Exhibit 10.4
FORM OF PLEDGE AND SECURITY
AGREEMENT
THIS
PLEDGE AND SECURITY AGREEMENT (this “Pledge Agreement”)
is entered into as of the dated as of the __th day of September
2008, by and among COMMERCE PLANET, INC., a Utah corporation (the
“Company”) with an address at 30 S. La Patera Lane,
Goleta, CA 93117, LEGACY MEDIA LLC, a California limited liability
company and wholly-owned subsidiary of, with the same address as,
the Company (“Legacy”), and CONSUMER LOYALTY GROUP LLC,
a California limited liability company and wholly-owned subsidiary
of, with the same address as, the Company (“Consumer”),
for the benefit of MORLEX, INC., a Colorado corporation
(hereinafter referred to as the “Lender” or
“Secured Party”). The Company, Legacy and Consumer are
hereinafter referred to individually as a “Pledgor” and
collectively as the “Pledgors.”
W I T N E S S E T H :
WHEREAS,
Legacy and Consumer are each wholly-owned subsidiaries of the
Company;
WHEREAS,
the parties hereto are parties to the Asset Purchase Agreement (the
“Purchase Agreement”) dated as of the 16 th
day of September 2008, by and among the Pledgors, Lender Superfly
Advertising, Inc., an Indiana corporation and wholly-owned
subsidiary of Lender (the
“Purchaser”). Pursuant to the Purchase
Agreement, the Legacy and Consumer have agreed to sell and
Purchaser has agreed to purchase certain of the assets used or held
for use by Legacy and Consumer in the conduct of the Business in
consideration of the Purchase Price and the Assumed Liabilities (as
such terms are defined in the Purchase Agreement).
WHEREAS,
the Company is the maker (the “Maker”) of the (US)
$200,000 promissory note (the “Note”) in favor of the
Lender or any subsequent holder of such Note;
WHEREAS,
the Pledgors have unconditionally and irrevocably guaranteed the
obligations of the Company under the Note pursuant that certain
Unconditional Guaranty Agreement executed by Legacy and Consumer in
favor of Lender (the “Guaranty”); and
WHEREAS,
the Lender is willing to make the loan evidenced by the Note only
if each Pledgor executes and delivers this Pledge Agreement and
jointly and severally pledges to the Secured Party all of the
merchant accounts of the Pledgors, including without limitation the
credit card reserve accounts, listed on Schedule A attached
hereto.
NOW,
THEREFORE, in consideration of the foregoing and other good
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, effective as of the date hereof, each Pledgor
hereby pledges and assigns to Secured Party, and grants Secured
Party a security interest in the Collateral (as hereinafter
defined).
Each
Pledgor hereby agrees with Secured Party as follows:
AGREEMENT
1.
Definitions. In addition to all of the other
initially-capitalized terms defined herein, the following terms
shall have the following respective meanings:
(a)
“Code” means the Uniform Commercial Code, as in effect
from time to time in the State of California.
(b)
“Collateral” means (i) all of the merchant accounts of
the Pledgors, including without limitation the credit card reserve
accounts, listed on Schedule A attached hereto (collectively, the
“Merchant Accounts”), and (ii) all Proceeds (as
hereinafter defined) of such Merchant Accounts. The inclusion of
Proceeds in this definition does not authorize Pledgor to sell,
dispose of or otherwise use the Collateral in any manner not
specifically authorized by this Pledge Agreement.
(c)
“Proceeds” means (i) all “proceeds” (as
such term is defined in Section 9-102(a)(64) of the Code) and
“products” with respect to the Collateral and (ii)
includes, without limitation: whatever is receivable or
received when Collateral is sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary;
all rights to payment, including return premiums, with respect to
any insurance relating thereto; all interest, dividends and other
property receivable or received on account of the Collateral or
proceeds thereof, (including all distributions in respect of the
Merchant Accounts, all collections thereon or all distributions
with respect thereto); and proceeds of any indemnity or guaranty
payable to Pledgor or Secured Party from time to time with respect
to any Collateral.
(d)
“Secured Obligations” means the full and timely
payment, performance and observance by the Company of all of the
terms, covenants and provisions of the Note, and the full and
timely payment, performance and observance by the Guarantors of all
of the terms, covenants and provisions of the Guaranty, including,
without limitation, the payment by the Company and the Pledgors of
all principal, interest and any other sums payable to Lender in
respect of the Note.
2.
Pledge of Collateral.
(a)
As security for the due and punctual payment and performance of all
of the Secured Obligations (whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise,
including without limitation the payment of amounts that would
become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a)),
whether allowed or allowable as claims, each Pledgor hereby (1)
pledge, transfer, hypothecate and assign to Secured Party ALL OF
its right, title and interest in and to the Collateral, whether now
owned or hereafter acquired, and (2) grants to Secured Party a
continuing first priority lien on and security interest in and to
the Collateral, whether now owned or hereafter
acquired. As a condition to the Secured Party’s
making the Loan (as defined in the Purchase Agreement), each
Pledgor shall deliver to Lender UCC-1 financing statements with
respect to the Secured Party’s lien on the
Collateral.
(b)
Secured Party shall retain a valid and perfected first priority
security interest in the Collateral until the date on which each
and every one of the Secured Obligations has been fully and
indefeasibly performed in accordance with the terms of the Note,
including the indefeasible payment in full of the principal amount
of the Note, and all interest accrued thereon (but excluding any
indemnity obligation or other obligations which, by the terms of
the Note, survive performance in full of the other obligations;
provided, however, that none of such future indemnity obligations
are then due and payable or reasonably likely to be due and payable
in the foreseeable future (such obligations, the “Surviving
Obligations”). Upon the occurrence and during the continuance
of an Event of Default (as defined in the Note), Secured Party may
exercise, in addition to its other rights and remedies hereunder,
or in the Note or the Guaranty, all rights and remedies of a
secured party under the Code with respect to the Collateral as in
effect at the time or otherwise available by action or actions at
law or in equity, including, without limitation:
(i)
to sell, assign and effectively transfer the Collateral either at
public or private sale, at the option of Secured Party, without
recourse to judicial proceedings and without either demand,
appraisement, advertisement or notice of any kind, all of which are
expressly waived;
(ii)
to proceed by way of appropriate judicial proceedings to have the
Collateral sold at judicial sale, with or without
appraisement;
(iii)
to seek an injunction of the prohibited action;
(iv)
make demand upon and receive from any or all Merchant Bank(s) all
amounts in such Merchant Accounts, and all Merchant Banks may rely
upon the authorization to release funds to Lender set forth herein
and will be indemnified by Pledgors from any and all liability in
connection with releasing funds to Lender; or
(v)
to pursue any other available legal remedy; and, out of the
Proceeds of the sale of the Collateral, Secured Party shall be
entitled to receive, by preference and priority over all Persons
whatsoever, the full remaining and unpaid balance of the Secured
Obligations, together with all interest, costs, reasonable
attorneys’ fees and other charges;
provided, however, that Secured Party shall
provide Pledgors with reasonable prior notice of a public or
private sale of the Collateral as required by the Code, and
Pledgors hereby agree and stipulate that such notice shall be
deemed to be commercially reasonable notice in satisfaction of the
requirements of the Code.
Without
limiting the foregoing, Secured Party and/or any nominee(s) or
designee(s) thereof, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except
for any notice required by law) to or upon Pledgors, or any other
person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell, assign or otherwise
dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), pursuant to this Section 2 or
otherwise in accordance with the Code upon such terms and
conditions as Secured Party may deem advisable and at such prices
and upon such other terms as Secured Party may deem commercially
reasonable, for cash or on credit or for future delivery without
assumption of any credit risk irrespective of the impact of such
sales on the market price of any Collateral. Secured
Party and/or such nominee(s) or designee(s) shall have the right
upon any public sale or sales, and, to the extent permitted by law,
upon any private sale or sales, to purchase the Collateral so sold,
free of any right or equity of redemption in Pledgors, which right
or equity each of the Pledgors hereby waives and/or
releases. Secured Party shall apply any Proceeds from
time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale
in accordance with this Pledge Agreement. Secured Party
may be the purchaser of any or all of the Collateral at any such
sale and Secured Party shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale,
to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Collateral payable by Secured
party at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or
right on the part of Pledgors, and each Pledgor hereby waives (to
the extent permitted by applicable law) all rights of redemption,
stay and/or appraisal which it now has or may have at any time in
the future have under any rule of law or statute now existing or
thereafter enacted. Each Pledgors agrees that, to the
extent notice of sale shall be required by law, at least fifteen
(15) days’ notice to Pledgors 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. Secured Party
shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcing
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 hereby waives, to the extent
permitted by law, any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which
might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral
to more than one offeree. If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the
Secured Obligations, each Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party
to collect such deficiency. To the extent permitted by
applicable law, each Pledgor further waives and agrees not to
assert any rights or privileges which it may acquire under Section
9-112 of the Code. In connection with any sale of the
Collateral, Secured Party may specifically disclaim any warranties
of title or the like, and such disclaimer shall not be considered
adversely to affect the commercial reasonableness of such
sale. If Secured Party sells any of the Collateral on
credit, each Pledgor will be credited only with payments actually
made by the purchaser, received by Secured Party and applied to the
indebtedness of such purchaser. In the event a purchaser
fails to pay for the Collateral, Secured Party may resell the
Collateral and Pledgors shall be credited with the proceeds of the
sale.
(c)
In addition to the remedies described in Section 2(b) above, if any
Event of Default shall occur and immediately upon the occurrence
thereof and so long as such Event of Default shall be
continuing: (i) Secured Party and/or its nominees or
designees shall have the right to receive any and all dividends,
payments or distributions paid with respect to the Merchant
Accounts and the other Collateral, as applicable, and make
application thereof in accordance with this Pledge Agreement (and
any dividends and other payments received in trust by Pledgors for
the benefit of Secured Party shall be segregated from the other
funds of Pledgors), and (ii) at Secured Party’s election, all
Merchant Accounts shall be transferred to Secured Party and/or one
(1) or more nominee(s) or designee(s) thereof, and Secured Party
and/or such nominee(s) or designee(s) may in the name of Pledgors
or in Secured Party’s and/or such nominee’s(s’)
or designee’s(s’) own name, collect all payments and
assets due Pledgor pursuant to the Merchant Accounts. Further,
unless and until Secured Party and/or such nominee(s) or
designee(s) succeeds to actual ownership thereof, pursuant to the
exercise of Secured Party’s remedies described in Section
2(b) above, neither Secured Party nor any such nominee or designee
shall be obligated to perform or discharge any obligation, duty or
liability in connection with the Merchant Accounts. The
rights of Secured Party hereunder shall not be conditioned or
contingent upon the pursuit by Secured Party of any other right or
remedy against Pledgors or any guarantor of any of the Secured
Obligations, or against any other person which may be or become
liable in respect of all or any part of the Secured Obligations or
against any other collateral security therefor, guarantee thereof
or right of offset with respect thereto. Neither Secured
Party nor any of its nominees or designees shall be liable for any
failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall they be under
any obligation to sell or otherwise dispose of any Collateral upon
the request of Pledgors or any other person or to take any other
action whatsoever with regard to the Collateral or any part
thereof.
(d)
Secured Party is hereby authorized to and shall apply the net
proceeds of such sale of, or other realization upon, any or all of
the Collateral, after first deducting the costs and expenses of
sale, including attorneys’ fees and the costs of Secured
Party and Secured Party’s agents, to the payment of the
Secured Obligations in such order as Secured Party shall elect, in
its sole discretion, it being understood that this Pledge Agreement
shall remain in full force and effect and Secured Party shall
retain all rights hereunder, until the date on which all of the
Secured Obligations have been indefeasibly satisfied in full, after
deducting all such costs and expenses. If, after any
sale of the Collateral pursuant to this Section 2 there shall be a
balance remaining after the payment of all of the items described
above, such balance shall be paid to Persons entitled by law to
receive such balance to allocate among themselves, without any
liability resulting therefrom on the part of Secured
Party.
(e)
Following the occurrence and during the continuance of an Event of
Default, Secured Party may, at its election, and in addition to any
other remedies available hereunder, in its sole and absolute
discretion, no such duty being imposed hereby, pay, purchase,
contest or compromise any encumbrance, charge or lien which is
prior or superior to its security interest in the Collateral and
pay all expenses incurred therewith (any payment or expense so
incurred shall be deemed Secured Obligations and shall be
immediately due and payable and secured hereby), all of which shall
be deemed authorized by Pledgors. All such expenses not
paid when due shall accrue interest at the Default Rate until the
date repaid.
(f)
All remedies of Secured Party hereunder are cumulative and are in
addition to any other remedies provided for at law or in equity and
may, to the extent permitted by law, be exercised concurrently or
separately, and the exercise of any one remedy shall not be deemed
an election of such remedy or to preclude the exercise of any other
remedy. No failure on the part of Secured Party to
exercise and no delay in exercising any right or remedy shall
operate as a waiver thereof or in any way modify or be deemed to
modify the terms of this Pledge Agreement or of the obligations
secured hereby, nor shall any single or partial exercise by Secured
Party of any right or remedy preclude any other or further exercise
of the same or any other right or remedy.
3.
Representations and Warranties of Pledgor.
3.1.
Each Pledgor hereby jointly and severally represents and warrants,
as of the date hereof, that:
(a)
Pledgors
(i) are the record and beneficial owners of, and have good and
marketable title to, the Merchant Accounts, and (ii) will have good
and marketable title to the Merchant Accounts hereafter acquired,
in any case, free and clear of all claims, liens, options and
encumbrances of any kind, and has not and will not pledge or grant
to any other person a security interest in the Merchant
Accounts, except as contemplated by the Note. Each
Pledgor has the right, power and authority to execute, deliver and
perform this Pledge Agreement and to pledge, grant security
interest in and assign the Collateral to the Secured Party as
described herein.
(b)
Pledgors
are the sole holders of the Merchant Accounts and no other person
has any right to or is named as an owner of any Merchant
Account. The execution, delivery and performance of this
Pledge Agreement by each Pledgor (i) are within the power and
authority of the Pledgor, and (ii) have been duly authorized by all
necessary entity action. This Agreement constitutes the legal,
valid and binding obligation of each Pledgor, enforceable against
each Pledgor in accordance with its terms. Further, the execution,
delivery and performance of this Pledge Agreement by each Pledgor
will not cause a violation of or a default under (i) a
