EXHIBIT 10.3
Pledge and Security Agreement
PLEDGE AND SECURITY AGREEMENT ("Agreement"), dated March 28, 2005, between
Xxxxxx X. Xxxxxxxx III, an individual with a residence of 00000 Xxxxx Xxxxx Xxx,
Xxx Xxxxx, Xxxxxxxxxx 00000 (the "Pledgor"), AICI, Inc, a corporation organized
and existing under the laws of the State of Nevada and having a place of
business at 0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000 (the
"Secured Party"), and Xxxxxxx X. Xxxxxxxxx PC, a professional law corporation
organized and existing under the laws of the State of California having its
principal place of business at 00000 Xxxxxxx Xxxxxx Xxxx, Xxxxx 000X, Xxx Xxxxx,
Xxxxxxxxxx 00000 ("Escrow Agent").
WHEREAS, Pledgor and Secured Party are parties to a certain Loan Agreement
dated March 25, 2005 (the "Loan Agreement") which Loan Agreement provides for
the loan to Pledgor by Secured Party certain funds as set forth in a Note of
even date.
NOW THEREFORE, in consideration of the entering into the Loan Agreement
and the making of the obligations evidenced by the Covenant the parties hereto
as follows:
1. As collateral security for the full and timely payment, performance and
observance of all of the Obligations (as hereinafter defined), the Pledgor
hereby deposits, hypothecates, pledges, transfers and delivers to the Escrow
Agent all the Pledged Securities, in form transferable for delivery, and grants
to the Secured Party a security interest in, the shares of stock and interest
and the certificates or other instruments or documents evidencing same in AICI,
Inc. (the "Company") more particularly described in Schedule A annexed hereto
and made a part hereof and such additional property at any time and from time to
time receivable by the Secured Party hereunder or otherwise distributed by the
Company in respect of or in exchange for any or all such shares (herein
collectively called "Pledged Securities" which term shall also include all other
property (tangible and intangible) which this Agreement designates as "Pledged
Securities"). Pledgor hereby grants to Secured Party a security interest in and
to the Shares represented by the Pledged Securities and the proceeds of same, as
security for the payment and performance of all obligations, liabilities and
indebtedness of the Company arising under or pursuant to the Loan Agreement. By
executing this Agreement, the Escrow Agent acknowledges the existence of such
security interest. Pledgor shall also provide to the Escrow Agent a Stock Powers
separate from Certificate, signed in blank, in the form set forth in Schedule B,
to transfer the Pledged Securities, as herein contemplated, and agrees to
provide such additional documentation to transfer the Pledged Securities as
requested from time to time by the Secured Party.
"Obligations" shall mean the obligations of Putegnat to the Secured Party
evidenced by the Loan Agreement and secured by this Agreement.
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2. (a) Based on the Secured Party's representations and warranties to
Pledgor contained in the Loan Agreement, the Pledgor represents and warrants
that the Pledged Securities are, and will be on deposit hereunder, duly and
validly issued and duly and validly pledged with the Secured Party in accordance
with law. Pledgor hereby agrees to defend the Secured Party's right, title, lien
and security interest in and to the Pledged Securities against the claims and
demands of all persons whomsoever. The Pledgor also represents and warrants to
the Secured Party that Pledgor has, and will have on deposit hereunder, good
title to all of the Pledged Securities, free and clear of all claims, rights to
purchase or redeem, requirements to sell or otherwise transfer, mortgages,
pledges, liens, encumbrances and security interests of every nature whatsoever,
and that no consent or approval of any governmental or regulatory authority, or
of any securities exchange, or any other person was or is necessary to the
validity of this pledge which has not been obtained.
(b) The Pledgor will not sell, assign, transfer or otherwise dispose of,
grant any option with respect to, or pledge or grant any security interest in or
otherwise encumber any of the Pledged Securities or any interest therein, except
for the pledge thereof provided for in this Agreement.
(c) The Pledgor, without the prior written consent of the Secured Party,
will not cause the Company to merge or consolidate with any third party or sell
all or substantially all of the Company's assets.
3. (a) In the Event of Default or in the event of a right of sale by
Secured Party pursuant to Paragraph 7 hereof, the Escrow Agent shall cause all
or any of the Pledged Securities to be transferred to or registered in the
Secured Party's name or the name of its nominee or nominees. Any remedies
available to the Secured Party upon the occurrence of an Event of Default shall
be deemed to be available only after the expiration of any applicable notice and
cure period.
(b) If the amounts due under the Loan Agreement shall be paid in full, the
Secured Party shall deliver written notice to that effect to the Escrow Agent.
Upon receipt of such notice, the Escrow Agent shall immediately release the
Pledged Securities from the escrow and deliver them to Pledgor, at which time
the escrow shall terminate.
4. So long as there shall exist no event of default under this Agreement
or the Loan Agreement ("Event of Default") or condition, event or act which
constitutes, or with notice or lapse of time, or both, would constitute, an
Event of Default, the Pledgor shall be entitled to exercise, as Pledgor shall
think fit, but in a manner in the reasonable judgment of the Secured Party not
inconsistent with the terms hereof or with the terms of the Loan Agreement, the
voting power with respect to the Pledged Securities, and for that purpose the
Secured Party shall (if the Pledged Securities shall be registered in the name
of the Secured Party or its nominee) execute or cause to be executed from time
to time, at the expense of the Pledgor, such proxies or other instruments in
favor of the Pledgor or its nominee, in such form and for such purposes as shall
be reasonably required by the Pledgor and shall be specified in a written
request therefor of its President or a Vice President, to enable Pledgor to
exercise such voting power with respect to the Pledged Securities.
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5. In case, upon the dissolution or liquidation (in whole or in part) of
the Company, any sum be paid as a liquidating dividend or otherwise upon or with
respect to any of the Pledged Securities, such sum shall be paid over to the
Secured Party, to be held by the Secured Party as substitute collateral
hereunder. In case any shares of stock or fractions thereof shall be issued
pursuant to any stock split involving any of the Pledged Securities, or any
distribution of capital shall be made on any of the Pledged Securities, or any
shares, obligations or other property shall be distributed upon or with respect
to the Pledged Securities pursuant to a recapitalization or reclassification of
the capital of the issuer thereof, or pursuant to the dissolution, liquidation
(in whole or in part), bankruptcy or reorganization of such issuer, or to the
merger or consolidation of such issuer with or into another corporation, the
shares, obligations or other property so distributed shall be delivered to the
Secured Party, to be held by it as additional collateral hereunder, and all of
the same (other than cash) shall constitute Pledged Securities for all purposes
hereof.
6. So long as there shall exist an Event of Default or a condition, event
or act which constitutes, or with notice or lapse of time, or both, would
constitute, an Event of Default, the Secured Party shall be entitled to exercise
all voting power with respect to the Pledged Securities and to receive and
retain, as additional collateral hereunder, any and all dividends at any time
and from time to time declared or paid upon any of the Pledged Securities.
7. If an Event of Default shall occur, the Escrow Agent shall deliver the
Pledged Securities to the Secured Party forthwith and the Secured Party, without
obligation to resort to other security, shall have the right at any time and
from time to time to sell, resell, assign and deliver, in its discretion, all or
any of the Pledged Securities, in one or more parcels at the same or different
times, and all right, title and interest, claim and demand therein and right of
redemption thereof, on any securities exchange or broker's board on which the
Pledged Securities or any of them may be listed, or broker's board or at public
or private sale, for cash or for future delivery.
8. The Secured Party shall give the Pledgor at least thirty (30) days
prior notice of the time and place of any public sale and of the time after
which any private sale or other disposition is to be made, which notice the
Pledgor agrees is reasonable, all other demands, advertisements and notices
being hereby waived. The Secured Party shall not be obligated to make any sale
of Pledged Securities if it shall determine not to do so, regardless of the fact
that notice of sale may have been given. The Secured Party may, without notice
or publication, adjourn any public or private announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. Upon each private sale of Pledged
Securities of a type customarily sold in a recognizable market and upon each
public sale, the Secured Party or any other obligee with respect to the
Obligations may purchase all or any of the Pledged Securities being sold, free
from any equity or right of redemption, which is hereby waived and released, and
may make payment therefor (by endorsement without recourse in the case of all
sales of Pledged Securities, public or private, the Pledgor shall pay all costs
and expense of every kind for sale or delivery, including brokers and reasonable
attorneys' fees, and after deducting such costs and expenses from the proceeds
of sale, the Secured Party shall apply any residue to the payment of the
Obligations and Pledgor shall be liable for any deficiency. The balance, if any,
remaining after payment in full of all of the Obligations, shall be paid to the
Pledgor, subject to any duty of the Secured Party imposed by law to the holder
of any subordinate security interest in the Pledged Securities known to the
Secured Party.
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9. The remedies provided herein in favor of the Secured Party shall not be
deemed exclusive, but shall be cumulative, and shall be in addition to all other
remedies in favor of the Secured Party existing at law (whether under the
Uniform Commercial Code or otherwise) or in equity or under any other agreement
or instrument.
10. If an Event of Default has occurred and is continuing, the Secured
Party shall have the right, for and in the name, place and stead of the Pledgor,
to execute endorsements, assignments or other instruments of conveyance or
transfer with respect to all or any of the Pledged Securities.
11. The Escrow Agent shall have no duty as to the collection or protection
of the Pledged Securities or any income thereon or as to the preservation of any
rights pertaining thereto (including without limitation rights against third
parties), beyond the safe custody of any thereof actually in its possession.
12. Upon the happening of an Event of Default, the Pledgor hereby appoints
the Secured Party as the Pledgor's attorney-in-fact for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes hereof. Without limiting the generality of the foregoing, the
Secured Party shall have the right and power to receive, endorse and collect all
checks and other orders for the payment of money made payable to the Pledgor
representing any interest or dividend or other distribution payable in respect
of the Pledged Securities or any part thereof and to give full discharge for the
same.
13. No delay on the part of the Secured Party or of any other obligee with
respect to the Obligations in exercising any of its options, owners or rights,
or partial or single exercise thereof, shall constitute a waiver thereof.
14. Upon payment in full or satisfaction of all Obligations the Pledgor
shall be entitled to the return of all of the Pledged Securities and of all
other property and cash which have not been used or applied toward the payment
of such Obligations and this Pledge and Security Agreement shall be released and
discharged. The assignment by the Secured Party to the Pledgor of such Pledged
Securities and other property shall be without representation or warranty of any
nature whatsoever and wholly without recourse. Notwithstanding the foregoing,
the Secured Party shall have the right to continue to hold the Pledged
Securities as security for any Obligations arising by reason of the avoidance of
any prior payment of Obligations by reason of any fraudulent conveyance,
preference or similar provision of applicable law during any period during which
any such payment may be subject to avoidance as aforesaid, and this Agreement
shall remain in full force and effect during such period.
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15. Any notice or demand upon the Pledgor shall be deemed to have been
sufficiently given for all purposes thereof if mailed, postage prepaid, by
registered or certified mail, return receipt requested, or if hand delivered, to
the Pledgor at the address specified above, or at such other address as the
Pledgor may theretofore have designated in writing and given in like manner to
the Secured Party.
16. This Agreement shall be immediately effective as an instrument under
seal. The rights and obligations of the Secured Party and the Pledgor hereunder
shall be construed in accordance with and governed by the laws of the State of
California applicable to contracts executed and to be performed therein, cannot
be changed orally and shall bind and inure to the benefit of the Pledgor and the
Secured Party and their respective successors, heirs, representatives and
assigns (including, without limitation, all subsequent obligees with respect to
the Obligations). Whenever the context so requires, the neuter gender includes
the masculine or feminine, and the singular number includes the plural, and
vice-versa.
17. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute but one and the same instrument.
18. The Pledgor will do all such acts, and will furnish to the Secured
Party all such financing statements, certificates, legal opinions and other
documents and will obtain all such governmental consents and corporate approvals
and will do or cause to be done all such other things as the Secured Party may
reasonably request from time to time in order to give full effect to this
Agreement and to secure the rights of the Secured Party hereunder.
19. Each party irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of California, over any action or proceeding
arising out of or relating to this Agreement and agrees that all claims in any
such action or proceeding may be heard and determined in any such court.
20. The Pledgor represents and warrants to the Secured Party that (i) the
execution and delivery of this Agreement and pledging of the Pledged Securities
do not require any consents or approvals by any person or contravene any law or
any rule or regulation thereunder or any judgment, decree or order of any
tribunal or of any agreement or instrument to which the Pledgor is a party or by
which Pledgor or any of Pledgor's property is bound or constitute a default
thereunder and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable against Pledgor in accordance with its
terms.
21. (a) The Escrow Agent shall not be responsible for the genuineness of
any certificate or signature and may rely conclusively upon and shall be
protected when acting upon any notice, affidavit, request, consent, instruction,
check, or other instrument believed by it in good faith to be genuine or to be
signed or presented by the proper person, duly authorized. The Escrow Agent
shall have no responsibility except for the performance of its express duties
hereunder and no additional duties shall be inferred herefrom or implied hereby.
The Escrow Agent shall not be responsible or liable for any act or omission on
its part in performing its duties as Escrow Agent under this agreement unless
such act or omission constitutes bad faith, gross negligence, or fraud.
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(b) The Escrow Agent shall not be required to institute or defend any act
involving any matter referred to herein or which affects it or its duties or
liabilities hereunder unless required to do so by any party to this Agreement
and then only upon receiving full indemnity, in character satisfactory to the
Escrow Agent, against all claims, liabilities, and expenses in relation thereto.
In the event of any dispute among the parties with respect to the Escrow Agent
or its duties, (i) the Escrow Agent may act or refrain from acting in respect of
any matter referred to herein in full reliance upon and by and with the advice
of its counsel and shall be fully protected in so acting or in refraining from
acting upon the advice of such counsel, or (ii) the Escrow Agent may refrain
from acting until required to do so by an order of a Court of competent
jurisdiction.
IN WITNESS WHEREOF, the Pledgor and the Secured Party have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
Pledgor:
/s/ Xxxxxx Xxxx Xxxxxxxx III
----------------------------
Xxxxxx Xxxx Xxxxxxxx III
Secured Party:
AICI, Inc.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------------
Xxxxxxx Xxxxxxxx, CFO
Escrow Agent:
Xxxxxxx X. Xxxxxxxxx PC
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxxxx, Esq.
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SCHEDULE A
Certificate No. Owner Number of Shares
TBD Xxxxxx Xxxx Xxxxxxxx III 120,000
SCHEDULE B
Stock Powers
