STOCK PLEDGE AGREEMENT BY AND BETWEEN LEGACY BRANDS, INC.,
AND XXXXXX X. XXXX DATED OCTOBER 30, 1996
This Stock Pledge Agreement ("Agreement") is entered into this date by and
between Xxxxxx X. Xxxx ("Pledgor") and Legacy Brands, Inc., a California
corporation ("Secured Party").
WHEREAS, the Pledgor has this date deposited 4,000,000 shares of common stock of
Legacy Brands, Inc. ("Shares") beneficially owned with Xxxxx & Gyemant ("Pledge
Holder") and pledges such Shares to the Secured Party and in partial payment
therefor, has executed and delivered a promissory note of even date, a copy of
which is attached hereto and incorporated herein by reference, to the Secured
Party in the principal amount of $1,000,000 ("Note").
WHEREAS, Pledgor has agreed to secure the Note's payment by the pledge of the
Shares (the "Collateral") under the terms of this Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Grant of Security Interest. The Pledgor grants to the Secured Party a
security interest in the Shares.
Section 2. Possession. Contemporaneous hereto, the Pledgor has delivered to the
Pledge Holder certificate no. _______ evidencing the Shares ("Certificate"),
together with a stock power endorsed in blank, to hold subject to terms of this
Agreement.
Section 3. Obligations of Pledge Holder. During the term of this Agreement, and
for so long as the Pledge Holder is in possession of the Certificate, the Pledge
Holder shall take reasonable care of the Certificate.
Section 4. Covenants of Pledgor. For as long as this Agreement is force and the
Pledge Holder is in possession of the Shares, the Pledgor agrees that:
4.1 Pledgor will not grant any other lien or security interest with respect to
the Shares.
4.2 Upon the reasonable request of the Secured Party, the Pledgor will take all
action and will execute all documents and instruments necessary or desirable to
consummate and give effect to this Agreement.
Section 5. Voting Shares; Custody of Certificates.
5.1 As long as no Event of Default (as defined in Section 8 below) shall have
occurred, the Pledgor shall be entitled to vote the Shares.
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5.2 The Pledgor shall be entitled to receive any dividend or any other
distribution, whether in securities or other property, by way of liquidation,
stock split, spin-off, split-up or reclassification, combination of shares, or
the like, or in case of any reorganization, consolidation, or merger. Secured
Party may endorse, in the Secured Party's name or in the name of the Pledgor,
any and all instruments by which any payment on the Shares may be made and may
take such action as the Secured Party may deem appropriate from time to time, in
the Secured Party's name or in the name of the Pledgor, to enforce collection of
the Shares. For such purpose, the Pledgor appoints the Secured Party the
attorney-in-fact of the Pledgor, under a power coupled with an interest, with
full power of substitution.
5.3 As long as the obligations secured by this Agreement and the Note remain
outstanding, the Pledgor will not transfer, whether by sale, gift, or otherwise,
any ownership interest in the Shares without the Secured Party's prior written
approval.
Section 6. Transferability of Shares. The Pledgor may transfer, assign or convey
Shares only upon delivery of the following to the Pledge Holder: (i) a
certificate of vesting provided by the Secured Party evidencing the length of
Pledgor's employment under the Employment Agreement, calculated quarterly, (ii)
an opinion of legal counsel to the Secured Party certifying that a transfer of
Collateral will not result in a violation of state and/or federal law, or other
rulings and regulations of any other governmental body, (iii) a certificate from
the Secured Party verifying payment or satisfaction of any amounts due under the
terms of the Note, and (iv) a certificate from the Secured Party waiving its
Repurchase Rights under the Restricted Stock Purchase Agreement, if applicable.
Within ten days of receipt of the aforementioned documents, the Pledge Holder
shall deliver the designated Shares to the Pledgor. The Secured Party may waive
any of the foregoing requirements and in such event shall notify the Pledge
Holder of the same.
Section 7. Pledge Holder.
7.1 The Pledge Holder shall only be obligated to take action, including
disbursement, with respect to the Collateral pursuant to Section 6 or this
Section 7, or upon receipt of written instructions from the Chief Executive
Officer of the Secured Party. The Pledge Holder is authorized to make delivery
against payment as directed by the parties hereto.
7.2 If the Pledge Holder shall become unable (in its sole discretion) to
continue in its capacity as Pledge Holder or notify the Parties hereto of its
desire to be relieved of any further obligations hereunder, then the Collateral
shall be delivered to the successor Pledge Holder which shall be an individual
or corporation designated by the Secured Party. If the Secured party shall fail
to designate a successor within ten (10) business days after having been
requested to do so, then the Pledge Holder may designate a successor bank or
trust company.
7.3 The Pledge Holder shall not be bound in any way by any other agreement
between the parties hereto as to which the Pledge Holder is not a party whether
or not it has knowledge
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thereof, nor by any notice of a claim or demand with respect to this Agreement
or the Collateral, and shall be required only to hold and distribute the
Collateral as herein provided. The Pledge Holder shall have no duties and
responsibilities other than those expressly set forth herein. The Pledge Holder
may retain and consult with legal counsel and shall be fully protected with
respect to any action taken or omitted on the advice of counsel. Pledge Holder
shall have no liability whatsoever arising from any of its actions or omissions
hereunder. The Pledge Holder may rely on any certificate, statement, request,
consent, waiver, receipt, agreement or other instrument which it believes to be
genuine and to have been signed and presented by an appropriate person or
persons.
7.4 The retention and distribution of the Collateral in accordance with the
terms and provisions of this Agreement shall fully and completely release the
Pledge Holder from any obligation or liability assumed by it hereunder as to the
Collateral.
7.5 The Pledgor and the Secured Party agree to and do hereby indemnify and hold
the Pledge Holder harmless against any and all losses, damages, claims and
expenses, including reasonable attorneys' fees, that may be incurred by it by
reason of its compliance with the terms of this Agreement. If as a result of any
disagreement between the parties hereto and/or adverse demands and claims being
made by any and all of the parties upon the Pledge Holder, the Pledge Holder
shall become involved in litigation, including any interpleader brought by it,
which it shall be entitled to do at any time it considers appropriate, the
Pledgor and the Secured Party agree that they are and shall be jointly and
severally liable to the Pledge Holder on demand for all costs, expenses and
attorneys' fees it shall incur and/or be compelled to pay by reason of such
litigation and the Pledge Holder shall have a lien upon the Collateral in its
possession hereunder to secure the repayment of such expenses, costs and
attorneys' fees.
7.6 The Pledgor and the Secured Party may elect to terminate Pledge Holder by
submitting written notice thereof to the Pledge Holder, but may only do so
jointly. In the event of such termination, the Pledgor and the Secured Party
indemnify and hold the Pledge Holder harmless against any and all losses,
damages, claims and expenses, including reasonable attorneys' fees, that may be
incurred by it by reason of its compliance with the written notice provided to
it by the parties pursuant to this Section 7.6.
Section 8. Events of Default. Any one or more of the following events
constitutes an event of default ("Event of Default"):
8.1 Failure to pay within 15 days after the Maturity Date any amount of
principal or interest owing under the Note.
8.2 INTENTIONALLY OMITTED
8.3 A breach of or failure to perform any of the terms of this Agreement or the
Note (except failure to make payments owing under the Note) which has not been
cured within 20 days after
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notice has been given of such breach or failure, including, without limitation,
the representations and warranties contained in Section 5.
Section 9. Remedies. Upon the occurrence of any Event of Default, Secured Party
may, in the Secured Party's sole discretion and with or without further notice
to the Pledgor and in addition to all rights and remedies at law or in equity or
otherwise:
9.1 Avail itself of any of the rights or remedies provided by Section 7 of the
Promissory Note between Pledgor and Secured Party.
9.2 Repurchase, redeem, cancel or otherwise dispose of any or all of the Shares
in accordance with Section 10, below, if applicable.
Section 10. Sale upon Default. Pledgor and Secured Party acknowledge and agree
that the Shares are restricted, unregistered stock that is difficult to value
and for which no public market exists. Notwithstanding the proposed initial
public offering of common stock of the Secured Party, the parties further agree
that the Shares are not currently subject to sale in a "recognized market" as
that term is described in Article 9, Section 504 of the Uniform Commercial Code.
The Pledgor and the Secured Party wish to agree to reasonable standards for
conducting a commercially reasonable sale of the Shares. Without limiting rights
and remedies otherwise available to the Secured Party, the parties agree that
compliance with the following steps shall satisfy requirements of a commercially
reasonable sale:
10.1 The sale may be either a public or a private sale, at the Secured Party's
discretion, and it may be for all or any portion of the Shares.
10.2 The Secured Party shall set a date for public sale of the Shares, or a date
after which a private sale may occur, which date shall be not less than 30 days
after the date notice of the sale is given to the Pledgor, and shall send
written notification to the Pledgor in advance regarding the date and the time
of the public sale, or the date after which a private sale may occur.
10.3 Any public sale shall take place at Sacramento, California or any other
site within the State of California which the parties have agreed to.
10.4 Within seven days of receipt of a written request, Pledgor shall provide
the Secured Party with information requested by the Secured Party for compliance
with state or federal securities laws.
10.5 At any sale of any of the Shares, the Secured Party may restrict the
prospective bidders or purchasers to persons or entities who, by certain
representations made by them, would render registration of the sale under state
or federal securities laws unnecessary.
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The provisions of this Section 10 will not apply in the event that at the time
of sale upon default a public market exists for the Collateral whereby the
securities of the Secured Party are trading on a regional or national stock
exchange.
Section 11. Miscellaneous Provisions.
11.1 Amendment and Modification. Subject to applicable law, this Agreement may
be amended, modified, or supplemented only by a written agreement signed by the
parties.
11.2 Waiver of Compliance; Consents
11.2.1 Any failure of any party to comply with any obligation, covenant,
agreement, or condition herein may be waived by the party entitled to the
performance of such obligation, covenant, or agreement or who has the benefit of
such condition, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement, or condition will not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
11.2.2 Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent will be given in a manner consistent with the
requirements for a waiver of compliance as set forth above.
11.3 Notices. All notices, requests, demands, and other communications required
or permitted hereunder will be in writing and will be deemed to have been duly
given when delivered by hand or two days after being mailed by certified or
registered mail, return receipt requested, with postage prepaid to the Pledgor
at:
Xxxxxx X. Xxxx
to the Secured Party at:
Legacy Brands, Inc.
0000-X Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Secretary
to the Pledge Holder at:
Xxxxxx Xxxxxx Xxxxxxx, Esq.
Xxxxx & Gyemant
000 X. Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, XX 00000
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or to such other address as parties furnishes to each other pursuant to the
above.
11.4 Titles and Captions. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
11.5 Priority of Agreements. In the event of a conflict between the provisions
of this Agreement and the Employment Agreement between the Pledgor and the
Secured Party, the Employment Agreement shall control.
11.6 Entire Agreement. This Agreement contains the entire understanding between
and among the parties and supersedes any prior understandings and agreements
among them respecting the subject matter of this Agreement.
11.7 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
11.8 Attorney Fees. In the event a suit or action is brought by any party under
this Agreement to enforce any of its terms, or in any appeal therefrom, it is
agreed that the prevailing party shall be entitled to reasonable attorneys fees
to be fixed by the arbitrator, trial court, and/or appellate court.
11.9 Computation of Time. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday, or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
11.10 Pronouns and Plurals. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or persons may require.
11.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
11.12 Presumption. This Agreement or any section thereof shall not be construed
against any party due to the fact that said Agreement or any section thereof was
drafted by said party.
11.13 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
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11.14 Parties in Interest. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
11.15 Savings Clause. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
11.16 Counterparts. This Agreement may be executed in counterparts, each thereof
is hereby declared to be an original, and all shall constitute one and the same
Agreement.
Dated:
"PLEDGOR" "SECURED PARTY"
Legacy Brands, Inc.,
By:
--------------------------------- --------------------------------
Xxxxxx X. Xxxx Title:_____________________________
"PLEDGE HOLDER"
Xxxxx & Gyemant, a professional law corporation
Xxxxxx Xxxxxx Xxxxxxx hereby consents to act as Pledge Holder pursuant to this
Stock Pledge Agreement.
By:
-----------------------------------
Xxxxxx Xxxxxx Xxxxxxx
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