Exhibit 10.5

 

PLEDGE AGREEMENT

 

This PLEDGE AGREEMENT (the “Agreement”) is made effective as of November 22,
2005, by and among STEN Acquisition Corporation, a Minnesota corporation (the
“Lender”), and Site Equities International, Inc., a Nevada corporation (the
“Borrower”).

 

BACKGROUND

 

A.                                   Concurrently with the execution of this
Agreement, the Borrower and the Lender are entering into a loan and merger
option agreement (the “Loan Agreement”) dated as of the same date hereof, under
which Lender has agreed to advance to Borrower certain funds pursuant to the
terms of the Loan Agreement and evidenced by a certain promissory note of
Borrower dated as of the same date as the Loan Agreement (the “Initial Note”),
and a certain Replacement Note (as defined in the Loan Agreement) (the Initial
Note and the Replacement Note are referred to herein as the “Notes”).

 

B.                                     The Borrower is the sole member of
Paycenters, LLC, a Nevada limited liability company (the “Issuer”).

 

C.                                     As a material inducement to enter into
the Loan Agreement, the Lender desires the Borrower to pledge to Lender, and the
Borrower agrees to grant to Lender, a security interest in 100% of the
membership interests of Issuer (the “Membership Interests”) as collateral to
secure the obligations of Borrower under the Loan Agreement and the Notes.

 

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the Lender and Borrower hereby agree as follows:

 

1.                                       Definitions.  All capitalized terms
which are not defined herein shall have the respective meanings provided for in
the Loan Agreement.  All terms not defined herein or in the Loan Agreement shall
have the meaning set forth in Article 9 of the Uniform Commercial Code in effect
in the State of Minnesota.  The term “Obligations”, as used herein, means all of
the indebtedness, obligations and liabilities of Borrower to Lender, due or to
become due, now existing or hereafter arising under or in respect of the Notes
and Loan Agreement.  The term “Event of Default” as used herein, means an event
of default as either described or listed in the Notes or the Loan Agreement.

 

2.                                       Pledge.  The Borrower hereby pledges to
the Lender and grants to the Lender a security interest in the Membership
Interests, including all present and future rights of Borrower to receive
distributions, cash, instruments, all proceeds and other property (cash or
non-cash) from time to time received, receivable or otherwise distributed in
respect of or in exchange for the Membership Interests, and all other rights of
Borrower as a member under the organizational documents of Issuer.

 

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3.                                       Security for Obligations.  This
Agreement secures payment of the principal, interest and other Obligations
required of Borrower under the Loan Agreement and the Notes.

 

4.                                       Representation on Issuer’s Books.  For
the better perfection of the Lender’s rights in and to the Membership Interests,
the Borrower shall obtain from the Issuer a notation on the books of the Issuer
acknowledging the pledge of the Membership Interests.

 

5.                                       Representations and Warranties.  The
Borrower represents and warrants as follows:

 

(a)                                  Borrower is a corporation, duly organized
and in good standing under the laws of the State of Nevada and has full power
and authority to execute this Agreement, to perform its obligations hereunder
and to grant the security interest provided hereunder.

 

(b)                                 The Borrower is the legal and beneficial
owner of the Membership Interests free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement.

 

(c)                                  The pledge of the Membership Interests
pursuant to this Agreement creates a valid and perfected first priority security
interest in the Membership Interests, securing the payment of the Obligations.

 

(d)                                 The pledged Membership Interests constitute
one hundred percent (100%) of the issued and outstanding Membership Interests of
Issuer as of the date of this Agreement.

 

(e)                                  The execution, delivery and performance of
this Agreement and the delivery and the granting of a valid and enforceable
security interest in the Membership Interests does not and will not violate any
provision of law or any order, rule, or regulation of any court or other
governmental agency or authority or regulatory body, any provision of any
articles or certificate of organization, member control agreement, operating
agreement or other governing document of Borrower, and will not violate or
constitute a breach or default under any other agreement, contract, mortgage or
instrument to which Borrower is a party or to which its properties are bound.

 

6.                                       Covenants.

 

(a)                                  Borrower agrees that it shall not during
the term of this Agreement cause or permit the Issuer to issue any Membership
Interests that may have the direct or indirect effect of diluting the financial
or governance rights of the Membership Interests.

 

(b)                             The Issuer agrees that it shall not cause or
permit to be issued during the term of this Agreement any membership interests
or other rights that may have the direct or indirect effect of diluting the
financial or governance rights of the Membership Interests.

 

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(c)                              Borrower expressly waives demand, presentment,
protest or notice of dishonor of the Notes.

 

7.                                       Further Assurances.  The Borrower
agrees that at any time and from time to time, the Borrower will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Lender may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Lender to exercise and enforce its rights and
remedies hereunder with respect to any Membership Interests.

 

8.                                       Voting Rights; Dividends.   So long as
no Event of Default or event which, with the giving of notice or the lapse of
time, or both, would become an Event of Default shall have occurred and be
continuing:

 

(a)                                  The Borrower shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Membership
Interests or any part thereof for any purpose not inconsistent with the terms of
this Agreement;

 

(b)                                 The Borrower shall be entitled to receive
and retain any and all distributions and interest paid in respect of the
Membership Interests.

 

9.                                       Further Covenants.  The Borrower agrees
that it: (a) will not, without the consent of Lender, create or permit to exist
any lien or security interest, or other charge or encumbrance upon or with
respect to any of the Membership Interests, except for the security interest
under this Agreement, (b) will not exercise its voting and other consensual
rights pertaining to the Membership Interests or any part thereof for any
purpose inconsistent with the terms of this Agreement,

 

10.                                 Remedies upon Default.  If any Event of
Default shall have occurred and be continuing for a period of five (5) business
days following delivery of written notice thereof by Lender to Borrower, the
Lender may: (a) cause the Issuer to cancel the Membership Interests and reissue
such cancelled Membership Interests in the name of the Lender, (b) sell all or
part of the Membership Interests in accordance with Section 11 below, or
(c) exercise such other rights and remedies of a secured party under the Uniform
Commercial Code (the “Code”) in effect in the State of Minnesota at that time.

 

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11.                                 Sale of Membership Interests.  A sale of
Membership Interests, as provided in Section 10(b), may be made by Lender at a
public or private sale, following the notice hereinafter provided, for cash,
upon credit or for future delivery at such price or prices as the Lender deems
satisfactory.  Lender or any parties related to or affiliated with it, may
purchase any or all of the Membership Interests sold at a public sale.  Lender
is authorized at any sale, if Lender deems it advisable to do so, to restrict
the prospective bidders or purchasers to persons who will represent and agree
that they are purchasing for their own account for investment, and not with a
view to the distribution or sale of any of the Membership Interests.  Upon any
such sale, Lender shall have the right to deliver, assign and transfer to the
purchaser thereof the Membership Interests so sold.  Each purchaser at any such
sale shall hold the property sold absolutely, free from any claim or right of
whatsoever kind, including any equity or right of redemption of Borrower which
it has or may have under any rule of law or statute now existing or hereafter
adopted; and as to such purchaser, Borrower hereby specifically waives all such
rights of redemption, of stay or of appraisal, which might in any way affect
such purchaser.  Lender shall give Borrowers ten (10) days written notice of
intention to make such public or private sale, which notice shall state the time
and place fixed for such sale and whether the sale is to be public or private. 
The Lender shall not be obligated to complete any sale for which he sends out
notice and may, without notice or publication, adjourn any sale or cause the
same to be adjourned by announcement at the time and place fixed for such sale,
and such sale may thereafter be made at the time and place to which the same has
been so adjourned.  The Lender instead of exercising the power of sale herein
conferred upon them, may proceed by a suit or suits at law of in equity to
foreclose the pledge and sell the Membership Interests, or any portion thereof,
under a judgment or decree of a court or courts of competent jurisdiction.

 

12.                                 Facilitation of Rights under this Agreement.
Upon the occurrence and continuance of any Event of Default, Lender or its
nominee or nominees shall be deemed to be granted a proxy from Borrower to
exercise the sole and exclusive right to exercise all powers of voting and/or
consent pertaining to the Membership Interests, for the purpose of taking any
and all action which the Lender may deem necessary or advisable to protect its
security interest in the Membership Interests and to assure repayment of the
Notes, which grant is deemed to be coupled with an interest and shall be
irrevocable; provided that in no event shall the Lender be deemed under any
obligation to exercise any such right or privilege.  In addition, Borrower
hereby designates Lender, or any agent designated by Lender, as attorney-in-fact
of Borrower, to (a) endorse in favor of the Lender any of the Membership
Interests; (b) cause the transfer of any of the Membership Interests in such
name as Lender may from time to time determine; (c) cause the issuance of
certificates for book entry and/or uncertificated securities; (d) make, demand
and initiate actions to enforce any of the Membership Interests or rights
therein; (e) take such action with respect to the Membership Interests as Lender
may reasonably determined to be necessary to protect and preserve its interest
therein.  It is understood and agreed that, upon an Event of Default, Lender
shall have and may exercise at any time all rights, remedies, powers and
privileges of the Borrowers with respect to and under the Membership Interests.

 

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13.                                 Additional Collateral/Notes. The Lender may
from time to time, without notice to Borrower and without impairing or affecting
the security interest created hereby:  (i) acquire a security interest in any
property owned by a third party in addition to the Membership Interests, or
release any such interest so acquired, or permit any substitution or exchange
for such property or any part thereof; (ii) modify, extend or renew for any
period one or more of the Notes; and (iii) upon the occurrence of an Event of
Default resort to the Membership Interests for payment of the Notes whether or
not the Lender shall have resorted to any other collateral or proceeded against
any other party primarily or secondarily liable under the Notes.

 

14.                                 Deficiency.  If the proceeds of the sale,
collection or other realization of or upon the Collateral are insufficient to
cover the costs and expenses of such realization and the payment in full of the
Notes, the Borrower shall remain liable for any deficiency.

 

15.                                 Amendments.  No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

16.                                 Notices.  All notices and other
communications hereunder shall be in writing and shall be deemed duly given upon
delivery either by commercial delivery service, or sent via facsimile (receipt
confirmed), to the parties at the following address or facsimile numbers (or at
such other address or facsimile numbers for a party as shall be specified by
like notice):

 

If to the Lender:

 

STEN Acquisition Corporation

10275 Minnetonka Boulevard, Suite 310

Wayzata, MN 55305

Attention:  Kenneth W. Brimmer, Chief Executive Officer

Facsimile: 952-545-2795

 

with a copy to:

 

Lindquist & Vennum P.L.L.P.

4200 IDS Center

80 South Eighth Street

Minneapolis, Minnesota 55402

Attention: Girard P. Miller

Facsimile: 612-371-3207

 

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If to Borrower:

 

Site Equities International Inc

8370 W. Cheyenne Ave.

Suite 109-300

Las Vegas, NV 89129

Attn Ken Antos

Facsimile: 702-248-4193

 

Any party hereto may by notice so given provide and change its address for
future notices hereunder.  Notice shall conclusively be deemed to have been
given when personally delivered or when deposited in the mail in the manner set
forth above.

 

17.           Continuing Security Interest.  This Agreement shall create a
continuing security interest in the pledged Membership Interests and shall
(i) remain in full force and effect until satisfaction in full of the
Obligations, (ii) be binding upon the Borrower, its successors and assigns, and
(iii) inure, together with the rights and remedies of the Lender hereunder, to
the benefit of the Lender, its successors and assigns.  Borrower shall be
entitled to the return, upon its request and at its expense, of any Membership
Interests transferred to Lender pursuant to the terms of this Agreement upon:
(i) the Borrower’s cure of an Event of Default within any stated cure period,
and if no cure period is stated within thirty (30) days from written notice of
the Event of Default, or (ii) upon full satisfaction of the Obligations within
the period described in the Loan Agreement or Notes.

 

18.                                 Governing Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Minnesota except as required by mandatory provisions of law and except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder, in respect of any particular Membership Interests are
governed by the laws of a jurisdiction other than the State of Minnesota.

 

19.                                 Submission to Jurisdiction; Consent to
Service; Waiver of Jury Trial.  Each of the parties acknowledges and agrees that
Section 8.06, 8.07 and 8.09 of the Loan Agreement is binding upon the parties
with respect any dispute under this Agreement and the same is incorporated by
reference herein as if fully set forth.

 

The Remainder of this Page is Intentionally Blank

 

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IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly executed
and delivered as of the above referenced effective date.

 

 

 

Borrower:

 

 

 

SITE EQUITIES INTERNATIONAL, INC.

 

 

 

By:

  /s/ Kenneth Antos

 

 

Its:

President

 

 

 

Lender:

 

 

 

STEN ACQUISITION CORPORATION

 

 

 

By:

  /s/ Kenneth W. Brimmer

 

 

Its:

Chief Executive Officer

 

The undersigned Issuer hereby agrees to comply with its Obligations under
Section 6(b) of this Agreement and agrees to cancel the number of Membership
Interests instructed by Lender and to reissue such Membership Interests in the
name of Lender upon written notice by Lender and evidence of an Event of
Default.

 

 

 

ISSUER:

 

 

 

PAYCENTERS, LLC

 

 

 

By:

  /s/ Kenneth Antos

 

 

Its:

Manager

 

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