Document:

EXHIBIT 10.1

  
 EXHIBIT 10.1
  
  
 ORIGINAL ISSUE DISCOUNT 10% SECURED PROMISSORY NOTE
 

 

 Face Amount:   $275,000
 ____________, 2015
 Purchase Price: $250,000
 

 FOR VALUE RECEIVED, IFAN Financial, Inc., a Nevada corporation (the “Maker”), with its principal offices located at 5694 Mission Center Road, Suite 602-660, San Diego, CA, 92108-4312, promises to pay to the order of SBI Investments LLC, 2014-1, or its registered assigns (the “Payee”), upon the terms set forth below, the principal amount of Two Hundred Seventy Five Thousand Dollars ($275,000) (this “Note”).
 

 1.
 Payments.
 

 (a) 
 All amounts payable hereunder shall be paid in lawful money of the United States by certified check or wire transfer. Quarterly payments of principal and interest shall be made on this Note beginning on _____, 2015 and continuing on the last day of each quarter until paid in full.  The remaining unpaid principal, accrued interest and any other fees under this Note shall become all due and payable on _________, 2016 (the “Maturity Date”).  This Note shall bear interest at the rate of 10% per annum.  Interest shall be computed on the basis of a 360-day year of 12 thirty-day months, shall compound monthly and shall accrue commencing on the date of issuance.  
 

 (b)  
 All overdue unpaid principal to be paid hereunder shall entail a late fee at the rate of 22% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) which will accrue daily, from the date such principal is due hereunder through and including the date of payment.
 

 (c)
 Absent the occurrence of an Event of Default (unless such Event of Default is waived in writing by the Payee), the Maker may prepay this Note for 100% of the full principal amount of this Note at any time prior to the Maturity Date.
 

 2.
 Secured Obligation. As security for the payment in full of principal and performance under this Note and of all other liabilities and obligations of the Maker to the Payee in respect of this Note, ____ shares of the Maker’s common stock shall have been pledged to the Payee as security for this Note by the Pledgors (as defined below) pursuant to a Pledge and Security Agreement acceptable to the Payee by and among the pledgors referred to therein (the “Pledgors”) and the Company.
 

 3.
 Events of Default.
 

 (a) 
 “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
 

 (i) 
 any default in the payment of the principal of this Note, as and when the same shall become due and payable;
 

 (ii) 
 Maker or any of its subsidiaries shall fail to observe or perform any of their respective obligations owed to Payee under this Note or any other covenant, agreement, representation or warranty contained in, or otherwise commit any breach hereunder or in any other agreement executed in connection herewith and such failure or breach shall not have been remedied within ten calendar days after the date on which notice of such failure or breach shall have been delivered;
 

 

 
 
 (iii) 
 Maker or any of its subsidiaries shall commence, or there shall be commenced against Maker or any subsidiary, a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or Maker or any subsidiary commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Maker or any subsidiary, or there is commenced against Maker or any subsidiary any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 60 days; or Maker or any subsidiary is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Maker or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or Maker or any subsidiary makes a general assignment for the benefit of creditors; or Maker or any subsidiary shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or Maker or any subsidiary shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by Maker or any subsidiary for the purpose of effecting any of the foregoing;
 

 (iv) 
 Maker or any subsidiary shall default in any of its respective obligations under any other note or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of Maker or any subsidiary, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; or
 

 (v) 
 Maker shall (a) be a party to any Change of Control Transaction (as defined below), (b) agree to sell or dispose all or in excess of 33% of its assets in one or more transactions (whether or not such sale would constitute a Change of Control Transaction), (c) redeem or repurchase more than a de minimis number of shares of Common Stock or other equity securities of Maker or (d) except as set forth on Schedule 3(a)(v)(d) make any distribution or declare or pay any dividends (in cash or other property, other than common stock) on, or purchase, acquire, redeem, or retire any of Maker's capital stock, of any class, whether now or hereafter outstanding. “Change of Control Transaction” means the occurrence of any of: (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended) of effective control (whether through legal or beneficial ownership of capital stock of Maker, by contract or otherwise) of in excess of 49% of the voting securities of Maker, (ii) a replacement at one time or over time of more than one-half of the members of Maker's board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (iii) the merger of Maker with or into another entity that is not wholly-owned by Maker, consolidation or sale of 33% or more of the assets of Maker in one or a series of related transactions, or (iv) the execution by Maker of an agreement to which Maker is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii).
 

 (vi)
 Maker shall fail to file a registration statement on a Form S-1 registering an equity line of credit for the benefit of the Payee (“S-1”) within 60 days of from the date of this Note.
 

 

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 (vii)
 Maker shall fail to obtain the effectiveness of the S-1 within 180 days from the date of this Note.
 

 (b)   If any Event of Default occurs (unless such Event of Default is waived in writing by the Payee), 125% of the full principal amount of this Note shall become, at the Payee's election, immediately due and payable in cash. Commencing 5 days after the occurrence of any Event of Default that results in the acceleration of this Note, the interest rate on this Note shall accrue at the rate of 22% per annum, or such lower maximum amount of interest permitted to be charged under applicable law.  The Payee need not provide and Maker hereby waives any presentment, demand, protest or other notice of any kind, and the Payee may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Payee at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
 

 4. 
 Negative Covenants. 
 So long as 33% or more of the principal amount of this Note is outstanding, the Maker will not and will not permit any of its Subsidiaries to directly or indirectly, unless consented to in writing by the Payee:
 

 a) 
 other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; 
 
 b) 
 other than Permitted Liens, enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
 

 c) 
 amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Payee; 
 

 d)
 repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of securities;
 

 e) 
 pay cash dividends or distributions on any equity securities of the Maker; or 
  
 f)
 enter into any agreement with respect to any of the foregoing. 
 

 “Permitted Indebtedness” shall mean (a) the indebtedness of the Maker existing on the date of issuance of this Note, (b) lease obligations and purchase money indebtedness incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets and (c) indebtedness incurred by the Maker that does not mature or require payments of principal prior to the Maturity Date of this Note and is made expressly subordinate in right of payment to the indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Payee and approved by the Payee in writing.
 

 “Permitted Lien” shall mean the individual and collective reference to the following: (a) liens for taxes, assessments and other governmental charges or levies not yet due or liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Maker) have been established in accordance with generally accepted accounting procedures; (b) liens imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s and mechanics’ liens, statutory landlords’ liens, and other similar liens arising in the ordinary course of business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Maker and its consolidated subsidiaries or 
 

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 (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such lien; and (c) liens of the Maker existing on the date of issuance of this Note.
 

 6.
 No Waiver of Payee’s Rights.    All payments of principal and interest shall be made without setoff, deduction or counterclaim. No delay or failure on the part of the Payee in exercising any of its options, powers or rights, nor any partial or single exercise of its options, powers or rights shall constitute a waiver thereof or of any other option, power or right, and no waiver on the part of the Payee of any of its options, powers or rights shall constitute a waiver of any other option, power or right. Maker hereby waives presentment of payment, protest, and all notices or demands in connection with the delivery, acceptance, performance, default or endorsement of this Note. Acceptance by the Payee of less than the full amount due and payable hereunder shall in no way limit the right of the Payee to require full payment of all sums due and payable hereunder in accordance with the terms hereof.
 

 7. 
 Modifications.   No term or provision contained herein may be modified, amended or waived except by written agreement or consent signed by the party to be bound thereby.
 

 8. 
 Cumulative Rights and Remedies; Usury.   The rights and remedies of Payee expressed herein are cumulative and not exclusive of any rights and remedies otherwise available under this Note, the Pledge and Security Agreement, or applicable law (including at equity). The election of Payee to avail itself of any one or more remedies shall not be a bar to any other available remedies, which Maker agrees Payee may take from time to time. If it shall be found that any interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall be reduced to the maximum permitted rate of interest under such law.
 

 9. 
 Use of Proceeds.  Maker shall use the proceeds from this Note hereunder for working capital purposes and not for the satisfaction of any portion of Maker’s or any subsidiary’s debt (other than payment of trade payables in the ordinary course of Maker's business and prior practices), to redeem any of Maker’s or any subsidiary’s equity or equity-equivalent securities or to settle any outstanding litigation.
 

 10. 
 Collection Expenses.   If Payee shall commence an action or proceeding to enforce this Note, then Maker shall reimburse Payee for its costs of collection and reasonable attorneys fees incurred with the investigation, preparation and prosecution of such action or proceeding.
 

 11. 
 Severability.    If any provision of this Note is declared by a court of competent jurisdiction to be in any way invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.
 

 12. 
 Successors and Assigns.   This Note shall be binding upon Maker and its successors and shall inure to the benefit of the Payee and its successors and assigns. The term "Payee" as used herein, shall also include any endorsee, assignee or other holder of this Note.
 

 13. 
 Lost or Stolen Promissory Note.   If this Note is lost, stolen, mutilated or otherwise destroyed, Maker shall execute and deliver to the Payee a new promissory note containing the same terms, and in the same form, as this Note. In such event, Maker may require the Payee to deliver to Maker an affidavit of lost instrument and customary indemnity in respect thereof as a condition to the delivery of any such new promissory note.
 

 14. 
 Due Authorization.   This Note has been duly authorized, executed and delivered by Maker and is the legal obligation of Maker, enforceable against Maker in accordance with its terms except as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally.  No consent of any other party and no consent, license, approval or authorization of, or registration or 
 

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 declaration with, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance by the Maker, or the validity or enforceability of this Note other than such as have been met or obtained. The execution, delivery and performance of this Note and all other agreements and instruments executed and delivered or to be executed and delivered pursuant hereto or thereto or the securities issuable upon conversion of this Note will not  violate any provision of any existing law or regulation or any order or decree of any court, regulatory body or administrative agency or the certificate of incorporation or by-laws of the Maker or any mortgage, indenture, contract or other agreement to which the Maker is a party or by which the Maker or any property or assets of the Maker may be bound.
 

 15. 
 Governing Law.   All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each of Maker and Payee agree that all legal proceedings concerning the interpretations, enforcement and defense of this Note shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each of Maker and Payee hereby irrevocably submit to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder (including with respect to the enforcement of this Note), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each of Maker and Payee hereby irrevocably waive personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to the other at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each of Maker and Payee hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.
 

 16.
 Notice.
   Any and all notices or other communications or deliveries to be provided by the Payee hereunder, including, without limitation, any conversion notice, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to the Maker, or such other address or facsimile number as the Maker may specify for such purposes by notice to the Payee delivered in accordance with this paragraph.  Any and all notices or other communications or deliveries to be provided by the Maker hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to the Payee at the address of the Payee appearing on the books of the Maker, or if no such address appears, at the principal place of business of the Payee.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission if delivered by hand or by telecopy that has been confirmed as received by 5:00 p.m. on a business day, (ii) one business day after being sent by nationally recognized overnight courier or received by telecopy after 5:00 p.m. on any day, or (iii) five business days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested.
  
 17.
 Public Disclosure.  The Maker shall, on the business day following the date hereof, issue a Current Report on Form 8-K, reasonably acceptable to the Payee, disclosing the material terms of the transactions contemplated hereby, and shall attach this Note thereto and other agreements entered into in connection herewith.  The Maker shall consult with the Payee in issuing any other press releases with respect to the transactions contemplated hereby.
 

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      The undersigned signs this Note as a maker and not as a surety or guarantor or in any other capacity.
 

 

 IFAN FINANCIAL, INC.
 

 

 

 By:  _____________________
         Name:  J. Christopher Mizer
         Title:  President and CEO
 

 

 

 Agreed and Acknowledged:
 

 SBI INVESTMENTS, 2014-1
 

 

 By:  _____________________
         Name:
         Title:
 

 

 

 

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 Schedule 3(a)(v)(d)
 

 7EXHIBIT 10.2

  
 EXHIBIT 10.2
 PLEDGE AND SECURITY AGREEMENT 
 PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of May __, 2015, made by and among IFAN Financial, 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 each of the holders of the Company’s 10% Secured Notes due, unless demanded earlier pursuant to the terms therein, on ____, 2016 (collectively, the “Pledgees”).
 

 W  I  T  N  E  S  S  E  T  H: 
 WHEREAS, Pledgees have agreed, severally and not jointly, to lend to the Company, and the Company has agreed to borrow from the Pledgees, up to an aggregate of $550,000.00 pursuant to the terms and conditions set forth in the 10% Secured Notes of the Company (the “Notes”);
 WHEREAS, pursuant to the provisions of the Notes, and as a condition to the obligation of the Pledgees to lend thereunder, the Pledgors, as principals, employees and 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 Notes;
 WHEREAS, as a condition to the obligation of the Pledgees to lend pursuant to the Notes, the Company agrees to undertake such action contemplated by this Agreement in order to induce Pledgees to perform their obligations under the Notes;
 WHEREAS, Pledgors 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 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 Notes, 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 Pledgees now existing or hereafter arising under or in connection with this Agreement or the Notes (collectively, the “Transaction Documents”). 
 

 SECTION 3. 
 Delivery of Pledged Collateral.  Within two (2) weeks of 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 Pledgees.  For the avoidance of doubt, failure to deliver the certificates representing or evidencing the Pledged Shares within (2) weeks of the date hereof shall be considered an Event of Default pursuant to Section 11(a) hereof, and also a cross-default of the Notes pursuant to Section 12 hereof.  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 Pledgees), 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 (unless such Event of Default is waived in writing by the Pledgees), 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 Pledgees. 
 (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 Pledgees. 
 (g)
 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. 
 (h)
 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, 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 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 
 

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  documents, and take all further action, that may be necessary or desirable, or that the Pledgees 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 Pledgees): 
 (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 Pledgees, 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 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 Pledgees): 
 (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 Pledgees, 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). 
 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 Pledgees), 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 Pledgees or the Pledgors, after the occurrence and during the continuance of an Event of Default, (i) to endorse any 
 

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  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 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 Pledgees, and at the expense of the Pledgors, severally and jointly, at any time, or from time to time, all acts and things which the Pledgees 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 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 Pledgees 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 Pledgees 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 Pledgees 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 Pledgees; 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 Pledgees) under any of the other Transaction Documents. 
 

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 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 Notes, and that any event of default (following expiration of any applicable cure period) under the Notes 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 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 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 
 

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  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. 
 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. 
 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 Notes, 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 Notes.  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. 
  
 [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: 
 

 

 __________________________
 J. Christopher Mizer
 

 __________________________
 Steve Scholl
 

 

 

 THE COMPANY: 
 IFAN FINANCIAL, INC. 
 

 

 By: _________________________
 

 Name:  J. Christopher Mizer 
 Title:  President and CEO 
  
  
 AGENT: 
 SBI INVESTMENTS LLC, 2014-1 
  
 By:  __________________________
 Name: 
 Title: 
  
  
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 
 SIGNATURE PAGE FOR PLEDGEES FOLLOWS] 
 

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 [PLEDGEE SIGNATURE PAGES TO IFAN FINANCIAL, INC. 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: 
 J. Christopher Mizer 
 7,300,000 
 
  
78 
 Steve Scholl 
 
 3,700,000 
 
  
79 
 

 *These shares shall be received as the Pledged Collateral on [date two weeks from execution of agreement]. 

 

 

 9
 

 
  

 SCHEDULE B 
 

 10
 

 
  

 ANNEX A 
 to 
 PLEDGE AND SECURITY 
 AGREEMENT 
  
 THE AGENT 
 1.
 Appointment.  The Pledgees (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 Notes or any of the other Transaction Documents. 
 

 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 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 
 

 11
 

 
  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 Notes (based on then-outstanding principal amounts of Notes 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 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 Pledgees will jointly and severally reimburse and indemnify the Agent, in proportion to their initially purchased respective principal amounts of Notes, 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. 
 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 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 Debtors 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 Debtors on demand. 
 8.  Rights with respect to Collateral.  Each Secured Party 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 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 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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