Exhibit 2
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of this 15
day of September, 2006, is made by ICTS International, N.V., a corporation
organized under the laws of The Netherlands and having its principal place of
business located at Xxxxxxxxx 000, 0000 XX Xxxxxxxxxx, Xxx Xxxxxxxxxxx (the
"Pledgor") in favor of Northwood Business Corporation, a corporation organized
under the laws of the British Virgin Islands, with an address at 000X Xxxx
Xxxxxx, Xxxxxx, X0, Xxxxxxx (the "Secured Party").
1. Pledge. In order to induce the Secured Party to extend the Debt
(as defined below), the Pledgor hereby grants a security interest in and
absolutely and presently pledges to the Secured Party all of the Pledgor's
right, title and interest in and to 2,157,894 shares of common stock of Inksure
Technologies Inc., a corporation organized under the laws of the State of
Delaware ("Inksure"), together with all substitutions, replacements and proceeds
and all income interest, dividends and other distributions thereon (the
"Collateral"). The certificate(s) (the "Certificates") representing the
Collateral shall be accompanied by duly executed blank stock power. The
Certificates and stock power shall be delivered to Xxxxx Xxxx, Esq. (the
"Collateral Agent") on behalf of the Secured Party, at c/o McLaughlin & Xxxxx,
LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. Notwithstanding
anything to the contrary contained herein, this Agreement evidences a present
and absolute pledge of the Collateral to the Secured Party, which shall be
effective upon the execution of this Agreement.
2. Obligations Secured. The Collateral secures payment to the
Secured Party of the loan owing to the Secured Party from the Secured Party
under that certain Promissory Note of even date herewith, payable to the Secured
Party in the aggregate principal amount of Two Million
Fifty Thousand Dollars ($2,050,000) (the "Note") and shall also secure
additional loans up to One Million Dollars ($1,000,000) which may be made in the
future by the Secured Party to the Pledgor. The foregoing obligations, including
any amendments, extensions, renewals or increases, and all costs and expenses of
the Secured Party incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including reasonable attorneys fees and expenses is hereinafter referred to as
the "Debt".
3. Representations and Warranties. The Pledgor represents and
warrants to the Secured Party as follows:
(a) There are no restrictions on the pledge or transfer of the
Collateral, other than restrictions referenced on the face of any certificates
evidencing the Collateral.
(b) The Pledgor is the legal owner of the Collateral, which is
registered in the name of the Pledgor as of the date hereof
(c) Except for the security interest created by this Agreement
or as approved in advance by Secured Party, the Collateral is free and clear of
any security interests, pledges, liens, encumbrances charges, agreements, claims
or other arrangements or restrictions of any kind; and the Pledgor will not
incur, create, assume or permit to exist and pledge, security interest, lien,
charge or other encumbrance of any nature whatsoever on any of the Collateral or
assign, pledge or otherwise encumber any right to receive income from the
Collateral.
(d) The Pledgor has the right to transfer the Collateral free
of any encumbrances and the Pledgor will defend the Pledgor's title to the
Collateral against the claims of all persons, and any registration with, or
consent or approval to or action by, any federal, state or other governmental
authority or regulatory body which was or is necessary for the validity of the
pledge and grant of the security interest in the Collateral has been obtained
(e) The pledge of and grant of the security interest in the
Collateral is intended to vest in the Secured Party a valid and perfected first
priority security interest, superior to the rights of any other person, in and
to the Collateral.
(f) Upon the occurrence of an Event of Default, no third party
has any rights to receive notice of such default or the sale of the Collateral
or any portion thereof, and no third party has rights to purchase all or any
portion of the Collateral.
4. Governmental Approvals. The Secured Party hereby acknowledges
that any transfer of the Collateral shall be subject to the approval of any
governmental authorities to the extent required by applicable law.
5. Default.
(a) If any of the following shall occur (each an "Event of Default"): (i) any
installment of principal and interest due under the Note remains unpaid for ten
(10) days after receipt by the Pledgor of written notice from the Secured Party
that payment has not been made, (ii) the institution by or against the Pledgor
of any proceedings under any law relating to bankruptcy or insolvency, (iii) the
assignment by the Pledgor for the benefit of its creditors or its attempt to
negotiate any plan of composition with any of its creditors or (iv) the failure
by the Pledgor to perform any of its obligations hereunder after written notice
from the Secured Party and a reasonable opportunity to cure, which cure period
shall in no event be less than ten (10) days, then the Secured Party is
authorized in its discretion to declare any or all of the Debt to be immediately
due and payable without further demand or notice of any kind whatsoever which
are expressly waived, and may exercise any one or more of the rights and
remedies granted pursuant to this Agreement or given to a Secured Party under
the Uniform Commercial Code of New York, as it may be amended from time
to time, or otherwise at law or in equity, including the right to sell or
otherwise dispose of the Collateral.
(b) (i) At any bona fide public sale the Secured Party shall
be free to purchase all or any part of the Collateral. Any such sale may be on
cash or credit. The Secured Party shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the Collateral
for their own account in compliance with Regulation D of the Securities Act of
1933 or any other applicable exemption available under such Act. If the
Collateral is customarily sold on a recognized market or threatens to decline
speedily in value, the Secured Party may sell such Collateral at any time
without giving prior notice to the Pledgor. Whenever notice is otherwise
required by law to be sent by the Secured Party to the Pledgor of any sale or
other disposition of the Collateral, five (5) days written notice sent to the
Pledgor at the notice address specified below will be reasonable.
(ii) The Pledgor recognizes that the Secured Party may be
unable to effect or cause to be effected a public sale of the Collateral by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Act"), so that the Secured Party may be compelled to resort to one
or more private sales to a restricted group of purchasers who will be obligated
to agree, among other things, to acquire the Collateral for resale thereof. The
Pledgor understands that private sales so made may be at prices and on other
terms less favorable to the seller than if the Collateral were sold at public
sales, and agree that the Secured Party have no obligation to delay or agree to
delay the sale of any of the Collateral from the period of time necessary to
permit the issuer of the securities which are part of the Collateral (even if
the issuer would agree), to register such securities
for sale under the Act. The Pledgor agrees that private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
(c) The net proceeds arising from the disposition of the
Collateral, if any, after deducting expenses incurred by the Secured Party, will
be applied to the Debt in the order determined by the Secured Party in its sole
discretion. If any excess proceeds and/or Collateral remain after the discharge
of all of the Debt, said excess proceeds and/or Collateral will be paid and/or
returned to the Pledgor.
(d) If any demand is made at any time upon the Secured Party
for the repayment or recovery of any amount received by it in payment or on
account of any of the Debt from the disposition of the Collateral and if the
Secured Party repays all or any part of such amount, the Pledgor will be and
remain liable for the amounts so repaid or recovered to the same extent as if
such proceeds were never originally received by the Secured Party.
6. Voting Rights and Transfer. Prior to the occurrence of an Event
of Default, the Pledgor will have the right to exercise all voting rights with
respect to the Collateral. At any time after the occurrence of an Event of
Default, the Secured Party may transfer any or all of the Collateral into its
name or that of its nominee and may exercise all voting rights with respect to
the Collateral, but no such transfer shall constitute a taking of such
Collateral in satisfaction of any or all of the Debt unless the Secured Party
expressly so indicates by written notice to the Pledgor.
7. Dividends, Interest and Premiums. The Pledgor will have the right
to receive all cash dividends, interest and premiums declared and paid on the
Collateral prior to the occurrence of any Event of Default. In the event any
additional shares are issued to the Pledgor as a stock
dividend or in lieu of interest on any of the Collateral, as a result of any
split of any of the Collateral by reclassification or otherwise, any
certificates evidencing any such additional shares will be immediately delivered
to the Secured Party and such shares will be subject to this Agreement and a
part of the Collateral to the same extent as the original Collateral. At any
time after the occurrence of an Event of Default, the Secured Party shall be
entitled to receive all cash or stock dividends, interest and premiums declared
or paid on the Collateral, all of which shall be subject to the Secured Party's
rights under Section 5 above.
8. Additional Covenants. The parties acknowledge that the liability
of the Pledgor with respect to the Debt is not limited to the proceeds that may
be obtained by the Secured Party from the disposition of the Collateral under
this Agreement and, in the event that the proceeds from such disposition are
less than the then outstanding Debt, the Secured Party may seek to recover any
deficiency from the Pledgor.
9. Further Assurances. At any time and from time to time, upon
demand of the Secured Party, the Pledgor will give, execute, file and record any
notice, instrument, document or agreement that the Secured Party may consider
necessary or desirable to create, preserve, continue, perfect or validate any
security interest granted hereunder or to enable the Secured Party to inform its
rights hereunder with respect to such security interest, including, but not
limited to, the pledging of additional shares of Inksure.
10. Notices. All notices, demands, requests, consents, approval and
other communications required or permitted hereunder shall be sent and delivered
in accordance with the Note. Copies of all notices with respect to the Secured
Party shall be sent to the Collateral Agent.
11. Preservation of Rights. No delay or omission on the Secured
Party part to exercise any right or power arising hereunder, including without
limitation, the failure of the Secured Party to exercise its rights against the
Collateral, will impair any such right or power or be considered a waiver of any
such right or power, nor will the Secured Party' action or inaction impair any
such right or power. The Secured Party's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Secured
Party may have under other agreements, at law or in equity.
12. Illegality. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
13. Changes in Writing. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by the Pledgor
therefrom will be effective unless made in a writing signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Pledgor in any case will entitle the Pledgor to any other or further notice or
demand in the same, similar or other circumstance. No executory agreement and no
course of dealing between the Secured Party and the Pledgor shall be effective
to terminate, change or modify this Agreement in whole or in part; nor shall any
waiver of any rights or powers of the Secured Party, or consent by the Secured
Party, be valid or effective unless in writing and signed by Secured Party.
14. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Pledgor and the Secured Party with respect to the subject matter hereof.
15. Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the Pledgor and the Secured Party and its respective
successors and assigns; provided, however, that the Secured Party may not assign
this Agreement in whole or in part without the Pledgor's prior written consent.
This Agreement is for the benefit of the Secured Party and its successors and
assigns and in the event of an assignment of any amounts payable under the Note,
the rights hereunder, to the extent applicable to the indebtedness so assigned,
may be transferred with such indebtedness.
16. Interpretation. In this Agreement, unless the Secured Party and
the Pledgor otherwise agree in writing, the singular includes the plural and the
plural the singular; references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to; the word "or" shall be deemed to include "and/or", the words "including" and
"includes" shall be deemed to be followed by the words "without limitation."
Section headings in this Agreement are included for the convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
17. Indemnity. The Pledgor agrees to indemnify the Secured Party,
its directors, officers, employees, agents and representatives and each legal
entity, if any, who controls the
Secured Party (the "Indemnified Party") and to hold the Indemnified Party
harmless from and against any and all claims, damages, losses, liabilities and
expenses (including all fees of counsel with whom the Indemnified Party may
consult and all expenses of litigation or preparation therefor) which the
Indemnified Party may incur or which may be asserted against the Indemnified
Party as a result of the execution of or performance under this Agreement;
provided, however, that the foregoing indemnity agreement shall not apply to
claims, damages, losses, liabilities and expenses solely attributable to the
Indemnified Party's negligence or willful misconduct.
18. Governing Law and Jurisdiction. This Pledge Agreement has been
delivered to and accepted by the Secured Party and will be deemed to be made in
the State of New York.
THIS PLEDGE AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PLEDGOR AND SECURED PARTY DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK.
The Pledgor hereby irrevocably consents to the exclusive jurisdiction of any
state or federal court for New York County and consents that all service of
process be sent by nationally recognized overnight courier service directed to
the Pledgor at the Pledgor's address set forth herein and service so made will
be deemed to be completed on the business day after deposit with such courier;
provided that nothing contained in this Agreement will prevent the Secured Party
from bringing any action, enforcing any award or judgment or exercising any
rights against the Pledgor individually, against any security or against any
property of the Pledgor within any other county state or other foreign or
domestic jurisdiction. The Pledgor acknowledges and agrees that the venue
provided above is the most convenient forum for both the
Secured Party and the Pledgor. The Pledgor waives any objection to venue and any
objection based on a more convenient forum in any action instituted under this
Agreement.
19. WAIVER OF JURY TRIAL. THE PLEDGOR IRREVOCABLY WAIVES ANY AND ALL
RIGHTS THE PLEDGOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY INURE RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF THE TRANACTION AGREEMENTS. THE PLEDGOR ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS MADE KNOWINGLY AND VOLUNTARILY.
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IN WITNESS WHEREOF, intending to be legally bound, the Pledgor and
the Secured Party have heretofore executed this Agreement as of the date and
year first above written.
PLEDGOR:
ICTS INTERNATIONAL, N.V.
By: /s/ Xxxxxxx Xxx
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Name: Xxxxxxx Xxx
Title: Managing Director
SECURED PARTY:
NORTHWOOD BUSINESS CORPORATION
By: /s/ Xxx Xxxxxx
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Name: Xxx Xxxxxx
Title: Director
