Document:

Exhibit 10.4

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”),
is made effective as of this 22nd 
day of November, 2005, by and between Paycenters, LLC, a Nevada limited
liability company (the “Grantor”) and STEN Acquisition Corporation, a Minnesota
corporation (the “Secured Party”).

 

In order to secure (a) the payment of
amounts advanced by Secured Party to Site Equities International, Inc., a
Nevada corporation (“Site Equities”) and the sole member of Grantor pursuant to
that certain: (i) Loan and Merger Option Agreement (the “Loan Agreement”)
dated as of November 22, 2005, by and between Secured Party and Site
Equities, (ii) promissory note (the “Initial Note”) dated as of November 22,
2005 and payable to the order of the Secured Party; and (iii) Replacement
Note (as defined in the Loan Agreement), which funds are being provided for the
purpose of Grantor’s acquisition of certain Collateral (as hereinafter
defined), and (b) the payment of all obligations of Grantor to Secured
Party under that certain Guaranty of Grantor to Secured Party dated as of November 22,
2005; (all of such debts, liabilities and obligations, whether it now exists or
is hereafter created or incurred, whether is arises under or is evidenced by
this Agreement or any other present or future instrument or agreement or by
operation of law, and whether it is direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
sole, joint or joint and several are herein collectively referred to as the “Secured
Obligations”), the Grantor hereby agrees as follows:

 

1.                                       SECURITY INTEREST AND COLLATERAL.  In order to secure the payment and
performance of the Secured Obligations, the Grantor hereby grants to the
Secured Party a security interest (herein called the “Security Interest”) in
and to the following properties, rights and assets of the Grantor, wherever
located, and whether now owned or hereafter acquired (hereinafter collectively
referred to as the “Collateral”):

 

any and all furniture, fixtures, machinery,
equipment, goods, inventory, accounts and any other rights to the payment of
money (including, but not limited to, all health-care-insurance receivables),
deposit accounts, money, vehicles, prepaid insurance, letter-of-credit rights,
supplies, causes of action, patents and patent applications, patent rights,
inventions, designs, registered and unregistered copyrights and applications,
trademarks, goodwill, trade names, trade secrets, methods, know-how, processes,
specifications, Internet addresses and sites, universal locators, software,
license rights, royalty rights, franchise rights, chattel paper (including,
without limitation, electronic chattel paper and tangible chattel paper),
documents, instruments, investment property, payment intangibles, general
intangibles, rights or benefits arising under any contracts, tax refund claims,
choses in action and claims against third parties (including, without
limitation, the right to sue for past, present and future infringements), commercial
tort claims, security deposits, security interests, rights to reimbursement and
indemnification, and books, records and other information relating to the
Grantor or the Collateral (whether in tangible or intangible form).

 

together with all supporting obligations,
additions, substitutions and replacements for and products and proceeds of any
of the foregoing property and, in the case of all tangible Collateral,

 

 

together with (i) all accessories,
attachments, parts, equipment, accessions and repairs now or hereafter attached
or affixed to or used in connection with any such goods, and (ii) all
warehouse receipts, bills of lading and other documents now or hereafter
covering such goods.

 

This Agreement shall create a continuing
security interest in the Collateral and shall, except as otherwise set forth in
Section 6, remain in full force in effect until the satisfaction in full
of the Secured Obligations.  All terms
not otherwise described herein shall have the meaning assigned to them in the
Loan Agreement.

 

2.                                       REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  The Grantor hereby
represents and warrants to, and covenants and agrees with, the Secured Party as
follows:

 

(a)                                  The Collateral will be used primarily for business purposes.

 

(b)                                 The Grantor is a duly organized Nevada limited liability company in
good standing.  The Grantor shall not
change its state of organization, legal structure, type of organization, as the
case may be, without the Secured Party’s prior written consent, which consent
shall not be unreasonably withheld.  The
Grantor shall promptly notify the Secured Party of any consolidation, merger or
other analogous reorganization or transaction involving the Grantor.

 

(c)                                  If any part or all of the Collateral will become so related to
particular real estate as to become a fixture, the Grantor will promptly advise
the Secured Party as to real estate concerned and the record owner thereof and
execute and deliver any and all instruments necessary to perfect the Security
Interest therein and to assure that such Security Interest will be prior to the
interest therein of the owner of the real estate.

 

(d)                                 The Grantor’s exact legal name is that indicated on the first page of
this Agreement.  During the preceding one
(1) year, the Grantor has not changed its name or operated or conducted
business under any trade name or “d/b/a” which is different from its corporate
name.  The Grantor shall promptly notify
the Secured Party of any change in such name or if it operates or conducts
business under any trade name or “d/b/a” which is different from such name by
providing at least thirty (30) days’ advance written notice.

 

(e)                                  The Grantor has (or will have at the time the Grantor acquires
rights in Collateral hereafter acquired or arising) and will maintain absolute
title to each item of Collateral free and clear of all security interests,
liens and encumbrances, except the Security Interest, purchase-money security
interests and such other security interests as are permitted under the Loan
Agreement, the Initial Note or the Replacement Note (the Security Interest and
the security interests permitted under the Initial Note, Replacement Note and
the Loan Agreement are hereinafter collectively referred to as the “Permitted
Interests”), and will defend the Collateral against all claims or demands of
all persons other than the Secured Party and those holding purchase-money
security interests and Permitted Interests. 
The Grantor will not sell, lease or otherwise dispose of the Collateral
or any interest therein except that until an Event of Default (as defined in
the Loan Agreement) has occurred the Grantor may sell inventory in the ordinary
course of its business.

 

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(f)                                    The Grantor will not permit any Collateral to be located in any
state (and, if a county filing is required, in any county) in which a financing
statement covering such Collateral is required to be, but has not in fact been,
filed.

 

(g)                                 The Grantor authorizes the Secured Party to file all of the Secured
Party’s financing statements and amendments to financing statements,
continuation statements, and all terminations of the filings of other secured
parties, all with respect to the Collateral, in such form and substance as the
Secured Party, in its sole discretion, may determine.

 

(h)                                 All rights to payment and all instruments, documents, chattel paper
and other agreements constituting or evidencing Collateral are (or will be when
arising or issued) the valid, genuine and legally enforceable obligation, subject
to no defense, set-off or counterclaim (other than those arising in the
ordinary course of business) of each account debtor or other obligor named
therein or in the Grantor’s records pertaining thereto as being obligated to
pay such obligation.

 

(i)                                     The Grantor will (i) keep all Collateral in good repair,
working order and condition, normal depreciation excepted, and will, from time
to time, replace any worn, broken or defective parts thereof; (ii) other
than taxes and other governmental charges contested in good faith and by
appropriate proceedings, promptly pay all taxes and other governmental charges
levied or assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interest; (iii) keep
all Collateral free and clear of all security interests, liens and
encumbrances, except as may otherwise be set forth or contemplated under the
Initial Note, the Replacement Note, the Loan Agreement or in this Agreement; (iv) at
all reasonable times, permit the Secured Party or its representatives to
examine or inspect any Collateral, wherever located, and to examine, inspect
and copy the Grantor’s books and records pertaining to the Collateral and its
business and financial condition and to discuss with account debtors and other
obligors requests for verifications of amounts owed to the Grantor; (v) keep
accurate and complete records pertaining to the Collateral and pertaining to
the Grantor’s business and financial condition and will submit to the Secured
Party such periodic reports concerning the Collateral and the Grantor’s
business and financial condition as the Secured Party may from time to time
reasonably request; (vi) promptly notify the Secured Party of any loss or
material damage to any Collateral or of any material adverse change, known to
the Grantor, in the prospect of payment of any sums due on or under any
instrument, chattel paper or account constituting Collateral; (vii) if the
Secured Party at any time so reasonably requests promptly deliver to the
Secured Party any instrument, document or chattel paper constituting
Collateral, duly endorsed or assigned by the Grantor to the Secured Party; (viii) at
all times keep all Collateral insured against risks of fire (including so
called extended coverage), theft, collision (in case of collateral consisting
of motor vehicles) and such other risks as is appropriate for a business of
this type; (ix) from time to time promptly execute and deliver such
financing statements or other forms, including, without limitation, patent and
trademark recordation forms, as the Secured Party may reasonably deem required
to be filed in order to perfect or maintain the perfection of the Security
Interest and, if any Collateral is covered by a certificate of title, execute such
documents as may be required to have the Security Interest properly noted on a
certificate of title; (x) pay when due or reimburse the Secured Party on demand
for all costs of

 

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collection
of any of the Secured Obligations and all other out-of-pocket expenses
(including in each case all attorneys’ fees) incurred by the Secured Party in
connection with the enforcement of the Security Interest or the enforcement of
this Agreement or any or all of the Secured Obligations including expenses
incurred in any litigation or bankruptcy or insolvency proceedings; (xi)
promptly execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings which the Secured
Party may at any time reasonably request in order to secure, protect, perfect
or enforce the Security Interest and the Secured Party’s rights under this
Agreement, including, without limitation, an assignment of claim with respect
to any account which is a government receivable; (xii) not use or keep any
Collateral, or permit it to be used or kept, for any unlawful purpose or in
violation of any federal, state or local law, statute or ordinance; (xiii)
permit the Secured Party at any time and from time to time to send requests
(both before and after the occurrence of an Event of Default under the Loan
Agreement) to account debtors or other obligors for verification of amounts
owed to Grantor; (xiv) not permit any Collateral to become part of or to be affixed
to any real property, without first assuring to the reasonable satisfaction of
the Secured Party that the Security Interest will be prior and senior to any
interest or lien then held or thereafter acquired by any mortgagee of such real
property or the owner or purchaser of any interest therein; and (xv) not wind
up or dissolve itself (or suffer any liquidation or dissolution).  If the Grantor at any time fails to perform
or observe any agreement contained in this Section 2(i), and if such
failure shall continue for a period of ten (10) calendar days after the
Secured Party gives the Grantor written notice thereof (or, in the case of the
agreements contained in clauses (viii) and (ix) of this Section 2(i),
immediately upon the occurrence of such failure, without notice or lapse of
time) the Secured Party may (but need not) perform or observe such agreement on
behalf and in the name, place and stead of the Grantor (or, at the Secured
Party’s option, in the Secured Party’s own name) and may (but need not) take
any and all other actions which the Secured Party may reasonably deem necessary
to cure or correct such failure (including, without limitation, the payment of
taxes, the satisfaction of security interests, liens or encumbrances (other
than Permitted Interests), the performance of obligations under contracts or
agreements with account debtors or other obligors, the procurement and
maintenance of insurance, the execution of financing statements, the
endorsement of instruments, and the procurement of repairs, transportation or
insurance); and, except to the extent that the effect of such payment would be
to render any loan or forbearance of money usurious or otherwise illegal under
any applicable law, the Grantor shall thereupon pay the Secured Party on demand
the amount of all moneys reasonably expended and all costs and expenses
(including attorneys’ fees) incurred by the Secured Party in connection with or
as a result of the Secured Party’s performing or observing such agreements or
taking such actions, together with interest thereon from the date expended or
incurred by the Secured Party at the rate provided for in the Initial Note or
the Replacement Note, as applicable.

 

(j)                                     The Collateral is subject to a valid and perfected security
interest granted to the Secured Party pursuant to this Agreement.

 

3.                                       ASSIGNMENT OF INSURANCE.  The Grantor hereby assigns to the Secured
Party, as additional security for the payment of the Secured Obligations, any
and all moneys (including

 

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but
not limited to proceeds of insurance and refunds of unearned premiums) due or
to become due under, and all other rights of the Grantor under or with respect
to, any and all policies of insurance covering the Collateral, and the Grantor
hereby directs the issuer of any such policy to pay any such moneys to the
Secured Party.  Before and upon the
occurrence of an Event of Default under the Loan Agreement, and at any time
thereafter, the Secured Party may (but need not) in its own name or in the
Grantor’s name, execute and deliver proofs of claim, receive all such moneys
(subject to the Grantor’s rights), endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or
release any claim against the issuer of any such policy.

 

4.                                       COLLECTION OF ACCOUNTS.  The Secured Party may, or at the Secured
Party’s request, the Grantor shall, after the occurrence of an Event of Default
under the Loan Agreement, and at any time thereafter, notify any account debtor
or any obligor on an instrument to make payment directly to a post office box
specified by and under the sole control of the Secured Party, whether or not
the Secured Party was theretofore making collections with respect thereto, and
the Secured Party shall be entitled to take control of any proceeds
thereof.  If so requested by the Secured
Party, the Grantor shall insert appropriate language on each invoice directing
its customers to make payment to such post office box.  The Grantor hereby authorizes and directs the
Secured Party to deposit into a special collateral account to be established
and maintained with the Secured Party all checks, drafts and cash payments,
received in said lock box.  All deposits
in said collateral account shall constitute proceeds of Collateral and shall
not constitute payment of any of the Secured Obligations.  At its option, the Secured Party may, at any
time, apply finally collected funds on deposit in said collateral account to the
payment of the Secured Obligations in such order of application as the Secured
Party may determine, or permit the Grantor to withdraw all or any part of the
balance on deposit in said collateral account. 
If a collateral account is so established the Grantor agrees that it
will promptly deliver to the Secured Party for deposit into said collateral
account, all payments on accounts and chattel paper received by it.  All such payments shall be delivered to the
Secured Party in the form received (except for the Grantor’s endorsement where
necessary).  Until so deposited, all
payments on accounts and chattel paper received by the Grantor shall be held in
trust by the Grantor for and as the property of the Secured Party and shall not
be commingled with any funds or property of the Grantor.

 

5.                                       REMEDIES.  Upon the occurrence of an Event of Default
under the Loan Agreement, and at any time thereafter, the Secured Party may
exercise any one or more of the following rights or remedies if any or all of
the Secured Obligations are not paid when due: (i) exercise and enforce
any or all rights and remedies available after default to a secured party under
the Uniform Commercial Code, including but not limited to the right to take
possession of any Collateral, proceeding without judicial process or by judicial
process (without a prior hearing or notice thereof, which the Grantor hereby
expressly waives), and the right to sell, lease or otherwise dispose of or use
any or all of the Collateral; (ii) the Secured Party may require the
Grantor to assemble the Collateral and make it available to the Secured Party
at a place to be designated by the Secured Party which is reasonably convenient
to both parties; (iii) exercise its rights under any lessors’ agreements
regardless of whether or not the Grantor is in default under such leases; and (iv) exercise
or enforce any or all other rights or remedies available to the Secured Party
by law or agreement against the Collateral, against the Grantor or against any
other person or property.  The Secured
Party is hereby granted a non-exclusive, worldwide and royalty-free license to
use or otherwise exploit all trademarks, franchises, copyrights and patents of
the

 

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Grantor
that the Secured Party deems necessary or appropriate to the disposition of any
Collateral.  If notice to the Grantor of
any intended disposition of Collateral or any other intended action is required
by law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 11 below) at least
ten (10) calendar days prior to the date of intended disposition or other
action.

 

6.                                       AMENDMENTS, MODIFICATIONS, INTERCREDITOR AGREEMENTS, ETC.  This Agreement and the
rights of the Secured Party hereunder can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released or
subordinated, only explicitly in a writing signed by the Secured Party.  A waiver signed by the Secured Party shall be
effective only in the specific instance and for the purpose given.  Mere delay or failure to act shall not
preclude the exercise or enforcement of any of the Secured Party’s rights or
remedies.

 

7.                                       POWER OF ATTORNEY.  Grantor hereby irrevocably authorizes and
empowers the Secured Party immediately upon the occurrence of an Event of
Default under the Loan Agreement, and at any time thereafter, to make,
constitute and appoint any officer or agent of the Secured Party, as the
Secured Party may select in its exclusive discretion, as the Grantor’s true and
lawful attorneys-in-fact, with the full irrevocable power and authority in the
place and stead of the Grantor or in the Secured Party’s own name to take any
and all necessary or desirable action for the purpose of carrying out this
Agreement including, without limitation on the generality of the foregoing, the
full and irrevocable power and authority (but not the duty), without notice to
or assent of the Grantor, (i) to endorse the Grantor’s name on, file with
any appropriate federal or local agency or authority, and prosecute all
applications, registrations, transfer applications, trademarks, patents,
copyrights, patentable inventions and processes, recordations, documents,
papers and instruments necessary for the Secured Party to use and collect on
any of the Collateral, (ii) to grant or issue any exclusive or
nonexclusive license under the Collateral to any third person, (iii) to
take such other action necessary or desirable for the Secured Party to
absolutely assign, pledge, perfect, convey or otherwise transfer title in or
dispose of the Collateral to any third person or otherwise, (iv) to
perform the agreements and obligations of the Grantor under Section 2 of
this Agreement; and (v) to bring suit in its own name or in the name of
the Grantor to enforce or protect any rights of the Grantor or the Secured
Party in the Collateral.  The Grantor
hereby ratifies all that such attorneys shall lawfully do or cause to be done
by virtue hereof.  This power of attorney
shall be irrevocable for the life of this Agreement and shall be coupled with
an interest.

 

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8.                                       MARSHALLING.  The Secured Party will not be required to
marshal any present or future collateral security (including but not limited to
the Collateral) for, or other assurances of payment of, the Secured Obligations
or any of them or to resort to such collateral security or other guaranty or
assurances of payment in any particular order, and all of its rights hereunder
and in respect of such collateral security and other assurances of payment will
be cumulative and in addition to all other rights, however existing or
arising.  The Grantor agrees that it will
not invoke any law relating to the marshalling of collateral which might cause
delay in or impede the enforcement of the Secured Party’s rights under this
Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is
outstanding or by which any of the Secured Obligations is secured or payment
thereof is otherwise assured, and, to the extent that it lawfully may, the
Grantor irrevocably waives the benefits of all such laws.

 

9.  WAIVER
OF JURY TRIAL.  EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS
OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

 

10.                                 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE. The Loan Documents shall be governed by and construed in
accordance with the internal laws of the State of Minnesota without giving
effect to its choice of law provisions. 
Any judicial proceeding against or on behalf of Grantor with respect to
any Loan Document or any related agreement shall be brought in solely any federal or state court
of competent jurisdiction located in Hennepin County in the State of
Minnesota.  By execution and delivery of
each Loan Document to which it is a party, Grantor (i) accepts the
exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby, (ii) waives personal service of
process, (iii) agrees that service of process upon it may be made by
certified or registered mail, return receipt requested, and (iv) waives
any objection to jurisdiction and venue of any action instituted hereunder and
agrees not to assert any defense based on lack of jurisdiction, venue,
convenience or forum non conveniens. 
Nothing shall affect the right of the Lender to serve process in any
manner permitted by law or shall limit the right of the Secured Party to bring
proceedings against Grantor in the courts of any other jurisdiction having
jurisdiction.  Any judicial proceedings
against the Secured Party involving, directly or indirectly, any Loan
Document or any related agreement shall be brought solely in a federal or state
court located in Hennepin County in the State of Minnesota.  All parties acknowledge that they
participated in the negotiation and drafting of this Agreement with the assistance
of counsel and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party
than against any other.

 

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11.                                 MISCELLANEOUS.  This Agreement does not contemplate a sale of
accounts or chattel paper, and, as provided by law, the Grantor is entitled to
any surplus and shall remain liable for any deficiency.  All rights and remedies of the Secured Party
shall be cumulative and may be exercised singularly or concurrently, at the
Secured Party’s option, and the exercise or enforcement of any one such right
or remedy shall neither be a condition to nor bar the exercise or enforcement
of any other.  The Secured Party’s duty
of care with respect to Collateral in its possession (as imposed by law) shall
be deemed fulfilled if the Secured Party exercises reasonable care in
physically safe keeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and the Secured
Party need not otherwise preserve, protect, insure or care for any
Collateral.  The Secured Party shall not
be obligated to preserve any rights the Grantor may have against any other
party, to realize on the Collateral at all or in any particular manner or
order, or to apply any cash proceeds of Collateral in any particular order of
application.  This Agreement shall be
binding upon and inure to the benefit of the Grantor and the Secured Party and
their respective heirs, representatives, successors and assigns and shall take
effect when signed by the Grantor and delivered to the Secured Party, and the
Grantor waives notice of the Secured Party’s acceptance hereof.  The Secured Party may execute this Agreement
if appropriate for the purpose of filing, but the failure of the Secured Party
to execute this Agreement shall not affect or impair the validity or
effectiveness of this Agreement.  Except
to the extent otherwise required by law, this Agreement shall be governed by
the internal laws of the State of Minnesota (without regard to its conflicts of
laws principles) and, unless the context otherwise requires, all terms used
herein which are defined in Articles 1 and 9 of the Uniform Commercial Code, as
in effect in said state, shall have the meanings therein stated and all
capitalized terms used herein which are defined in the Loan Agreement shall
have the meanings therein stated.  If any
provision or application of this Agreement is held unlawful or unenforceable in
any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect, and this Agreement shall
be construed as if the unlawful or unenforceable provision or application had
never been contained herein or prescribed hereby.  This Agreement may be executed by facsimile
and in one or more counterparts and will be effective when one or more
counterparts have been signed by each party. 
All representations and warranties contained in this Agreement shall
survive the execution, delivery and performance of this Agreement and the
creation and payment of the Secured Obligations.

 

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12.                                 NOTICES.  All notices, consents, requests,
instructions, approvals and other communications required by this Agreement
will be validly given, made or served if in writing and delivered personally,
sent by certified mail (postage prepaid), facsimile transmission, or by a nationally
recognized overnight delivery service, addressed as follows (or such other
address as is furnished in writing by a party to the other parties):

 

(a)                                  If to the Secured Party:

 

STEN
Corporation

Attention:
Kenneth W. Brimmer

10275 Wayzata
Blvd., Suite 310

Minnetonka,
Minnesota 55305

Facsimile:  (612) 371-3207

 

with a copy
to:

 

Girard P.
Miller

Lindquist &
Vennum PLLP

4200 IDS
Center

80 South
Eighth Street

Minneapolis,
MN 55402

Facsimile:  (612) 371-3207

 

(b)                                 If to the Grantor:

 

Paycenters,
LLC

8307 W. Cheyenne Ave. #109-300

Las Vegas, NV 83129

Attention: Ken Antos

 

 

[signature page to follow]

 

9

 

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

 

	
   

  	
  GRANTOR:

  
	
   

  	
   

  
	
   

  	
  PAYCENTERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Kenneth Antos

  	
   

  
	
   

  	
   

  	
  Its: Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SECURED
  PARTY:

  
	
   

  	
   

  
	
   

  	
  STEN AQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth W. Brimmer

  	
   

  
	
   

  	
   

  	
  Its: Chief Executive Officer

  

 

10Exhibit 10.5

 

PLEDGE AGREEMENT

 

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

 

BACKGROUND

 

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

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.                                       Covenants.

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

If to the Lender:

 

STEN Acquisition Corporation

10275 Minnetonka Boulevard, Suite 310

Wayzata, MN 55305

Attention: 
Kenneth W. Brimmer, Chief Executive Officer

Facsimile: 952-545-2795

 

with a copy to:

 

Lindquist & Vennum P.L.L.P.

4200 IDS Center

80 South Eighth Street

Minneapolis, Minnesota 55402

Attention: Girard P. Miller

Facsimile: 612-371-3207

 

5

 

If to Borrower:

 

Site Equities International Inc

8370 W. Cheyenne Ave.

Suite 109-300

Las Vegas, NV 89129

Attn Ken Antos

Facsimile: 702-248-4193

 

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

 

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

 

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

 

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

 

The
Remainder of this Page is Intentionally Blank

 

6

 

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

 

 

	
   

  	
  Borrower:

  
	
   

  	
   

  
	
   

  	
  SITE EQUITIES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Kenneth Antos

  	
   

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
  Lender:

  
	
   

  	
   

  
	
   

  	
  STEN ACQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Kenneth W. Brimmer

  	
   

  
	
   

  	
  Its:

  	
  Chief Executive Officer

  
							

 

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

 

 

	
   

  	
  ISSUER:

  
	
   

  	
   

  
	
   

  	
  PAYCENTERS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Kenneth Antos

  	
   

  
	
   

  	
  Its:

  	
  Manager

  
					

 

7

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