Exhibit 10.2

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of May 29, 2015,
is made by and among FONU2 Inc., a Nevada corporation (the “Company”) and each
holder of Company’s common stock signatory hereto (the “Pledgor” and,
collectively, the “Pledgors”) in favor of SBI Investments LLC, 2014-1 (the
“Agent”) and the holders of the Company’s 5% convertible promissory note due,
unless demanded earlier pursuant to the terms therein, on May 29, 2016
(collectively, the “Pledgee”).

 

W I T N E S S E T H:

 

WHEREAS, the Pledgee has agreed to lend to the Company, and the Company has
agreed to borrow from the Pledgee $250,000 pursuant to the terms and conditions
set forth in the 5% convertible promissory note of the Company (the “Note”);

 

WHEREAS, pursuant to the provisions of the Note, and as a condition to the
obligation of the Pledgee to lend thereunder, the Pledgor(s), as principals,
employees and shareholders of the Company, have agreed to make the pledge
contemplated by this Agreement in order to induce the Pledgee to perform its
obligations under the Note;

 

WHEREAS, the Pledgor(s) own the shares of common stock, $0.001 par value per
share, of the Company (the “Common Stock”) as set forth opposite the Pledgors’
respective 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 Pledgee,
and grants to the Pledgee 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 Note, the
following (collectively, the “Pledged Collateral”):

 

(a)          the shares of Common Stock owned by such Pledgor and set forth on
Schedule A attached hereto (the “Pledged Shares”), 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 Pledgee now existing or
hereafter arising under or in connection with this Agreement or the Note
(collectively, the “Transaction Documents”).

 

 

 

 

SECTION 3.          Delivery of Pledged Collateral. Upon 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, are being deposited with and delivered to the Agent, as
collateral agent for the Pledgee. The Agent shall have the right, at any time
after the occurrence of an Event of Default (as hereinafter defined) (unless
such Event of Default is waived in writing by the Pledgee), without notice to
the Pledgor, to transfer to or to register in the name of the Pledgee 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 (unless such
Event of Default is waived in writing by the Pledgee), to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.

 

SECTION 4.          Representations and Warranties. Each Pledgor, severally and
not jointly with the other Pledgors, represents and warrants as follows:

 

(a)          Except as set forth on Schedule 4(a) hereto, 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)          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, 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)          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 Pledgee.

 

(f)          Such Pledgor will not transfer, pledge, hypothecate, sell or
otherwise dispose of any of the Pledged Collateral without the prior written
consent of the Pledgee.

 

(g)          Such Pledgor shall promptly execute and deliver to the Pledgee such
further assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Pledgee 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.

 

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(h)          All information heretofore, herein or hereafter supplied to the
Pledgee 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, severally and not jointly
with the other Pledgors, 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 Pledgee 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 Pledgee 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 Pledgee may reasonably request.

 

SECTION 6.          Voting Rights; Dividends; Etc.

 

(a)          So long as no Event of Default shall have occurred (unless such
Event of Default is waived in writing by the Pledgee):

 

(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, in the reasonable judgment of such
Pledgee, such action would have a material adverse effect on the Security
Interest or the rights and remedies of the Pledgee hereunder; provided, further,
that such Pledgor shall give the Pledgee at least ten (10) days' prior written
notice of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any such right.

 

(ii)          Each Pledgor shall be entitled to receive and retain any and all
cash dividends and interest paid in respect of such Pledgor’s Pledged
Collateral.

 

(b)          Upon and after the occurrence of any Event of Default (unless such
Event of Default is waived in writing by the Pledgee):

 

(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) and to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain pursuant
to Section 6(a)(ii) 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 and to receive
and hold as Pledged Collateral such dividends and interest payments.

 

(ii)          All dividends and interest payments which are received by the
Pledgors contrary to the provisions of paragraph (i) of this Section 6(b) shall
be received in trust for the benefit of the Pledgee, shall be segregated from
other funds of the applicable Pledgor and shall be forthwith paid over to the
Agent as Pledged Collateral in the same form as so received (with any necessary
endorsement).

 

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SECTION 7.          Transfers and Other Liens; Additional Shares. During the
term of this Agreement, 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.

 

SECTION 8.          Agent Appointed Attorney-in-Fact.

 

(a)          Effective only upon an Event of Default (unless such Event of
Default is waived in writing by the Pledgee), 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.

 

(b)          Each Pledgor, severally and not jointly, 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 Pledgee or the
Pledgors, after the occurrence and during the continuance of an Event of
Default, (i) to 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 Pledgee; (ii) to sign and endorse any financing statement pursuant to the
UCC or any invoice, freight or express bill, bill 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 sue for
monies due in respect of the Pledged Collateral; (v) generally to do, at the
option of the Pledgee, and at the expense of the Pledgors, severally and
jointly, at any time, or from time to time, all acts and things which the
Pledgee deem 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 such Pledgor, to appoint a
receiver or equivalent person to marshall such Pledgor’s assets, and such
Pledgor hereby ratifies all that said attorney-in-fact 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 and thereafter
as long as any of the Obligations shall be outstanding.

 

(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 file 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 Pledgee may itself perform, or
cause performance of, such agreement, and the expenses of the Agent and/or
Pledgee incurred in connection therewith shall be payable by such Pledgor under
Section 14 hereof.

 

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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.

 

SECTION 11.          Event of Default. The occurrence of 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 ten 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 any 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 Pledgee; or

 

(d)          If any event of default (and expiration of any cure period) shall
occur (unless such event of default is waived in writing by the Pledgee) under
any of the other 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 Note, and that any event of
default (following expiration of any applicable cure period) under the Note
shall constitute a default under this Agreement.

 

SECTION 13.          Remedies upon Event of Default. Upon and after the
occurrence of any Event of Default:

 

(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 Shares), all the rights and
remedies of a secured party on default under the UCC, and may also, without
notice except as specified below and subject to the applicable securities laws,
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 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 Pledgee, who may hold all of such
Pledged Collateral as payment in full of the Obligations.

 

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(b)          Any cash held by the Agent or the Pledgee as Pledged Collateral and
all cash proceeds received by the Agent or 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 Agent or the Pledgee, 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 Pledgee 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 Pledgee 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 Pledgee 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 Pledgee 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 indefeasible payment in full of the
Obligations. Upon the indefeasible payment in full of the Obligations, 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 such 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 such Pledgors such documents as such
Pledgors shall reasonably request to evidence such termination.

 

SECTION 16.          Governing Law; Terms. For the convenience of the Agent,
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.

 

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.

 

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SECTION 18.          Waivers.

 

(a)          Waivers. Each Pledgor waives any right to require the Pledgee 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 Pledgee, nor any failure to exercise nor any delay in exercising on the part
of the Agent or Pledgee, 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 Pledgee 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 Pledgee 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.

 

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 Note, the
provision giving Pledgee 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 Pledgee under the Note. 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 Pledgee, 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.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date first above written.

 

  PLEDGOR:           Jake Shapiro       THE COMPANY:       FONU2  INC.        
By:       Name:  Roger Miguel     Title:         AGENT:       SBI INVESTMENTS
LLC, 2014-1         By:       Name: Peter Wisniewski     Title: Manager, Sea
Otter Global Ventures, L.L.C.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

SIGNATURE PAGE FOR PLEDGEE FOLLOWS]

 

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[PLEDGEE SIGNATURE PAGES TO PLEDGE AND SECURITY AGREEMENT]

 

Name of Pledgee: SBI Investments LLC, 2014-1

 

Signature of Authorized Signatory of Pledgee: ____________________________

 

Name of Authorized Signatory: ________________________________

 

Title of Authorized Signatory: _______________________________

 

E-mail Address of Authorized Signatory: _______________________

 

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SCHEDULE A

 

Pledged Shares

 

Pledgor:   Number of Shares:   Certificate Number:           Jake Shapiro   [3x
face of  promissory note*]    

 

*These shares were received on ________as consideration for ________.

 

Pledgor is providing a certificate in the amount of $2,500,000. In the event of
a default, the certificate will be sent to the transfer agent, with $750,000 of
the Preferred shares being returned to escrow agent, and the balance returned to
Mr. Jake Shapiro

 

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SCHEDULE B

 

11

 

 

ANNEX A

 

to

 

PLEDGE AND SECURITY

 

AGREEMENT

 

THE AGENT

 

1. Appointment. The Pledgee (all capitalized terms used herein and not otherwise
defined shall have the respective meanings provided in the Pledge and Security
Agreement to which this Annex A is attached (the "Agreement")), by their
acceptance of the benefits of the Agreement, hereby designate SBI Investments
LLC, 2014-1 (“Agent”) as the Agent to act as specified herein and in the
Agreement. Each Secured Party shall be deemed irrevocably to authorize the Agent
to take such action on its behalf under the provisions of the Agreement and any
other Transaction Document 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 conduct 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 Debtor
or any Secured Party; 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 Secured Party, 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 Company and its subsidiaries in connection with
such Secured Party’s investment in the Debtors, 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 Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party 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 Debtors or
any Secured Party 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 Debtors or the value of any of the 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 Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Note 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 Collateral, on behalf of all of the Pledgee. To the
extent practical, the Agent shall request instructions from the Pledgee 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 Pledgee
holding a majority in principal amount of Note (based on then-outstanding
principal amounts of Note 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
Pledgee 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 Secured Party 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 Debtors 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.

 

6. Indemnification. To the extent that the Agent is not reimbursed and
indemnified by the Debtors, the Pledgee will jointly and severally reimburse and
indemnify the Agent, in proportion to their initially purchased respective
principal amounts of Note, 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 Secured Party 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 Debtors and the
Pledgee. 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 Pledgee, 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 Pledgee 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
Debtors and the Pledgee 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 Debtors on demand.

 

8. Rights with respect to Collateral. Each Secured Party agrees with all other
Pledgee and the Agent (i) that it shall not, and shall not attempt to, exercise
any rights with respect to its security interest in the 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 Pledgee in respect of the Collateral or its rights hereunder (other than
any such action arising from the breach of this Agreement) and (ii) that such
Secured Party has no other rights with respect to the Collateral other than as
set forth in this Agreement and the other Transaction Documents.

 

 

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