any Pledged 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 or other distributions 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,
instrument, option, right, payment or distribution in trust for the benefit
of
the Pledgee, shall segregate it from Pledgor’s other property and shall deliver
it forthwith to the Pledgee, for the benefit of itself and the Noteholders,
in
the exact form received, with any necessary endorsement and/or appropriate
stock
powers duly executed in blank, to be held by the Pledgee as Pledged Collateral
and as further collateral security for the Obligations.
SECTION
5. Representations
and Warranties.
The
Pledgor represents and warrants that as of the date hereof that:
(a) The
Pledgor (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, 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 and the
Guaranty (i) have been duly authorized by all necessary action, (ii) do not
and
will not contravene its charter or by-laws, or any applicable law compliance
with which is material to the business of the Pledgor or any Material Contract
or any other contractual restriction binding on or otherwise affecting it or
any
of its properties where the contravention of such other contractual restriction
has or could reasonably be expected to have a Material Adverse Effect, (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 any Transaction Document
and (iv) do not and will not result in any default, noncompliance,
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to it or its operations or any
of
its properties
where
such default, noncompliance, suspension, revocation, impairment, forfeiture
or
nonrenewal has or could reasonably be expected to have a Material Adverse Effect
(as defined in the Note Purchase Agreement).
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(c) The
Pledged Shares to the extent applicable have been duly authorized and validly
issued and are fully paid and nonassessable and the holders thereof are not
entitled to any preemptive, first refusal or other similar rights.
(d) The
Pledgor is and will be at all times the legal and beneficial owner of its
Pledged Collateral free and clear of any Lien except for the Lien created by
this Agreement and other Transaction Documents and the Permitted
Liens.
(e) The
exercise by the Pledgee of any of its rights and remedies in accordance with
the
terms of this Agreement will not contravene any applicable law compliance with
which is material to the business of the Pledgor or any Material Contract or
any
other contractual restriction binding on or otherwise affecting the Pledgor
or
any of the properties of the Pledgor where the contravention of such other
contractual restriction has or would reasonably be expected to have a Material
Adverse Effect, and will not result in or require the creation of any Lien
(other than Permitted Liens, or pursuant to this Agreement or the other
Transaction Documents) upon or with respect to any of the properties of the
Pledgor.
(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 Lien created
hereby in the Pledged Collateral or (iii) the exercise by the Pledgee, for
the
benefit of itself and the Noteholders, of any of its rights and remedies
hereunder, except as may be required in connection with any sale of any Pledged
Collateral by laws affecting the offering and sale of securities
generally.
(g) This
Agreement has been duly executed and delivered by and on behalf of the Pledgor
and constitutes the legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms.
SECTION
6. Covenants
as to the Pledged Collateral.
Unless
and until the Obligations have been paid in full, the Pledgor shall, unless
the
Pledgee shall otherwise consent in writing:
(a) keep
adequate records concerning the Pledged Collateral and permit the Pledgee or
any
agents, designees or representatives thereof at any time or from time to time,
subject to the terms of the Notes, to examine and make copies of and abstracts
from such records during
normal business hours of the Pledgor provided that the Pledgor shall not bear
the cost and expense of more than two such examinations or other visits in
any
calendar year unless an Event of Default has occurred and is
continuing;
(b) at
the
Pledgor’s expense, promptly, and in any event within five (5) days after
receipt, deliver to the Pledgee a copy of each material notice or other material
communication received by it in respect of the Pledged Collateral;
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(c) at
the
Pledgor’s expense, defend the Pledgee’s right, title and security interest in
and to the Pledged 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 appropriate or that the Pledgee 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 Pledgee to
exercise and enforce its rights and remedies hereunder in respect of the Pledged
Collateral in accordance with the provisions hereof or (iii) otherwise effect
the purposes of this Agreement, including, without limitation, delivering to
the
Pledgee, after the occurrence and during the continuation of an Event of
Default, irrevocable proxies in respect of the Pledged Shares;
(e) not
sell,
assign (by operation of law or otherwise), exchange or otherwise dispose of
any
Pledged Collateral or any of its interest therein other than as permitted under
the Notes and other Transaction Documents;
(f) not
create or suffer to exist any Lien upon or with respect to any Pledged
Collateral owned by it except for the Lien created hereby or the other
Transaction Documents or for any Permitted Lien;
(g) not
make
or consent to any amendment or other modification or waiver with respect to
any
Pledged Collateral except that any Pledgor may make or consent to any amendment
or other modification or waiver solely to the extent necessary to reflect any
merger or consolidation permitted by the Notes or enter into any agreement
or
permit to exist any restriction with respect to any Pledged Collateral other
than under the Transaction Documents;
(h) not
take
or fail to take any action which would in any manner impair the value or
enforceability of the Pledgee’s security interest in and Lien on any Pledged
Collateral;
(i) in
the
event the Pledgor achieves the 2008 Projected Income, as defined in Section
6(i)
of the Note Purchase Agreement, the security interest and Lien on the Pledged
Shares created hereby shall terminate, all rights to the Pledged Shares shall
revert to Xxxxxx Xxxx and the Pledged Shares shall be returned to Xxxxxx
Xxxx.
(j) upon
the
direction of the Collateral Agent as described in Section 2(a) of that certain
Lockbox Agreement (the “Lockbox Agreement”) dated as of the date hereof by and
among the Pledgor, the Collateral Agent and the Lockbox Agent, as defined
therein, the
Pledgor shall promptly, but in no event later than thirty Business Days, after
such direction is given, notify all the account debtors on the Accounts
Receivable that payments in respect thereof shall be made directly to the
Collateral Account. Funds may be withdrawn from the Collateral Account only
in
accordance with Section 4 of the Lockbox Agreement.
SECTION
7. Distributions
and Voting Rights, Etc. in Respect of the Pledged Shares.
(a) So
long
as no Event of Default shall have occurred and be continuing:
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(i) Xxxxxx
Xxxx may exercise any and all voting and other consensual rights pertaining
to
the Pledged Shares for any purpose not inconsistent with the terms of this
Agreement, the Notes or the other Transaction Documents; provided,
however,
that
(A) Xxxxxx Xxxx will not exercise or refrain from exercising any such right,
as
the case may be, if the Pledgee has provided prior written notice to Xxxxxx
Xxxx
that, in the Pledgee’s judgment, such action (or inaction) could reasonably be
expected to affect adversely in any material respect the value of the Pledged
Shares or otherwise could reasonably be expected to have a Material Adverse
Effect and (B) Xxxxxx Xxxx will give the Pledgee 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 that could reasonably be expected
to
affect adversely in any material respect the value of any Pledged Collateral
or
otherwise could reasonably be expected to have a Material Adverse
Effect;
(ii) Xxxxxx
Xxxx may receive and retain any and all dividends, interest or other
distributions paid in respect of the Pledged Shares to the extent permitted
by
the Notes or the other Transaction Documents; provided,
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, the Pledged Shares,
(B)
dividends and other distributions paid or payable in cash in respect of the
Pledged Shares 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, the Pledged Shares, together with any dividend, interest or other
distribution or payment which, in the case of each of (A), (B) and (C) hereof,
at the time of such payment or other distribution was not permitted by the
Notes, shall be, and shall forthwith be delivered to the Pledgee to hold as,
Pledged Collateral and shall, if received by Xxxxxx Xxxx, be received in trust
for the benefit of the Pledgee, shall be segregated from the other property
or
funds of Xxxxxx Xxxx, and shall be forthwith delivered to the Pledgee in the
exact form received with any necessary endorsement and/or appropriate stock
powers duly executed in blank, to be held by the Pledgee as Pledged Collateral
and as further collateral security for the Obligations; provided,
that,
the
Pledgee shall return such amounts to Xxxxxx Xxxx within ten (10) Business Days
of a request from the Pledgor for such return unless such amounts are applied
to
the Obligations in accordance with the Notes during such ten (10) Business
Day
period; and
(iii) the
Pledgee will execute and deliver (or cause to be executed and delivered) to
Xxxxxx Xxxx all such proxies and other instruments as Xxxxxx Xxxx may reasonably
request for the purpose of enabling Xxxxxx Xxxx to exercise the voting and
other
rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof
and
to receive the dividends, interest and/or other distributions which it is
authorized to receive and retain pursuant to Section 7(a)(ii)
hereof.
(b) Upon
the
occurrence and during the continuance of an Event of Default:
(i) all
rights of Xxxxxx Xxxx to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof,
and to receive the dividends and interest payments which it would otherwise
be
authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall
cease, and all such rights shall thereupon become vested in the Pledgee which
shall thereupon have the sole right to exercise such voting and other consensual
rights and to receive and hold as Pledged Collateral such dividends and interest
payments;
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(ii) without
limiting the generality of the foregoing, the Pledgee may at its option exercise
any and all rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to the Pledged Shares as if it were the
absolute owner thereof, including, without limitation, the right to exchange,
in
its discretion, any and all of the Pledged Shares upon the merger,
consolidation, reorganization, recapitalization or other adjustment of the
Pledgor, and, in connection therewith, to deposit and deliver any and all of
the
Pledged Shares with any committee, depository, transfer agent, 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
Xxxxxx Xxxx contrary to the provisions of Section 7(b)(i) hereof shall be
received in trust for the benefit of the Pledgee and shall be segregated from
other funds of Xxxxxx Xxxx, and shall be forthwith paid over to the Pledgee
as
Pledged Collateral in the exact form received with any necessary endorsement
and/or appropriate stock powers duly executed in blank, to be held by the
Pledgee as Pledged Collateral and as further collateral security for the
Obligations.
SECTION
8. Additional
Provisions Concerning the Pledged Collateral.
(a) The
Pledgor hereby authorizes the Pledgee to file any financing statements required
hereunder or under any other Transaction Document, and any continuation
statements or amendment with respect thereto for the perfection of the security
interest created hereby in any appropriate filing office without the signature
of the Pledgor. A photocopy or other reproduction of this Agreement or any
financing statement covering the Pledge Collateral or any part thereof shall
be
sufficient as a financing statement where permitted by law.
(b) The
Pledgor hereby irrevocably appoints the Pledgee the Pledgor’s attorney-in-fact
and proxy, with full authority in the place and stead of the Pledgor and in
the
name of the Pledgor or otherwise, from time to time in the Pledgee’s discretion,
to take any action and to execute any agreements, instruments or other documents
in the Pledgor’s name and to file such agreements, instruments or other
documents in the Pledgor’s name and to file such agreements, instruments, or
other documents in any appropriate filing office, which the Pledgee 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, endorse and collect all instruments made payable to
the
Pledgor representing any dividend, interest payment or other distribution in
respect of any Pledged Collateral and to give full discharge for the same.
This
power is coupled with an interest and is irrevocable until all of the
Obligations are paid in full.
(c) If
the
Pledgor fails to perform any agreement or obligation contained herein, the
Pledgee itself may, after the occurrence and during the continuance of an Event
of Default, perform, or cause performance of, such agreement or obligation,
and
the expenses of the Pledgee incurred in connection therewith shall be payable
by
the Pledgor pursuant to Section 11 hereof and shall be secured by the Pledged
Collateral.
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(d) Other
than the exercise of reasonable care to assure the safe custody of the Pledged
Collateral while held hereunder, the Pledgee shall have no duty or liability
to
preserve rights pertaining thereto and shall be relieved of all responsibility
for the Pledged Collateral upon surrendering it or tendering surrender of it
to
the Pledgor. The Pledgee shall be deemed to have exercised reasonable care
in
the custody and preservation of the Pledged Collateral in its possession if
the
Pledged Collateral is accorded treatment substantially equal to that which
the
Pledgee accords its own property, it being understood that the Pledgee shall
not
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Pledgee 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 Pledged Collateral.
(e) The
powers conferred on the Pledgee hereunder are solely to protect its interest
in
the Pledged Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Pledged Collateral in its
possession and the accounting for monies actually received by it hereunder,
the
Pledgee shall have no duty as to any Pledged Collateral or as to the taking
of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Pledged Collateral.
(f) Upon
the
occurrence and during the continuation of any Event of Default, the Pledgee
may
at any time in its discretion (i) without notice to any Pledgor, transfer or
register in the name of the Pledgee or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights of the Pledgor under
Section 7(a) hereof, and (ii) exchange certificates or instruments constituting
Pledged Collateral for certificates or instruments of smaller or larger
denominations.
SECTION
9. No
Assumption of Liabilities.
(a) Nothing
herein shall be construed to make the Pledgee liable as a member or owner of
the
Subsidary and the Pledgee by virtue of this Agreement or otherwise shall not
have any of the duties, obligations or liabilities of a member or owner of
the
Subsidiary. The parties hereto expressly agree that this Agreement shall not
be
construed as creating a partnership or joint venture between the Pledgee and
the
Pledgor.
(b) By
accepting this Agreement, the Pledgee does not intend to be deemed to be a
co-venturer with respect to the Pledgor either before or after an Event of
Default shall have occurred. The Pledgee shall have only those powers set forth
herein and shall assume none of the duties, obligations or liabilities of the
Pledgor. The Pledgee shall not be obligated to perform or discharge any
obligation of the Pledgor as a result of the pledge hereby effected.
(c) The
acceptance by the Pledgee of this Agreement, with all of the rights, powers,
privileges and authority so created, shall not at any time or in any event
obligate the Pledgee to appear in or defend any action or proceeding relating
to
the Pledged Collateral to which it is not a party, or to take any action
hereunder or thereunder, or to expend any money or incur any expense or perform
or discharge any obligation, duty or liability hereunder or otherwise with
respect to the Pledged Collateral.
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SECTION
10. Remedies
Upon Default.
If any
Event of Default shall have occurred and be continuing:
(a) The
Pledgee may exercise in respect of the Pledged Shares, 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 Delaware; and without limiting the generality of the foregoing
and without notice except as specified below, sell the Pledged 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 Pledgee 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 of Pledged Collateral
or
the time after which any private sale is to be made shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of Pledged
Collateral regardless of whether or not notice of sale has been given. The
Pledgee 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) In
the
event that the Pledgee determines to exercise its right to sell all or any
part
of the Pledged Collateral pursuant to Section 10(a) hereof, the Pledgor will,
at
the Pledgor’s expense and upon request by the Pledgee: execute and deliver, and
cause the Pledgor and the directors and officers thereof to execute and deliver,
all such instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the Pledgee,
advisable to sell such Pledged Collateral in accordance with the provisions
of
the Securities Act of 1933, as amended (the “Securities Act”), as well as
applicable “Blue Sky” or other state securities laws. The Pledgor acknowledges
the difficulty of ascertaining the amount of damages which would be suffered
by
the Pledgee by reason of the failure by the Pledgor to perform any of the
covenants contained in this Section 10(b) and, consequently, agrees that,
without limiting any other rights or remedies of Pledgee, if the Pledgor fails
to perform any of such covenants, the Pledgee shall be entitled to specific
performance against the Pledgor compelling performance of such
covenants.
(c) Notwithstanding
the provisions of Section 10(b) hereof, the Pledgor recognizes
that the
Pledgee may deem it impracticable to effect a public sale of all or any part
of
the Pledged Shares and that the Pledgee may, therefore, determine to make one
or
more private sales of the Pledged Shares to a restricted group of purchasers
who
will be obligated to agree, among other things, to acquire such securities
for
their 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 Pledgee 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.
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(d) Any
cash
held by the Pledgee as Pledged Collateral and all cash proceeds received by
the
Pledgee in respect of any sale of, collection from, or other realization upon,
all or any part of the Pledged Collateral may, in the discretion of the Pledgee,
be held by the Pledgee as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Pledgee pursuant to Section
11 hereof) in whole or in part by the Pledgee against, all or any part of the
Obligations in such order as the Pledgee shall elect consistent with the
provisions of the Notes. Any surplus of such cash or cash proceeds held by
the
Pledgee and remaining after the date all of the Obligations have been paid
in
full shall be paid over to the Pledgor or to such Person as may be lawfully
entitled to receive such surplus.
(e) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Pledgee or any Noteholder is
legally entitled, the Pledgor shall be liable for the deficiency, together
with
interest thereon at the highest rate specified in the Notes 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 Pledgee or any Noteholder to collect
such deficiency.
SECTION
11. Application
of Proceeds.
The
proceeds of any collection, sale or other realization of all or any part of
the
Pledged Collateral pursuant hereto shall be applied by the Collateral Agent
pursuant to the rights and powers granted to the Collateral Agent by the
Collateral Agency Agreement:
(a) First,
to
the payment of the costs and expenses of such collection, sale or other
realization, including reasonable out-of-pocket costs and expenses of the
Collateral Agent, and the Pledgee and the fees and expenses of its agents and
counsel;
(b) Next,
to
the payment in full of the Secured Obligations; and
(c) Finally,
to the payment to the Pledgor, or its successors or assigns, or as a court
of
competent jurisdiction may direct, of any surplus then remaining.
As
used
in this Section 11, "proceeds" of Pledged Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of, Pledged
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Pledgor.
SECTION
12. Indemnity
and Expenses.
(a) The
Pledgor agrees to indemnify, defend, protect and hold harmless the Pledgee
(and
all of its respective officers, directors, employees, attorneys, consultants
and
agents) from and against any and all claims, damages, losses, liabilities
obligations, penalties, fees, costs and expenses (including, without limitation,
reasonable legal fees, costs, expenses 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, as
to
any such indemnified Person, claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses resulting solely and directly from such
Person’s gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
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(b) The
Pledgor agrees to pay to the Pledgee upon demand the amount of any and all
reasonable costs and expenses, including the reasonable fees, costs, expenses
and disbursements of the Pledgee’s counsel and of any experts and agents, which
the Pledgee 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 Pledged Collateral, (iii) the exercise or enforcement of any of the rights
of the Pledgee hereunder, or (iv) the failure by any Pledgor to perform or
observe any of the provisions hereof.
(c) The
Pledgor agrees to pay to the Collateral Agent certain fees set forth in the
Schedule of Collateral Agent Fees attached as Exhibit A.
SECTION
13. 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), telecopied or delivered, if to the Pledgor, to it at the address
of
the Company specified in the Notes or as otherwise specified next to the
Pledgor’s signature below; if to the Pledgee, to it at the address specified in
the Notes; 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 12. All such notices and other
communications shall be effective (a) if mailed (by certified mail, postage
prepaid and return receipt requested), when received or three (3) days after
deposit in the mails, whichever occurs first, (b) if telecopied, when
transmitted and confirmation is received, or (c) if delivered by overnight
courier or by hand delivery upon delivery.
SECTION
14. Governing
Law; Process Agents; Consent to Jurisdiction, Venue, Etc.
(a) THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, 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 CREATED
HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
(b) The
Pledgor (the “Process
Agent Entity”)
hereby
irrevocably and unconditionally appoints the Secretary of State of State of
New
York (the “Process
Agent”)
as its
agent to receive on behalf of the Process Agent Entity and its property service
of copies of the summons and complaint and any other process which may be served
in any such action, suit or proceeding, agrees that such service may be made
by
mailing (by certified or registered mail, postage prepaid and return receipt
requested) or delivering a copy of such process to the Process Agent Entity
in
care of the Process Agent at the Process Agent’s above address, irrevocably
authorizes and directs the Process Agent to accept such service on its behalf
and as an alternative method of service, irrevocably consents to the service
of
any and all process in any such action, suit or proceeding by the mailing of
copies of such process to the Process Agent Entity at its address specified
above, such service to become effective ten (10) days after such mailing. The
Pledgee hereby irrevocably appoints the Secretary of State of the State of
New
York as its agent for service of process in respect of any such action or
proceeding and further irrevocably consents to the service of process out of
any
of the aforementioned courts and in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to the
Secretary of State of the State of New York, such service to become effective
ten (10) days after such mailing. Nothing herein shall affect the right of
the
Pledgee to service of process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any Pledgor in any
other
jurisdiction.
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(c) ANY
LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN XXX XXXXXX
XX XXX XXXXX XX XXX XXXX IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT
OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS.
THE
PLEDGOR HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS AGENT FOR SERVICE
OF
PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS
AND
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS FOR NOTICES
HEREIN AND TO THE PROCESS AGENT, SUCH SERVICE TO BECOME EFFECTIVE TEN (10)
DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF PLEDGEE AND THE
NOTEHOLDERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PLEDGOR IN ANY
OTHER
JURISDICTION. THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT
IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PLEDGOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS.
(d) 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.
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SECTION
15. WAIVER
OF JURY TRIAL, ETC THE
PLEDGOR (AND BY ITS ACCEPTANCE OF THIS AGREEMENT, THE PLEDGEE) HEREBY WAIVES
ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER
ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED
OR
WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM
ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND
AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE
A
COURT AND NOT BEFORE A JURY. THE PLEDGOR CERTIFIES THAT NO OFFICER,
REPRESENTATIVE, AGENT OR ATTORNEY OF PLEDGEE OR ANY NOTEHOLDER HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT PLEDGEE OR ANY NOTEHOLDER WOULD NOT, IN THE EVENT
OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS. THE PLEDGOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENTS
AND THE
NOTEHOLDERS ENTERING INTO THIS AGREEMENT.
SECTION
16. Security
Interest Absolute.
All
rights of the Pledgee and the Noteholders, 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 Notes or any other Transaction
Document, (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 Notes or any other Transaction
Document, (iii) any exchange or release of (except to the extent of any such
release), 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 such Obligations having been paid in full. All
authorizations and agencies contained herein with respect to any of the Pledged
Collateral are irrevocable and powers coupled with an interest.
SECTION
17. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by the Pledgee and the Pledgor, 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 Pledgee
and the Pledgor, 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 Pledgee or the Noteholders to exercise, and no delay
in exercising, any right hereunder or under any 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 Pledgee and the Noteholders provided
herein and in the Transaction Documents are cumulative and are in addition
to,
and not exclusive of, any rights or remedies provided by law. The rights of
the
Pledgee and the Noteholders under the applicable Transaction Document against
any party thereto are not conditional or contingent on any attempt by the
Pledgee or the Noteholders to exercise any of their rights under any other
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 thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
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(d) Subject
to the provisions of Section 6(i), this Agreement shall create a continuing
security interest in and Lien on the Pledged Collateral and shall (i) remain
in
full force and effect until the date the Obligations are paid in full, and
(ii)
be binding on each Pledgor and, by its acceptance hereof, the Pledgee, and
its
permitted successors and assigns, and shall inure, together with all rights
and
remedies of the Pledgee and the Noteholders hereunder, to the benefit of Pledgee
and the Noteholders and their respective permitted successors, transferees
and
assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, the Pledgee and the Noteholders may assign or otherwise
transfer their respective rights and obligations under this Agreement and any
other Transaction Document to any other Person (to the extent permitted by
the
Notes), and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Pledgee and the Noteholders herein
or
otherwise. Upon any such assignment or transfer, all references in this
Agreement to Pledgee or any Noteholder shall mean the assignee of Pledgee or
any
such Noteholder. None of the rights or obligations of the Pledgor hereunder
may
be assigned or otherwise transferred without the prior written consent of the
Pledgee, and any such assignment or transfer without such consent shall be
null
and void.
(e) Subject
to the provisions of Section 6(i), on the date the Obligations have been paid
in
full and the Notes and the other Transaction Documents have been terminated
(i)
this Agreement and the security interest and Lien created hereby shall terminate
and all rights to the Pledged Collateral shall revert to the Pledgor, and (ii)
the Pledgee will, at the Pledgor’s expense, except as otherwise required by
applicable law, (A) return to any of the Pledgor such of the Pledged Collateral
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 and reversion of rights.
(f) This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which shall be deemed an
original, but all such counterparts shall constitute one and the same
agreement.
[REMAINDER
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IN
WITNESS WHEREOF, the Pledgor has caused this Agreement to be executed and
delivered by their officer thereunto duly authorized, as of the date first
above
written.
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PLEDGOR:
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By:
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Name:
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Title:
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Xxxxxx
Xxxx
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