PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated May 21, 2008, made
by and among ABC Funding, Inc., a Nevada corporation (the "Company") and the
holders signatory hereto (collectively, the "Pledgors") of the common stock of
the Company, in favor of each of the holders of the Company's of Senior Secured
Convertible Debentures due, unless due earlier pursuant to the terms therein,
September 29, 2008 (collectively, the "Pledgees").
W I T N E S S E T H:
WHEREAS, Pledgees have, severally and not jointly, agreed to loan the
Company an aggregate of $800,000 pursuant to the terms and conditions set forth
in a securities purchase agreement dated May 20, 2008 among the Company and the
Pledgees (the "Purchase Agreement"), pursuant to which the Company issued to
each Pledgee a Senior Secured Convertible Debenture the Company (the
"Debentures");
WHEREAS as a condition to the obligation of the Pledgees under the
Agreement, the Pledgors, as principals, employees, executive officers and/or
shareholders of the Company, have agreed to make the pledge contemplated by this
Agreement in order to induce Pledgees to perform their obligations under the
Purchase Agreement;
WHEREAS, as a condition to the obligation of the Pledgees under the
Agreement, the Company agrees to undertake such action contemplated by this
Agreement in order to induce Pledgees to perform their obligations under the
Purchase Agreement;
WHEREAS, Pledgors own the shares of common stock, par value $.001 per
share, of the Company (the "Common Stock"), set forth opposite the Pledgors'
names on Schedule A attached hereto;
WHEREAS, terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the Uniform Commercial Code in effect in the State of
New York at that time (whether or not the UCC applies to the affected Pledged
Collateral) (the "UCC") shall have the meanings ascribed to them in the UCC; and
NOW, THEREFORE, in consideration of the premises, covenants and promises
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:
SECTION 1. Pledge and Security Interest. Each Pledgor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the
Pledgees, and grants to the Pledgees a continuing first priority security
interest in, a first lien upon and a right of set-off against, all of its
respective rights, titles and interests of whatsoever kind and nature in (the
"Security Interest"), and to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the obligations pursuant to
the Debentures, the following (collectively, the "Pledged Collateral"):
(a) All of the shares of Common Stock owned by such Pledgor and set
forth on Schedule A attached hereto (the "Pledged Shares"), (such shares
constituting all of the shares of capital stock of the Company owned by
the Pledgor and its affiliates) and all dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares; and
(b) all proceeds of any and all of the foregoing Pledged Collateral,
in whatever form (including, without limitation, proceeds that constitute
property of the types described above).
SECTION 2. Security for Obligations. This Agreement secures the
payment and performance of the following obligations (collectively, the
"Obligations"): all present and future indebtedness, obligations, covenants,
duties and liabilities of any kind or nature of the Company to the Pledgees now
existing or hereafter arising, including but not limited to, under or in
connection with this Agreement and the Debentures (collectively, the
"Transaction Documents").
SECTION 3. Delivery of Pledged Collateral.
(a) On or before the date hereof, , all certificates representing or
evidencing the Pledged Shares, in suitable form for transfer by delivery,
or accompanied by instruments of transfer or assignment duly executed in
blank, including a signature guarantee, are being deposited with and
delivered to [Alpha Capital AG]. (the "Agent"), as collateral agent for
the Pledgees. The Agent shall have the right, at any time after the
occurrence of an Event of Default (as hereinafter defined), without notice
to the Pledgor, to transfer to or to register in the name of the Pledgees
or their nominees any or all of the Pledged Collateral. In addition, the
Agent shall have the right at any time after the occurrence of an Event of
Default, to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller
or larger denominations.
(b) If any Pledgor shall receive, by virtue of its 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), promissory
note 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 or interest payable in cash or in securities or
other property, (iv) dividends, interest and other distributions 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, any Pledged Collateral, (v) 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, or (vi) cash paid, payable or otherwise distributed in redemption
of, or in exchange for, any Pledged Collateral, such stock certificate,
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promissory note, instrument, option, right, property, payment or
distribution constituting Pledged Collateral shall be, and shall forthwith
be delivered to the Agent to hold as, Pledged Collateral and shall be
received in trust for the benefit of the Pledgees, shall be segregated
from Pledgor's other property and shall be delivered forthwith to the
Agent 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 4. Representations and Warranties. Each Pledgor represents
and warrants as follows:
(a) Such Pledgor is the legal, record and beneficial owner of the
Pledged Collateral owned by such Pledgor, free and clear of any lien,
security interest, restriction, option or other charge or encumbrance
(collectively, "Liens").
(b) The pledge of the Pledged Collateral and the grant of the
Security Interest pursuant to this Agreement creates a valid and perfected
first priority security interest in the Pledged Collateral, securing
payment and performance of the Obligations.
(c) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the pledge
by the Pledgor of the Pledged Collateral pursuant to this Agreement or for
the execution, delivery or performance of this Agreement by the Pledgor,
(ii) for the perfection or maintenance of the security interest created
hereby, or (iii) for the exercise by the Agent of the voting or other
rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement (except as may be required
in connection with any disposition of any portion of the Pledged
Collateral by laws affecting the offering and sale of securities
generally).
(d) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(e) Except for the filing of financing statements pursuant to the
UCC with the proper filing and recording agencies in the jurisdictions
indicated on Schedule B, attached hereto, and the transfer to the Pledgees
of stock certificate(s) representing the Pledged Shares and the Pledgees'
continued possession thereof, acting individually or through the Agent, no
other action or the authorization or approval of or filing with or notice
to any governmental authority or regulatory body is required either (i)
for the grant by such Pledgor of, or the effectiveness of, the Security
Interest granted hereby or for the execution, delivery and performance of
this Agreement by such Pledgor or (ii) for the perfection of or exercise
by the Pledgees of their rights and remedies hereunder.
(f) Effective on the date of execution of this Agreement, such
Pledgor hereby authorizes the Agent to file one or more financing
statements under the UCC with respect to the Security Interest with the
proper filing and recording agencies in the jurisdictions indicated on
Schedule B attached hereto, and in such other jurisdictions as may be
requested by the Pledgees.
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(g) Such Pledgor will not transfer, pledge, hypothecate, sell or
otherwise dispose of any of the Pledged Collateral without the prior
written consent of the Pledgees.
(h) Such Pledgor shall promptly execute and deliver to the Pledgees
such further assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such
further action as the Pledgees may from time to time request and may in
its sole discretion deem necessary to perfect, protect or enforce its
security interest in the Pledged Collateral.
(i) Such Pledgor shall promptly notify the Pledgees, in sufficient
detail, upon becoming aware of any attachment, garnishment, execution or
other legal process levied against any Pledged Collateral and of any other
information received by such Pledgor that may materially affect the
Security Interest or the rights and remedies of the Pledgees hereunder.
(j) All information heretofore, herein or hereafter supplied to the
Pledgees by or on behalf of such Pledgor with respect to the Pledged
Collateral is accurate and complete in all material respects as of the
date furnished.
SECTION 5. Further Assurances. Each Pledgor agrees that at any time
and from time to time, at the expense of such Pledgor, the Pledgor shall
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Agent and/or the
Pledgees may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Agent and/or
Pledgees to exercise and enforce their rights and remedies hereunder with
respect to any Pledged Collateral. The Company agrees that at any time and from
time to time, at the expense of the Company, the Company shall promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgees may reasonably request.
SECTION 6. Voting Rights in respect of the Pledged Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Each Pledgor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining
to the Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement; provided, however,
that such Pledgor shall not exercise or refrain from exercising any
such right if such action would have a material adverse effect on
the Security Interest or the rights and remedies of the Pledgees
hereunder; provided, further, that such Pledgor shall give the
Pledgees at least five (5) days' prior written notice of the manner
in which it intends to exercise, or the reasons for refraining from
exercising, any such right.
(b) Upon and after the occurrence of any Event of Default:
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(i) All rights of each Pledgor to exercise or refrain from
exercising the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 6(a)(i) shall
cease, and all such rights shall thereupon become vested in the
Agent who shall thereupon have the sole right to exercise or refrain
from exercising such voting and other consensual rights.
SECTION 7. Transfers and Other Liens; Additional Shares.
(a) The Pledgor agrees that it shall not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral, or (ii) create or
permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest granted pursuant to this
Agreement.
(b) From the date hereof until the Debentures have been indefeasibly
paid in full or converted in full in accordance with the terms thereof, as
applicable, neither the Company nor any Subsidiary shall issue any shares
of Common Stock or Common Share Equivalents (as defined in the Purchase
Agreement) or other equity securities of the Company to any Pledgor or to
any of their respective affiliates.
(c) The undersigned Pledgors irrevocably agree that, from the date
hereof until the Debentures have been indefeasibly paid in full or
converted in full in accordance with the terms thereof, as applicable, the
undersigned Pledgors will not offer, sell, contract to sell, hypothecate,
pledge or otherwise dispose of (or enter into any transaction which is
designed to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the undersigned Pledgors or any affiliate
of the undersigned or any person in privity with the undersigned or any
affiliate of the undersigned Pledgors), directly or indirectly, including
the filing (or participation in the filing) of a registration statement
with the Commission in respect of, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent position
within the meaning of Section 16 of the Exchange Act with respect to, any
shares of Common Stock or Common Share Equivalents beneficially owned,
including but not limited to the Pledge Shares, held or hereafter acquired
by the undersigned Pledgors. Beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act.
SECTION 8. Agent Appointed Attorney-in-Fact.
(a) Effective upon the occurrence and continuation of an Event of
Default, the Pledgors hereby appoints the Agent as the Pledgors'
attorney-in-fact, with full authority in the place and stead of, and in
the name of, the Pledgors or otherwise, from time to time in the Agent's
discretion to take any action and to execute any instrument which the
Agent may deem necessary or desirable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect
all instruments made payable to the Pledgors representing any dividend,
interest payment or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same.
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(b) Each Pledgor authorizes the Agent, and do hereby make,
constitute and appoint the Agent and its respective officers, agents,
successors or assigns with full power of substitution, as the Pledgors'
true and lawful attorney-in-fact, with power, in the name of the Pledgees
or the Pledgors, to, after the occurrence and during the continuance of an
Event of Default, (i) endorse any checks, drafts, money orders or other
instruments of payment (including payments payable under or in respect of
any policy of insurance) in respect of the Pledged Collateral that may
come into possession of the Pledgees; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or express
▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts against
Pledgors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Pledged Collateral; (iii) to
pay or discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on or threatened against the Pledged Collateral;
(iv) to demand, collect, receipt for, compromise, settle and ▇▇▇ for
monies due in respect of the Pledged Collateral; (v) generally, to do, at
the option of the Pledgees, and at the expense of the Pledgors, severally
and jointly, at any time, or from time to time, all acts and things
necessary to protect, preserve and realize upon the Pledged Collateral and
the Security Interest granted herein in order to effect the intent of this
Agreement all as fully and effectually as the Pledgors might or could do;
and (vi) in the event of the bankruptcy of any Pledgor, to appoint a
receiver or equivalent person to ▇▇▇▇▇▇▇▇ such Pledgor's assets, and such
Pledgor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement or
earlier satisfaction in full of the Debenture.
(c) Each Pledgor hereby irrevocably appoints the Agent as such
Pledgor's attorney-in-fact, with full authority in the place and stead of
such Pledgor and in the name of such Pledgor, from time to time in the
Agent's discretion, to take any action and to execute any instrument which
the Pledgees may deem necessary or advisable to accomplish the purposes of
this Agreement, including the filing, in its sole discretion, of one or
more financing or continuation statements and amendments thereto, relative
to any of the Collateral without the signature of such Pledgor where
permitted by law.
SECTION 9. Pledgee May Perform. If any Pledgor fails to perform any
agreement contained herein, the Agent and/or Pledgees may itself perform, or
cause performance of, such agreement, and the expenses of the Agent and/or
Pledgees incurred in connection therewith shall be payable by such Pledgor under
Section 14 hereof.
SECTION 10. The Agent's Duties. The duties and rights of the Agent
are as set forth on Annex A attached hereto and incorporated herein by
reference. Any fees of the Agent for its services hereunder shall be paid by the
Company. The powers conferred on the Agent hereunder are solely to protect the
interests of the Pledgee in the Pledged Collateral and shall not impose any duty
upon the Agent to exercise any such powers. Except for the safe custody of any
Pledged Collateral in its possession and the accounting for moneys actually
received it hereunder, neither the Agent nor Pledgee shall have any duty as to
any Pledged Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Collateral, whether or not such party has or is to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
The Agent and Pledgee shall be deemed to have exercised reasonable care in the
custody and preservation of any Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that which such
party accords its own property.
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SECTION 11. Event of Default. The occurrence and expiration of the
applicable cure period with respect to any of the following events shall
constitute an event of default under this Agreement (each, an "Event of
Default"):
(a) The failure of any Pledgor to observe, perform or comply with
any act, duty, covenant, agreement or obligation under this Agreement,
which is not cured within five business days following written notice by
Agent to such Pledgor;
(b) If any of the representation or warranty of any Pledgor set
forth in this Agreement shall be breached or shall be untrue or incorrect
in any material respect, and is not cured within ten business days
following written notice by Agent to such Pledgor;
(c) The filing of a financing statement with regard to any of the
Pledged Collateral other than pursuant to this Agreement, or the
attachment of any additional Lien to any portion of the Pledged Collateral
in favor of any Person other than the Pledgees; or
(d) If any event of default (and expiration of any cure period)
shall occur under any of the Transaction Documents.
SECTION 12. Cross-Default; Cross-Collateralization. The Pledgors
acknowledges and agrees that any default under the terms of this Agreement shall
constitute a default by the Company under the Debentures, and that any event of
default (following expiration of any applicable cure period) under the
Debentures shall constitute a default under this Agreement. The security
interests, liens and other rights and interests in and relative to any of the
real or personal property of the Pledgors now or hereafter granted to the
Pledgee by the Pledgors pursuant to any agreement, document or instrument,
including, but not limited to, this Agreement or the Debentures shall serve as
security for any and all of the Obligations, and, for the repayment thereof,
Pledgees may resort to any such collateral in such order and manner as they may
elect.
SECTION 13. Remedies upon Event of Default. So long as any Event of
Default is continuing:
(a) The Agent may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to the Agent (including, without limitation, the vesting in the
Agent pursuant to Section 6(b)(i) of the sole right to exercise voting
rights pertaining to the Pledged Collateral, including, without
limitation, voting rights with respect to the sale of assets of the issuer
of such Pledged Collateral), all the rights and remedies of a secured
party on default under the UCC, and may also, without notice except as
specified below, sell the Pledged Collateral or any part thereof at public
or private sale, at any exchange, broker's board or at any of the Agent's
offices or elsewhere, for cash, on credit or for future delivery, and upon
such other terms as the Agent may deem commercially reasonable. Each
Pledgor agrees that, to the extent notice of sale shall be required by
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law, at least ten (10) days' notice to such Pledgor 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 Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having
been given. The Agent 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. Each Pledgor acknowledges and agrees that the Pledged
Collateral consisting of the Pledged Shares, and/or any other shares of
common stock of the Company, is of a type customarily sold on a recognized
market, and accordingly that no notice of the sale thereof need be given.
In addition, Agent may transfer all of the Pledged Collateral to Pledgees,
who may hold all of such Pledged Collateral as payment in full of the
Obligations
(b) Any cash held by the Agent or the Pledgees as Pledged Collateral
and all cash proceeds received by the Agent or the Pledgees 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 Agent or the
Pledgees, be held as collateral for, and/or then or at any time thereafter
be applied (after payment of any amounts payable pursuant to Section 14)
in whole or in part against, all or any part of the Obligations. Any
surplus of such cash or cash proceeds held by the Agent or the Pledgees
and remaining after payment in full of all the Obligations shall be paid
over to the Pledgors, pro-rata, or to whomsoever may be lawfully entitled
to receive such surplus.
SECTION 14. Expenses. The Pledgors and the Company, severally and
jointly, shall upon demand pay to the Agent and/or the Pledgees the amount of
any and all reasonable expenses, including reasonable attorneys' fees and
expenses and the reasonable fees and expenses of any experts and agents, which
the Agent and/or Pledgees may incur in connection with (a) the administration of
this Agreement, (b) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Pledged Collateral, (c) the exercise
or enforcement of any of the rights of the Agent and/or Pledgees hereunder or
(d) the failure by any Pledgor to perform or observe any of the provisions
hereof.
SECTION 15. Continuing Security Interest; Termination. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall remain in full force and effect until the Debentures have been
indefeasible paid in full or converted in full in accordance with the terms
thereof, as applicable. Upon the indefeasible payment in full of the Debenture
or the conversion in full thereof, as applicable, the security interest granted
hereby shall terminate and all rights to the Pledged Collateral shall revert to
the Pledgors. Upon any such termination, the Agent shall, at the Pledgors'
expense, return, pro-rata, to the Pledgors such of the Pledged Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof and
execute and deliver to the Pledgors such documents as the Pledgors shall
reasonably request to evidence such termination.
SECTION 16. Governing Law; Terms. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York, without
regard to principles of conflict of laws. Each Pledgor agrees to submit to the
in personam jurisdiction of the state and federal courts situated within the
City of New York, State of New York with regard to any controversy arising out
of or relating to this Agreement. Unless otherwise defined herein, terms defined
in Article 9 of the UCC are used herein as therein defined.
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SECTION 17. Notice. All notices and other communications hereunder
shall be in writing and shall be deemed to have been received when delivered
personally (which shall include, without limitation, via express overnight
courier) or if mailed, three (3) business days after having been mailed by
registered or certified mail, return receipt requested, postage prepaid, to the
addresses of the parties as set forth herein.
SECTION 18. Waivers.
(a) Waivers. Each Pledgor waives any right to require the Pledgees
to (i) proceed against any person, (ii) proceed against any other
collateral under any other agreement, (iii) pursue any other remedy, or
(iv) make presentment, demand, dishonor, notice of dishonor, acceleration
and/or notice of non-payment.
(b) Waiver of Defense. No course of dealing between the Pledgors and
the Pledgees, nor any failure to exercise nor any delay in exercising on
the part of the Agent or Pledgees, any right, power, or privilege under
this Agreement or under any of the other Transaction Documents shall
operate as a waiver. No single or partial exercise of any right, power, or
privilege under this Agreement or under any of the other Transaction
Documents shall preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or
privilege.
SECTION 19. Rights Are Cumulative. All rights and remedies of the
Agent and the Pledgees with respect to the Pledged Collateral, whether
established by this Agreement, the other Transaction Documents or by law, shall
be cumulative and may be exercised concurrently or in any order.
SECTION 20. Indemnity. Each Pledgor, jointly and severally, agrees
to indemnify and hold harmless the Agent, the Pledgees and their respective
heirs, successors and assigns against and from all liabilities, losses and costs
(including, without limitation, reasonable attorneys' fees) arising out of or
relating to the taking or the failure to take action in respect of any
transaction effected under this Agreement or in connection with the lien
provided for herein, including, without limitation, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to any
of the Pledged Collateral, except to the extent resulting from their gross
negligence or intentional misconduct. The liabilities of the Pledgors under this
Section 20 shall survive the termination of this Agreement.
SECTION 21. Severability. The provisions of this Agreement are
severable. If any provision of this Agreement is held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such provision or part thereof
in any other jurisdiction, or any other provision of this Agreement in any
jurisdiction.
SECTION 22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
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SECTION 23. Amendments; Entire Agreement. This Agreement is subject
to modification only by a writing signed by the parties. To the extent any
provision of this Agreement conflicts with any provision of the Debentures, the
provision giving Pledgees greater rights or remedies shall govern, it being
understood that the purpose of this Agreement is to add to, and not detract
from, the rights granted to Pledgees under the Debentures. This Agreement and
the other Transaction Documents constitute the entire agreement of the parties
with respect to the subject matter of this Agreement.
SECTION 24. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and assigns; provided, however,
that no Pledgor may, without the prior written consent of the Pledgees, assign
or delegate any rights, powers, duties or obligations hereunder, and any such
purported assignment or delegation without such consent shall be null and void.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
PLEDGORS:
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Address for Notice:
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Address for Notice:
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Address for Notice:
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▇▇▇▇▇ ▇▇▇▇▇▇
Address for Notice:
THE COMPANY:
ABC FUNDING, INC.
By:
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
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SIGNATURE PAGE FOR PLEDGEES FOLLOWS]
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[PLEDGEE SIGNATURE PAGES TO AFDG PLEDGE AND SECURITY AGREEMENT]
Name of Pledgee: _________________________________
Signature of Authorized Signatory of Pledgee: ____________________________
Name of Authorized Signatory: ________________________________
Title of Authorized Signatory: _______________________________
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SCHEDULE A
Pledged Shares
14,151,000 shares of ABC Funding, Inc. certificated as follows:
Pledgor: Number of Shares: Certificate Number:
-------- ----------------- -------------------
▇▇▇▇ ▇▇▇▇▇▇ 11,151,000 ABC 00319
▇▇▇▇▇ ▇▇▇▇▇▇ 750,000 ABC 00131
250,000 ABC 00246
▇▇▇▇▇ ▇▇▇▇▇▇ 750,000 ABC 00132
250,000 ABC 00247
▇▇▇▇▇ ▇▇▇▇▇▇ 750,000 ABC 00133
250,000 ABC 00245
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SCHEDULE B
Not Applicable
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ANNEX A
THE AGENT
1. Appointment. The Pledgees (all capitalized terms used herein and
not otherwise defined shall have the respective meanings provided in the Pledge
Agreement to which this Annex A is attached (the "Agreement")), by their
acceptance of the benefits of the Agreement, hereby designate [Alpha Capital AG]
("Agent") as the Agent to act as specified herein and in the Agreement. Each
Pledgee shall be deemed irrevocably to authorize the Agent to take such action
on its behalf under the provisions of the Agreement and the Transaction
Documents (as defined in the Purchase Agreement) and to exercise such powers and
to perform such duties hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof and such other powers
as are reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its agents or employees.
2. Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Agent nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss, unless caused solely by its or their gross negligence
or willful misconduct as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in
respect of any Pledgor or any Pledgee; and nothing in the Agreement or any other
Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.
3. Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Pledgee, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Pledgor and the Issuer in connection with such
Pledgee's investment in the Pledgor, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Pledged Collateral from time to time, and the Agent shall have
no duty or responsibility, either initially or on a continuing basis, to provide
any Pledgee with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Agent shall not be responsible to the Pledgor or
any Pledgee for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of
the Pledgor or the value of any of the Pledged Collateral, or be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of the Agreement or any other Transaction
Document, or the financial condition of the Pledgor, or the value of any of the
Pledged Collateral, or the existence or possible existence of any default or
Event of Default under the Agreement, the Debentures or any of the other
Transaction Documents.
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4. Certain Rights of the Agent. The Agent shall have the right to
take any action with respect to the Pledged Collateral, on behalf of all of the
Pledgees. To the extent practical, the Agent shall request instructions from the
Pledgees with respect to any material act or action (including failure to act)
in connection with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the instructions of
Pledgees holding a majority in principal amount of Debentures (based on
then-outstanding principal amounts of Debentures at the time of any such
determination); if such instructions are not provided despite the Agent's
request therefor, the Agent shall be entitled to refrain from such act or taking
such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Pledgees in respect of actions to be taken by the
Agent; and the Agent shall not incur liability to any person or entity by reason
of so refraining. Without limiting the foregoing, (a) no Pledgee shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the terms of the Agreement
or any other Transaction Document, and the Pledgor shall have no right to
question or challenge the authority of, or the instructions given to, the Agent
pursuant to the foregoing and (b) the Agent shall not be required to take any
action which the Agent believes (i) could reasonably be expected to expose it to
personal liability or (ii) is contrary to this Agreement, the Transaction
Documents or applicable law.
5. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it. Anything to the contrary notwithstanding, the
Agent shall have no obligation whatsoever to any Pledgee to assure that the
Pledged Collateral exists or is owned by the Pledgor or is cared for, protected
or insured or that the liens granted pursuant to the Agreement have been
properly or sufficiently or lawfully created, perfected, or enforced or are
entitled to any particular priority.
6. Indemnification. To the extent that the Agent is not reimbursed
and indemnified by the Pledgor, the Pledgees will jointly and severally
reimburse and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Pledgee to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.
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7. Resignation by the Agent.
(a) The Agent may resign from the performance of all its functions
and duties under the Agreement and the other Transaction Documents at any
time by giving 30 days' prior written notice (as provided in the
Agreement) to the Pledgor and the Pledgees. Such resignation shall take
effect upon the appointment of a successor Agent pursuant to clauses (b)
and (c) below.
(b) Upon any such notice of resignation, the Pledgees, acting by a
Majority in Interest, shall appoint a successor Agent hereunder.
(c) If a successor Agent shall not have been so appointed within
said 30-day period, the Agent shall then appoint a successor Agent who
shall serve as Agent until such time, if any, as the Pledgees appoint a
successor Agent as provided above. If a successor Agent has not been
appointed within such 30-day period, the Agent may petition any court of
competent jurisdiction or may interplead the Pledgor and the Pledgees in a
proceeding for the appointment of a successor Agent, and all fees,
including, but not limited to, extraordinary fees associated with the
filing of interpleader and expenses associated therewith, shall be payable
by the Pledgor on demand.
8. Rights with respect to Pledged Collateral. Each Pledgee agrees
with all other Pledgees and the Agent (i) that it shall not, and shall not
attempt to, exercise any rights with respect to its security interest in the
Pledged Collateral, whether pursuant to any other agreement or otherwise (other
than pursuant to this Agreement), or take or institute any action against the
Agent or any of the other Pledgees in respect of the Pledged Collateral or its
rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Pledgee has no other rights with respect to the
Pledged Collateral other than as set forth in this Agreement and the other
Transaction Documents. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
and the retiring Agent shall be discharged from its duties and obligations under
the Agreement. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex A shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.
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