STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by XXXXX XXXXXXXX, an
individual with a residence at ____________________ ("Pledgor"), in favor of
GRAPHON CORPORATION, with its principal place of business at 0000 Xxxxxx Xxx.,
Xxxxx Xxxx, Xx 00000 ("Pledgee").
WHEREAS, Pledgor has concurrently herewith executed that certain Secured
Promissory Note (the "Note") in favor of Pledgee in the amount of Three Hundred
Fifty Thousand Dollars ($350,000), which amount is to be used as consideration
for the purchase from Xxxxxxxxx Xxxxxxxx of Twenty Thousand Nine Hundred Nine
(20,909) shares of the Common Stock of Network Engineering Software, Inc.
("NES"); and
WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only upon
the condition, among others, that Pledgor shall have executed and delivered to
Pledgee this Pledge Agreement and the Pledged Collateral (as defined below);
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Pledgor hereby agrees as
follows:
1. As security for the full, prompt and complete payment and performance when
due (whether by stated maturity, by acceleration or otherwise) of all
indebtedness of Pledgor to Pledgee created under the Note, together with,
without limitation, the prompt payment of all expenses, including, without
limitation, reasonable attorneys' fees and legal expenses, incidental to the
collection of the foregoing and the enforcement or protection of Pledgee's lien
in and to the collateral pledged hereunder (all such indebtedness being the
"Liabilities"), Pledgor hereby pledges to Pledgee, and grants to Pledgee, a
first priority security interest in all of the following (collectively, the
"Pledged Collateral"):
(a) Fifty-Two Thousand Thirty-Nine (52,039) shares of Common Stock of NES
represented by Certificate(s) numbered ________________ (the "Pledged Shares"),
and all dividends, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares, including without limitation, any shares
of Common Stock of Pledgee that may be received in exchange for the Pledged
Shares;
(b) all voting trust certificates held by Pledgor evidencing the right to vote
any Pledged Shares subject to any voting trust; and
(c) all additional shares of Common Stock of NES and all voting trust
certificates held by Pledgor evidencing the right to vote any such additional
shares subject to any voting trust from time to time acquired by Pledgor in any
manner (which additional shares shall be deemed to be part of the Pledged
Shares), and the certificates representing such additional shares, and all
dividends, cash, instruments and other property or proceeds from time to time
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received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares.
The term "indebtedness" is used herein in its most comprehensive sense and
includes any and all advances, debts, obligations and liabilities heretofore,
now or hereafter made, incurred or created, whether voluntary, or involuntary,
and whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether recovery upon such indebtedness may be
or hereafter becomes unenforceable.
2. Pledgor hereby represents and warrants to Pledgee as follows:
(a) Pledgor is, at the time of delivery of the Pledged Shares to Pledgee
hereunder, and at all times during which this Pledge Agreement is in effect
shall be, the sole holder of record and the sole beneficial owner of the Pledged
Collateral, free and clear of any lien thereon or affecting title thereto,
except for the lien created by this Pledge Agreement.
(b) None of the Pledged Shares have been transferred in violation of securities
registration, securities disclosure or similar laws of any jurisdiction to which
such transfer may be subject.
(c) No consent, approval, authorization or other order of any person and no
consent or authorization of any governmental authority or regulatory body is
required to be made or obtained by Pledgor either (i) for the pledge by Pledgor
of the Pledged Collateral pursuant to this Pledge Agreement or for the
execution, delivery, or performance of this Pledge Agreement by Pledgor; or (ii)
for the exercise by Pledgee of the voting or other rights provided for in this
Pledge Agreement or the remedies with respect to the Pledged Collateral pursuant
to this Pledge Agreement, except as may be required in connection with such
disposition by laws affecting the offering and sale of securities generally.
(d) The pledge, grant of a security interest in, and delivery of the Pledged
Collateral pursuant to this Pledge Agreement, will create a valid first priority
lien on and in the collateral pledged by Pledgor, and the proceeds thereof,
securing the payment of the Liabilities.
(e) This Pledge Agreement has been duly executed and delivered by Pledgor and
constitutes a legal, valid, and binding obligation of Pledgor enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or other similar laws affecting the rights of creditors
generally or by the application of general equity principles.
Pledgor covenants, warrants, and represents to Pledgee that all
representations and warranties contained in this Pledge Agreement shall be true
at the time of Pledgor's execution of this Pledge Agreement, and shall continue
to be true until the Liabilities have been paid or otherwise satisfied in full.
3. At any time, without notice, and at the expense of Pledgor, Pledgee in its
name or in the name of its nominee or of Pledgor may, but shall not be obligated
to: (a) collect by legal proceedings or otherwise all dividends (except cash
dividends other than liquidating dividends), interest, principal payments and
other sums now or hereafter payable upon or on account of said Pledged
Collateral; (b) enter into any extension, reorganization, deposit, merger or
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consolidation agreement, or any agreement in any way relating to or affecting
the Pledged Collateral, and in connection therewith may deposit or surrender
control of such Pledged Collateral thereunder, accept other property in exchange
for such Pledged Collateral and do and perform such acts and things as it may
deem proper, and any money or property received in exchange for such Pledged
Collateral shall be applied to the Liabilities or thereafter held by it pursuant
to the provisions hereof; (c) insure, process and preserve the Pledged
Collateral; (d) cause the Pledged Collateral to be transferred to its name or to
the name of its nominee; and (e) exercise as to such Pledged Collateral all the
rights, powers and remedies of an owner, except that so long as no Event of
Default (as defined in the Note), exists under the Note, Pledgor shall retain
all voting rights as to the Pledged Shares.
4. Pledgor hereby irrevocably appoints Pledgee to be Pledgor's attorney-in-fact,
with full authority in the place and stead of Pledgor and in the name of Pledgor
or otherwise, from time to time in Pledgee's discretion after the occurrence and
during the continuance of an Event of Default, to take any action and to execute
any instrument which Pledgee may reasonably deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including, without limitation:
(a) after the occurrence and during the continuance of an Event of Default, to
ask, demand, collect, xxx for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the
Pledged Collateral;
(b) to receive, endorse, and collect any drafts or other instruments, documents
and chattel paper, in connection with clause (a), above; and
(c) to file any claims or take any action or institute any proceedings which
Pledgee may deem necessary or desirable for the collection of any of the Pledged
Collateral or otherwise to enforce the rights of Pledgee with respect to any of
the Pledged Collateral.
Pledgor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section 4 is irrevocable and coupled with an
interest.
5. Pledgor agrees to pay prior to delinquency all taxes, charges, liens and
assessments against the Pledged Collateral, and upon the failure of Pledgor to
do so, Pledgee at its option may pay any of them and shall be the sole judge of
the legality or validity thereof and the amount necessary to discharge the same.
6. Pledgor agrees that Pledgor:
(a) will not (i) sell, transfer or otherwise dispose of (other than in exchange
for shares of Common Stock of Pledgee in connection with an acquisition of NES
by Pledgee), or grant any option or warrant with respect to, any of the Pledged
Collateral (or any part thereof or interest therein) except with the prior
written consent of Pledgee, or (ii) create or permit to exist any lien or
encumbrance upon or with respect to any of the Pledged Collateral except for the
lien created by this Pledge Agreement. If, with the prior written consent of
Pledgee, any of the Pledged Collateral is sold or transferred, Pledgor shall pay
to Pledgee twenty-five percent (25%) of the gross proceeds of such sale or
transfer within five (5) days following the closing of such sale or transfer. If
any Pledged Collateral, or any part thereof, is sold, transferred or otherwise
disposed of in violation of this Section 5, the security interest of Pledgee
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shall continue in the Pledged Collateral notwithstanding such sale, transfer or
other disposition, and the Pledgor will deliver any proceeds thereof to the
Pledgee to be held as Pledged Collateral hereunder;
(b) shall, at Pledgor's own expense, promptly execute, acknowledge, and deliver
all such instruments and take all such actions as Pledgee from time to time may
reasonably request in order to ensure to Pledgee the benefits of the lien in and
to the Pledged Collateral intended to be created by this Pledge Agreement;
(c) shall maintain, preserve and defend the title to the Pledged Collateral and
the lien of Pledgee thereon against the claim of any other person.
7. At the option of Pledgee and without necessity of demand or notice, all or
any part of the Liabilities shall immediately become due and payable
irrespective of any agreed maturity, upon the occurrence of an Event of Default
under the Note.
8. All advances, charges, costs and expenses, including reasonable attorneys'
fees, incurred or paid by Pledgee in exercising any right, power or remedy
conferred by this agreement, or in the enforcement thereof, shall become a part
of the indebtedness secured hereunder and shall be paid to Pledgee by the
undersigned immediately and without demand.
9. Upon the occurrence of an Event of Default under the Note, Pledgee may then,
or at any time thereafter, at its election, apply, set off, collect or sell in
one or more sales, or take such steps as may be necessary to liquidate and
reduce to cash in the hands of Pledgee in whole or in part, with or without any
previous demands or demand of performance or notice or advertisement, the whole
or any part of the Pledged Collateral in such order as Pledgee may elect, and
any such sale may be made either at public or private sale at its place of
business or elsewhere, or at any broker's board or securities exchange, either
for cash or upon credit or for future delivery; provided, however, that if such
disposition is at private sale, then the purchase price of the Pledged
Collateral shall be equal to the public market price then in effect, or, if at
the time of sale no public market for the Pledged Collateral exists, then, in
recognition of the fact that the sale of the Pledged Collateral would have to be
registered under the Securities Act of 1933 and that the expenses of such
registration are commercially unreasonable for the type and amount of collateral
pledged hereunder, Pledgee and Pledgor hereby agree that such private sale shall
be at a purchase price mutually agreed to by Pledgee and Pledgor or, if the
parties cannot agree upon a purchase price, then at a purchase price established
by the Board of Directors of the Pledgee in the exercise of its reasonable
discretion. Pledgee may be the purchaser of any or all Pledged Collateral so
sold and hold the same thereafter in its own right free from any claim of
Pledgor or right of redemption. Demands of performance, notices of sale,
advertisements and presence of property at sale are hereby waived, and Pledgee
is hereby authorized to sell hereunder any evidence of debt pledged to it. Any
sale hereunder may be conducted by any officer or agent of Pledgee.
10. The proceeds of the sale of any of the Pledged Collateral and all sums
received or collected by Pledgee from or on account of such Pledged Collateral
shall be applied by Pledgee to the payment of expenses incurred or paid by
Pledgee in connection with any sale, transfer or delivery of the Pledged
Collateral, to the payment of any other costs, charges, attorneys' fees or
expenses mentioned herein, and to the payment of the Liabilities or any part
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thereof, all in such order and manner as Pledgee in its discretion may
determine. Pledgee shall then pay any balance to Pledgor.
11. Upon the transfer of all or any part of the Liabilities, Pledgee may
transfer all or any part of the Pledged Collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such Pledged
Collateral so transferred, and the transferee shall be vested with all the
rights and powers of Pledgee hereunder with respect to such Pledged Collateral
so transferred; but with respect to any Pledged Collateral not so transferred
Pledgee shall retain all rights and powers hereby given.
12. Until all Liabilities shall have been paid in full the power of sale and all
other rights, powers and remedies granted to Pledgee hereunder shall continue to
exist and may be exercised by Pledgee at any time and from time to time
irrespective of the fact that the Liabilities or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Pledgor may have ceased.
13. Pledgee may at any time deliver the Pledged Collateral or any part thereof
to Pledgor and the receipt thereof by Pledgor shall be a complete and full
acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
14. The rights, powers and remedies given to Pledgee by this Pledge Agreement
shall be in addition to all rights, powers and remedies given to Pledgee by
virtue of any statute or rule of law. Any forbearance, failure or delay by
Pledgee in exercising any right, power or remedy hereunder shall not be deemed
to be a waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the further
exercise thereof: and every right, power and remedy of Pledgee shall continue in
full force and effect until such right, power or remedy is specifically waived
by an instrument in writing executed by Pledgee.
15. If any provision of this Pledge Agreement is held to be unenforceable for
any reason, it shall be adjusted, if possible, rather than voided in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Pledge Agreement shall be deemed valid and enforceable
to the full extent possible.
16. This Pledge Agreement shall be governed by, and construed in accordance
with, the laws of the State of California as applied to contracts made and
performed entirely within the State of California by residents of such State.
Dated: 10/6/04
PLEDGOR /s/ Xxxxx Xxxxxxxx
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XXXXX XXXXXXXX
