EXHIBIT 10.38
PLEDGE AGREEMENT
This Pledge Agreement is made effective December 3, 2003 between IPG
Photonics Corporation, a Delaware corporation ("Pledgee"), and Xxxxxx X. Xxxxx,
an individual ("Pledgor").
Recitals
Pledgee made a loan to Pledgor in the amount of $190,000 in connection
with the exercise of stock options for Common Stock of Pledgee, which loan was
evidenced by a Non-Recourse Promissory Note from Pledgor in favor of Pledgee,
dated March 17, 2000 (the "2000 Note").
Pledgor agreed to pledge shares of Common Stock of IPG Photonics
Corporation pursuant to the 2000 Note and Plegdor has agreed to provide 50,000
additional shares of such Common Stock as collateral to Pledgee in consideration
of the reissuance of the 2000 Note as reflected in the Non-Recourse Promissory
Note, in the aggregate principal amount of $220,884, dated the date hereof,
executed and delivered by Pledgor (the "Non-Recourse Note").
NOW, THEREFORE, it is agreed as follows:
A. Creation and Description of Pledge Interest. In consideration of
the amendment to the loan by Pledgee to Pledgor as reflected in the Non-Recourse
Note, Pledgor hereby pledges 240,000 shares of Common Stock of IPG Photonics
Corporation owned by Pledgor (the "Shares") all of such Shares (herein sometimes
referred to as the "Collateral") represented by certificates number 29 & 30
("Certificates Nos. 29 & 30"), duly endorsed in blank or with executed stock
powers, and herewith delivers said certificate to Pledgee, who shall hold said
Certificates Nos. 29 &30 subject to the terms and conditions of this Pledge
Agreement.
The Collateral (together with an executed blank stock assignment for
use in transferring title to all or a portion of the Shares to Pledgee if, as
and when required pursuant to this Pledge Agreement) shall be held by the
Pledgee as security for the repayment of the Non-Recourse Note, and any
extensions or renewals thereof, and neither the Pledgor nor Pledgee shall
encumber or dispose of such Collateral except in accordance with the provisions
of this Pledge Agreement.
B. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Pledge Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
1. Payment of Indebtedness. Pledgor will pay the principal sum of
the Non-Recourse Note secured hereby, together with interest thereon, at the
time and in the manner provided in the Non-Recourse Note. Pledgee agrees that
the obligation of Pledgor under the Non-Recourse Note shall be non-recourse to
Pledgor.
2. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, except for the encumbrances of Pledgee and those listed on
Certificates Nos. 29 & 30. Pledgor will not further encumber the Shares without
the prior written consent of Pledgee.
3. Margin Regulations. Pledgor and Pledgee shall comply with all
applicable rules and regulations promulgated by the Federal Reserve Board.
C. Voting Rights. During the term of this pledge and so long as
Pledgor is not in default under this Pledge Agreement, Pledgor shall have the
right to vote all of the Shares pledged hereunder.
D. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Pledge Agreement in
the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor and Pledgee shall cooperate and execute
such documents as are reasonable so as to provide for the substitution of such
Collateral and, upon such substitution, references to "Shares" in this Pledge
Agreement shall include the substituted shares of capital stock of Pledgor as a
result thereof.
E. Options and Rights. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such rights and options shall be the
property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgee shall be immediately delivered to Pledgee, to be held under the terms
of this Pledge Agreement in the same manner as the Shares pledged.
F. Default. Pledgor shall be deemed to be in default under the
Non-Recourse Note and of this Pledge Agreement in the event:
1. Payment of principal on the Non-Recourse Note shall be
delinquent for a period of thirty (30) days or more after the due date
of the Non-Recourse Note or any extension or renewal thereof; or
2. Pledgor fails to perform any of the covenants set forth in
this Pledge Agreement for a period of ten (10) days after written
notice thereof from Pledgee, and Pledgor fails to remedy such
failure(s) within such 10-day period.
In the case of an event of a default, as set forth above, Pledgee
shall have the right to accelerate payment of the Non-Recourse Note upon written
notice to Pledgor, and Pledgee shall thereafter be entitled to proceed only
against the Collateral securing the Non-Recourse Note; provided, however, in the
case of an event of default under Paragraphs B.2 (Encumbrances), D. (Stock
Adjustments) or E. (Options and Rights) hereof, Pledgee shall thereafter be
entitled to pursue its remedies under the Massachusetts Uniform Commercial Code.
G. Release of Collateral. Subject to any applicable contrary
applicable regulations, there shall be released from this pledge a portion of
the pledged Shares held by Pledgee hereunder upon payment of the principal of
the Non-Recourse Note. The number of the pledged Shares which shall be released
shall be that number of full Shares which bears the same proportion to the
initial number of Shares pledged hereunder as the payment of principal bears to
the initial full principal amount of the Non-Recourse Note.
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H. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee, which shall make
specific reference to this Agreement.
I. Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining Collateral shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph G above.
J. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against him, or if a receiver is appointed for
the property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default only against
the Collateral securing the Non-Recourse Note.
K. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Pledge
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
L. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Pledge Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators; provided, however,
nothing contained in this Paragraph L shall make, or be construed to make, the
Non-Recourse Note recourse to Pledgor's estate or heirs.
M. Governing Law. This Pledge Agreement shall be interpreted and
governed under the laws of the Commonwealth of Massachusetts, without giving
effect to choice of law principles thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement as of the day and year first above written.
"PLEDGOR" By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Address: 0000 Xxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
"PLEDGEE" IPG PHOTONICS CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxxx
Title: CEO and Chairman of the Board
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