Exhibit 10.40
STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 9, 1996, by and between RSL COMMUNICATIONS PLC, a United Kingdom
corporation (the "Debtor") with offices at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx 00000, XXXXXXX X. XXXXXX (the "Secured Party"), having an address
at l69 EAB Plaza, Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000-0000, and
XXXXXXXX, XXXXX & XXXXXXXX, P.L.C. ("Security Agent") with offices at 0000 Xxxxx
00xx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, the Secured Party and the Debtor have entered into a stock
purchase agreement (the "Purchase Agreement"), dated July 3, 1996, pursuant to
which the Secured Party agreed to sell to the Debtor and the Debtor agreed to
purchase from the Secured Party up to l06,985 shares of the common stock of
International Telecommunications Group, Ltd. ("ITG") owned by the Secured Party;
WHEREAS, as provided in the Purchase Agreement, the Debtor will issue a
Secured Promissory Note (the "Note") in the amount of $7,500,000 to the Secured
Party;
WHEREAS, the Debtor has agreed to execute this instrument as security for
its performance and payment under the Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Event of Default" shall mean the occurrence or existence of any
Event of Default under the Note.
"Obligations" shall mean all now existing and hereafter arising
indebtedness, obligations and/or liabilities of the Debtor to the Secured Party
under the Note, including all principal amount thereof and interest thereon,
this Agreement or the Purchase Agreement.
"Shares" shall mean 80,238.75 shares of the common stock of
International Telecommunications Group, Ltd., par value $0.01 per share
constituting the portion of shares deemed to be purchased by Debtor from Secured
Party by Notes pursuant to the Purchase Agreement, together with all
certificates, options, rights, dividends, cash or other distributions issued as
an addition to, in substitution or exchange for, or on account of, any such
Shares and any and all documents and agreements pertaining thereto, and all
proceeds of any of the foregoing.
ARTICLE 2
SECURITY AND PLEDGE
2.1 As security for the prompt and full satisfaction of all terms,
conditions, covenants, recitals, stipulations and agreements contained in the
Obligations, Debtor hereby pledges and assigns the Shares to Secured Party and
grants Secured Party a security interest therein. Upon an Event of Default,
Secured Party is entitled to the use and possession of the Shares to the full
extent necessary to protect its lien hereunder.
2.2 Debtor shall deliver, upon the execution of this Agreement,
certificate(s) representing 80,238.75 Shares, endorsed in blank or with
appropriate stock powers duly executed in blank, to be held by Xxxxxxxx, Xxxxx &
Xxxxxxxx, P.L.C., 0000 Xxxxx 00xx Xxxxxx, 00xx Xxxxx, Xxxxxxx, XX 00000,
Attention: Xxxx Xxxxxxx, Esq., as Security Agent, subject to the terms hereof.
2.3 Simultaneously with the delivery of the Shares pursuant to this
Agreement, Debtor shall record the pledge of the Shares to Secured Party on
ITG's corporate records and provide Secured Party with evidence of the same.
2.4 Upon any Event of Default, Secured Party shall receive in
connection with any of the Shares, any:
(a) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits;
(b) option, warrant, or right, whether as an addition to or in
substitution or in exchange for any of the Shares, or otherwise; and
(c) dividend or distribution payable in property (i.e., other
than cash), including securities issued by any party other than ITG and received
by the Debtor prior to an Event of
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Default; then, and in such event, the Debtor shall accept the same as the
Secured Party's agent, in trust for the Secured Party, and shall deliver them
forthwith to the Security Agent in the exact form received with, as applicable,
its endorsements when necessary, or appropriate stock powers duly executed in
blank, to be held by the Security Agent, subject to the terms hereof, as part of
the Shares.
2.5 Unless an Event of Default shall have occurred, the Debtor shall
be entitled to vote the Shares.
2.6 Any and all cash dividends and other distributions by ITG to the
Debtor on the Shares shall be delivered to the Secured Party as additional
security hereunder, or applied toward the satisfaction of the Obligations, at
the Secured Party's sole option.
2.7 At each Installment Date (as defined in the Note) at which
principal and interest is timely paid to the Secured Party pursuant to the terms
of the Note and as to which Debtor has notified the Security Agent and the
Secured Party, one-third of the Shares shall be released from the pledge
hereunder and shall then be released from any restrictions on transfer contained
in the Note and shall be promptly delivered to Debtor by the Security Agent.
ARTICLE 3
PROXY AND EVENTS OF DEFAULT
3.1 Proxy. The Debtor shall, concurrently with the execution hereof
(and upon its subsequent acquisition of any additional Shares), execute and
deliver to Secured Party a proxy in the form of Exhibit A hereto designating the
Secured Party as its proxy and attorney-in-fact with full authority to vote all
of the Shares of the Debtor at any annual or special meeting of the Stockholders
of ITG in accordance with the terms of said Proxy upon occurrence of an Event of
Default.
3.2 The term "Event of Default", as used in this Agreement, shall
mean the occurrence or happening, at any time and from time to time, of any one
or more of the following:
(a) An Event of Default shall occur and be continuing under
the Note or this Agreement; or
(b) Nonperformance by the Debtor of any of the terms or
conditions of the Purchase Agreement, Note or this Agreement.
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ARTICLE 4
RIGHTS AND REMEDIES
4.1 Acceleration of Obligations. Upon the occurrence of an Event of
Default, all or any portion of the Obligations shall, at the option of the
Secured Party and without notice, demand or legal process, become immediately
due and payable.
4.2 Rights Under Uniform Commercial Code. In addition to all of its
other rights and remedies under this Agreement, the Note and any other agreement
with the Debtor, the Secured Party shall have all of the rights and remedies of
a secured party under the U.C.C. of the State of New York and of any state in
which Shares are located from time to time and shall comply with all procedures
thereunder for disposition and sale of the Shares.
4.3 Disposition of Shares. (a) Upon the occurrence of an Event of
Default, the Secured Party shall have the right to require Security Agent to
sell or otherwise dispose of all or any of the Shares. Such sales may be
adjourned and continued from time to time, with or without notice. The Security
Agent shall have the right to conduct such sales. To enable the Security Agent
to effect any such sale, assignment and/or transfer and to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, the Debtor hereby makes, constitutes
and appoints the Security Agent as its true and lawful attorney, in its name,
place and stead, and for its account and risk, to make, execute and deliver any
and all assignments or other instruments which the Security Agent may deem
necessary or proper to effectuate the authority hereby conferred by signing the
Debtor's name only or by signing the same as its attorney-in-fact, as may be
deemed by the Security Agent to be necessary or proper in connection with any
sale, assignment or transfer of all or any part of the Shares. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains unpaid in whole or
in part.
(b) The Secured Party may purchase all or any part of the Shares at
public sale or, if permitted by law, private sale, subject to appropriate U.C.C.
rules, and in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Except as otherwise provided by
law, the proceeds realized from the sale of any of the Shares may be applied by
the Secured Party first to the reasonable costs, expenses and attorneys' fees
and expenses incurred by the Secured Party for collection and for sale and
delivery of the Shares, and then to any of the Obligations in such order and
manner as the Secured Party, in its sole discretion, deems advisable. If any
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deficiency shall arise, the Debtor shall remain liable to the Secured Party
therefor.
4.4 The proceeds of any such disposition or other action by the
Secured Party shall be applied as follows:
(a) first, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Shares or in any way relating to the rights of the Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) second, to the satisfaction of the Obligations;
(c) third, to the payment of any other amounts required by
applicable law; and
(d) fourth, to the Debtor to the extent of any surplus
proceeds.
4.5 Remedies Cumulative. All rights and remedies of the Secured
Party arising under this Agreement, the Note or any other agreement with the
Debtor or by operation of law shall be cumulative and non-exclusive, to the
fullest extent permitted by law.
4.6 No Forfeiture. The Secured Party may at its sole option incur
reasonable expenses including attorneys' fees to protect his interest in the
Shares and the Debtor shall immediately reimburse the Secured Party for any such
fees and expenses.
4.7 Share Owner Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all corporate rights, privileges, options or
other rights pertaining thereto as if it were the absolute owner thereof,
including, without limitation, the right to vote the Shares at any annual or
special meeting of the Stockholders of ITG and to give consents, waivers and
ratifications with respect thereto, to sell, redeem or exchange any or all of
the Shares upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, pledge, or option pertaining to any of the Shares, and, in connection
therewith, to deliver any of the Shares to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as it
may determine, all without liability except to account for property actually
received by it. The Secured Party shall have no duty to
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exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
ARTICLE 5
Representations and Warranties of Debtor
5.1 Power and Authority. Debtor has, and has duly exercised, all
requisite corporate power and authority to enter into this Agreement, to pledge
the Shares for the purposes described in Article 2 hereof, to grant the proxy
for the voting of the Shares as provided in Article 3 hereof and otherwise to
carry out the transactions contemplated by this Agreement.
5.2 Owner of Shares. Debtor is the legal and beneficial owner of the
Shares.
5.3 Valid and Perfected Security Interest. The pledge of the Shares
pursuant to this Agreement creates a valid security interest in the Shares as
security for the prompt and full satisfaction of all terms, conditions,
covenants, recitals, stipulations and agreements contained in the Obligations
and the Secured Party shall, upon delivery of the Shares to the Security Agent,
as agent for the Secured Party, have a perfected first priority security
interest in the Shares.
5.4 No Authorization, Consent. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either: (i) for the pledge by the Debtor of the
Shares pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by the Debtor; or (ii) for the exercise by the Secured Party
of the voting or other rights provided for in this Agreement or the remedies in
respect of the Shares pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
5.5 Valid and Binding Agreement. This Agreement constitutes a valid
and binding obligation of the Debtor and is enforceable in accordance with its
terms.
5.6 The Shares. The Shares, except for the lien granted hereunder to
the Secured Party, are owned by the Debtor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest in such shares or
the proceeds thereof.
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ARTICLE 6
THE SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
6.l The Debtor's Liability for the Secured Party's Expenses. The
Debtor shall held liable to the Secured Party for any and all reasonable sums,
costs and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or the Note or in defending, protecting or
enforcing the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof.
ARTICLE 7
SECURITY AGENT
7.1 Duties, Reliance. The Security Agent shall have no duties or
obligations other than those expressly imposed on it herein. In the event that
any of the terms and provisions of any other agreement (excluding any amendment
to this Agreement) between or among any of the parties hereto conflict, or are
inconsistent, with any of the terms or provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects. The
Security Agent may rely upon any paper or other document which may be submitted
to it in connection with its duties hereunder and which it believes to be
genuine and to have been signed or presented by the proper party or parties and
shall have no liability or responsibility with respect to the form, execution or
validity thereof. The Security Agent shall not be liable for any act which it
may do or omit to do, except in the case of its own bad faith or gross
negligence.
7.2 Resignation. The Security Agent may resign as security agent at
any time upon ten days' notice to the other parties hereto. In the case of the
Security Agent's resignation, its only duty shall be to hold the Shares for a
period of 15 days after the effective date of such resignation, at which time
(a) if a successor security agent shall have been appointed and written notice
thereof (including the name and address of such successor security agent) shall
have been given to the resigning Security Agent by the other parties hereto and
such successor security agent, then the resigning Security Agent shall deliver
to the successor security agent the Shares or (b) if the resigning Security
Agent shall not have received written notice signed by the other parties hereto
and a successor security agent, then the resigning Security Agent shall promptly
deliver the Shares to a successor security agent selected by the Security Agent
in its reasonable discretion exercised in good faith; whereupon, in either case,
the Security Agent shall be relieved of all further obligations and released
from all liability under
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this Agreement. Without limiting the provisions of this Section 7.2, the
resigning Security Agent shall be entitled to be reimbursed by the other parties
hereto for any expenses incurred in connection with its resignation or transfer
of the Shares to a successor security agent.
7.3 Indemnification. The debtor and the Secured Party agree, jointly
and severally, to defend, indemnify and hold harmless the Security Agent from
and against any and all taxes, expenses (including without limitation,
reasonable attorneys' fees), assessments, liabilities, claims, damages, actions,
suits, proceedings or other charges incurred by or assessed against the Security
Agent in the performance of the Security Agent's duties hereunder, except as a
result of the Security Agent's own bad faith or gross negligence. The Security
Agent will send notice to each of the Secured Party and the Debtor within a
reasonable time after any issue of indemnification arises. The agreement in this
paragraph shall survive any termination of the Security Agent's duties
hereunder.
7.4 Arbitration. Any dispute between the parties with respect to
this Agreement or any of the terms included herein and including the validity,
interpretation, breach, and remedies for breach, and the enforcement of this
Agreement, shall be resolved by an arbitrator in accordance with the following
provisions. The arbitration shall be before a single arbitrator (the
"Arbitrator") appointed upon the mutual agreement of the parties; provided,
however, that in the event the parties cannot reach such agreement, each of the
parties shall appoint an arbitrator and such arbitrators shall select the
Arbitrator. The Arbitrator will be bound by the substantive law of the State of
New York but will not be bound by the laws of evidence and procedure customary
in courts of law. The arbitration shall take place in New York. The execution of
this Agreement shall constitute an execution of an arbitration agreement as
well.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers. Any failure or delay by the Secured Party to require
strict performance by the Debtor of any of the provisions, warranties, terms or
conditions contained herein or in the Note shall not affect the Secured Party's
right to demand strict compliance therewith and performance thereof, and any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent thereto, and whether of the same or of a different type. None of
the warranties, conditions, provisions and terms contained herein or in any
other agreement, document or instrument shall be deemed to have been waived by
any
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act or knowledge of the Secured Party, its agents, officers, stockholders or
employees, but only by an instrument in writing, signed by an officer of the
Secured Party and directed to the Debtor, specifying such waiver.
8.2 Notices
(i) Any and all notices or other communications provided for
herein shall be in writing and hand delivered against receipted copy; mailed by
registered or certified mail, postage prepaid, return receipt requested;
telecopied (with hard copy sent by United States mail within one (1) business
day after the facsimile notice is transmitted); or delivered by Fed Ex or other
similar overnight courier, to the following addresses:
a) Any Notice to the Debtor shall he addressed to
such party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxx, Esq.
(b) Any Notice to the Secured Party shall be
addressed to such party at its address
hereinabove set forth,
with a copy to:
Galland, Kharasch, Xxxxx & Xxxxxxxxx, P.C.
Canal Square
0000 Xxxxxx-Xxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(c) Any Notice to the Security Agent shall be
addressed to such party at its address hereinabove
set forth.
(ii) or to such other place as the parties may designate in
writing. If mailed as aforesaid, notice shall be deemed given three (3) business
days after being deposited in the United States mail; if hand delivered or
telecopied, notice shall
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be deemed given when delivered or telecopied on a business day and such hand
delivery or telecopy is received before 5:00 p.m. by the addressee thereof;
otherwise, such notice by hand delivery or telecopy shall be deemed given on the
next succeeding business day; and if sent by overnight courier, notice shall be
deemed given on the next business day after being deposited with the overnight
courier service.
8.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in a manner so as to be effective and valid under
applicable law. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and effect.
8.4 Successors and Assigns. This Agreement shall be binding upon and
for the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
8.5 Further Assurance. The Debtor shall provide the Secured Party
with all such documentation and do any such act in order to perfect the Secured
Party's security interest in the Shares.
8.6 Modifications. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Debtor and the Secured Party.
8.7 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by the laws of the State of New York applicable to
contracts entered into and to be performed entirely within such state.
8.8 Articles and Section Titles. The titles of articles and sections
contained in this Agreement are merely for convenience and shall be without
substantive meaning or content.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an
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original but all of which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
September 9th, 1996.
RSL COMMUNICATIONS PLC
By /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title: President
/s/ Xxxxxxx X. Xxxxxx
---------------------
XXXXXXX X. XXXXXX
XXXXXXXX, XXXXX & XXXXXXXX, P.L.C.
By: /s/ Xxxx Xxxxxxx
---------------------
As Security Agent
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EXHIBIT A
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
constitute and appoint XXXXXXX X. XXXXXX ("Xxxxxx"), with full power of
substitution, as the undersigned's attorney-in-fact and proxy and in the
undersigned's name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD., a
Delaware corporation (the "Company"), held during the term of that certain Stock
Pledge and Security Agreement (the "Agreement") dated the 9th day of September,
1996, between the undersigned and Xxxxxx, that number of shares of common stock
of the Company as set forth opposite the undersigned's name below, with all the
powers the undersigned would possess if personally present at such meeting.
This Proxy shall be effective only upon the occurrence of an Event of
Default as defined in the Agreement.
The undersigned hereby states and acknowledges that this Proxy is coupled
with an interest, and was granted for the consideration stated in the Agreement
and cannot be lawfully revoked or limited in any respect whatsoever (including
the death, bankruptcy or adjudication of incompetency or insanity of either of
the undersigned), except as provided in the Agreement. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting "Shares" as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy, except as otherwise expressly
provided in the Agreement.
The undersigned hereby revokes all proxies heretofore granted by it with
respect to any and all Shares (as defined in the Agreement) owned by it.
The undersigned hereby ratifies and confirms all that said attorney and
proxy or its substitute or substitutes may lawfully do or cause to be done by
virtue hereof and in accordance with the provisions of the Agreement.
By accepting and acting under this Proxy, the said proxy agrees to be
bound by and to perform all the provisions of the
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Agreement with respect to the performance of his functions and duties as proxy
hereunder.
Dated: 9th day of September, 1996
No. of Shares: 80,238.75 or such lesser amount as is provided in accordance
with Section 2.7 of the Agreement.
RSL COMMUNICATIONS PLC
By:_________________________________
Name:
Title:
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