STOCK PLEDGE AGREEMENT
Execution
Version
THIS
STOCK PLEDGE AGREEMENT (“Pledge
Agreement”)
is
made this 28th day of September, 2007 by DIOMED
HOLDINGS, INC. and
DIOMED,
INC.,
each a
Delaware corporation (each a “Pledgor”
and
together, the “Pledgors”),
in
favor of HERCULES
TECHNOLOGY GROWTH CAPITAL, INC.
(“Pledgee”).
WHEREAS,
each
Pledgor has concurrently herewith entered into that certain Loan and Security
Agreement dated as of September 28th, 2007 (as amended and in effect from time
to time, the “Loan
Agreement”)
with
Pledgee pursuant to which Pledgee has agreed to make certain advances of money
and to extend certain financial accommodations to Pledgor (collectively, the
“Loan”),
subject to the terms and conditions set forth therein;
WHEREAS,
each Pledgor
owns the percentage of the outstanding stock set forth beside the entities
listed on Exhibit
A
attached
hereto (which may be amended, updated, or otherwise modified from time to
time);
WHEREAS,
Pledgee
is willing to make the Loan to Pledgor, but only upon the condition, among
others, that each 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, each Pledgor hereby agrees as
follows:
1. All
capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Loan Agreement.
2. As
security for the full, prompt and complete payment and performance when due
(whether by stated maturity, by acceleration or otherwise) of all the Secured
Obligations, 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”),
each
Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first priority
security interest in all of the following (collectively, the “Pledged
Collateral”):
(a) the
shares of capital stock or other equity securities of the entities listed on
Exhibit
A
attached
hereto now owned or hereafter acquired (whether in connection with any
recapitalization, reclassification, or reorganization of the capital of such
entities or any successors in interest thereto) by Pledgor (collectively, 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;
(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 and voting trust certificates of the entities listed on
Exhibit
A
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 received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Shares;
1.
provided,
however,
that
notwithstanding the foregoing clauses
(a)
through
(c),
in no
event and at no time shall the Pledged Collateral include or be comprised of
the
issued and outstanding capital stock or other equity securities (calculated
on
an as-converted or as-exercised basis) of any Subsidiary of Pledgor organized
under the laws of any jurisdiction other than the United States of America,
or a
subdivision thereof (a “Foreign
Subsidiary”)
which
exceeds 65% of all such issued and outstanding capital stock or other equity
securities (calculated on an as-converted or as-exercised basis) of such Foreign
Subsidiary, and, in each case, the corresponding proportion of dividends,
distributions, interest and other payments and rights with respect
thereto.
3. Each
Pledgor hereby represents and warrants to Pledgee as follows:
(a) Pledgor
is, at the time of delivery of the Pledged Shares to Pledgee hereunder, the
sole
holder of record and the sole beneficial owner of its Pledged Collateral, free
and clear of any lien thereon or affecting title thereto, except for the lien
created by this Pledge Agreement and Permitted Liens.
(b) None
of
the Pledged Shares have been transferred in violation of applicable federal
or
state securities laws to which such transfer may be subject.
(c) All
of
the Pledged Shares have been duly authorized, validly issued, and fully paid,
and are non-assessable and constitute the percentage of the issued and
outstanding capital stock owned by Pledgor set forth on Exhibit
A.
(d) 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 its 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 offer and sale of securities generally.
(e) 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 Pledged Collateral, and the proceeds thereof, securing the payment
of
the Liabilities.
(f) 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.
Each
Pledgor warrants and represents to Pledgee that all representations and
warranties contained in this Pledge Agreement shall be true in all material
respects at the time of Pledgor’s execution of this Pledge Agreement and with
each Advance made to the Borrowers under the Loan Agreement.
4. So
long
as no Event of Default exists and Pledgee has not given either Pledgor notice
it
will enforce its security interest in the Pledged Collateral:
(a) Voting
Rights.
Each
Pledgor shall be entitled to exercise any and all voting and other consensual
rights pertaining to its Pledged Collateral, provided that no vote shall be
cast
or consent, waiver or ratification given by such Pledgor if the effect thereof
would in the reasonable judgment of the Lender materially impair any of the
Pledged Collateral or be inconsistent with or result in any violation of any
of
the provisions of the Loan Agreement, the Notes or any of the other Loan
Documents; and
2.
(b) Dividend
and Distribution Rights.
Each
Pledgor shall be entitled to receive and to retain and use any and all dividends
or distributions paid in respect of its Pledged Collateral; provided, however,
that any
and all:
(i) non-cash
dividends or distributions in the form of capital stock, instruments or other
property received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral, and
(ii) dividends
and other distributions paid or payable in cash in respect of any Pledged
Collateral in connection with total liquidation or dissolution,
shall
forthwith be delivered to Pledgee, to be held as Pledged Collateral and shall,
if received by a Pledgor, be received in trust for the benefit of Pledgee,
be
segregated from the other property of such Pledgor, and forthwith be delivered
to Pledgee as Pledged Collateral in the same form as so received (with any
necessary endorsement).
5. Each
Pledgor agrees to pay prior to delinquency all taxes, charges, liens and
assessments against the Pledged Collateral, except those with respect to which
the amount or validity is being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have
been
provided on the books of such Pledgor and upon the failure of such 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. So
long
as Pledgee has any commitment to make Advances to any Pledgor under the Loan
Agreement or any Pledgor has any Secured Obligations (other than inchoate
indemnity obligations) outstanding under the Loan Agreement, each Pledgor agrees
that such Pledgor:
(a) will
not
(i) sell, transfer or otherwise dispose of, 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 Permitted Liens. If any Pledged Collateral,
or
any part thereof, is sold, transferred or otherwise disposed of in violation
of
this Section
6,
the
security interest of Pledgee shall continue in the Pledged Collateral
notwithstanding such sale, transfer or other disposition, and Pledgor will
deliver any proceeds thereof to 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;
3.
(d) upon
obtaining any shares of capital stock or other equity securities that should
be
pledged pursuant to Section
2
of this
Pledge Agreement, shall immediately (i) deliver to Pledgee a duly executed
Pledge Agreement Supplement in substantially the form of Schedule
1
attached
hereto (a “Pledge
Agreement Supplement”)
identifying such additional shares of capital stock or other equity securities,
and (ii) deliver or otherwise cause the transfer of such additional shares
of capital stock or other equity securities to the Pledgee, provided,
in
each
case so as to cause at all times the Pledged Collateral to constitute, but
in no
event and at no time to exceed, 65% of the issued and outstanding capital stock
or other equity securities (calculated on an as-converted or as-exercised basis)
of any Foreign Subsidiary. Pledgor hereby authorizes Pledgee to attach each
Pledge Agreement Supplement to this Pledge Agreement and agrees that all shares
of capital stock or other equity securities listed thereon shall for all
purposes hereunder constitute Pledged Collateral.
7. In
the
event that during the term of this Pledge Agreement, any reclassification,
readjustment, new issuance or other change is declared or made in the capital
structure of the issuer of the Pledged Shares, all new substituted and
additional shares, options, or other securities, issued or issuable to any
Pledgor by reason of any such issuance, change or exercise shall be delivered
to
and held by Pledgee under the terms of this Pledge Agreement in the same manner
as the Pledged Collateral originally pledged hereunder.
8. All
advances, charges, costs and expenses, including reasonable attorneys’ fees,
incurred or paid by Pledgee in exercising any right, power or remedy conferred
upon Pledgee by this Pledge Agreement, or in the enforcement thereof, shall
become a part of the Liabilities secured hereunder and shall be paid to Pledgee
on demand.
9. During
the existence of an Event of Default, Pledgee may, to the extent permitted
by
applicable law, 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, as amended (the “Act”),
and
that the expenses of such registration are commercially unreasonable for the
type and amount of collateral pledged hereunder, Pledgee and each Pledgor hereby
agree that such private sale shall be at a purchase price mutually agreed to
by
Pledgee and the Pledgors or, if the parties cannot agree upon a purchase price,
then at a purchase price established by Pledgee in the exercise of its
reasonable discretion. Pledgee shall be under no obligation to delay the sale
of
any of the Pledged Shares for the period of time necessary to permit a Pledgor
to register such securities for public sale under the Act, or under applicable
state securities laws, even if such Pledgor would agree to do so. 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 any Pledgor or right of
redemption. To the extend permitted by law, demands of performance, notices
of
sale, advertisements and presence of property at sale are hereby waived. 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 reasonable 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 Secured Obligations or
any
part hereof, all in such order and manner as Pledgee in its discretion may
determine. Pledgee shall then pay any remaining balance of the Secured
Obligations to the Pledgor.
11. Upon
the
transfer of all or any part of Secured Obligations pursuant to the terms of
the
Loan Agreement, Pledgee may transfer all or any part of the Pledged Collateral
to the transferee of the Secured Obligations 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.
4.
12. Until
all
Secured Obligations shall have been paid in full in cash, 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 pursuant to the terms hereof.
13. Pledgee
may at any time deliver the Pledged Collateral or any part thereof to a Pledgor
and the receipt thereof by such 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 therefore, except for such
as is
directly caused by Pledgee’s gross negligence or willful misconduct.
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,
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.
17. Upon
the
payment in full in cash of all Secured Obligations (other than inchoate
indemnity obligations) and the cancellation or termination of any commitment
to
extend credit or make Advances under the Loan Agreement, the security interest
granted herein shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgors, and Pledgee shall immediately return all Pledged
Collateral to the applicable Pledgor. Upon such termination, Pledgee shall,
at
Pledgors’ cost and expense, execute and deliver to any Pledgor any additional
documents or instruments as such Pledgor reasonably request to evidence such
termination.
[Signature
Page Follows]
5.
IN
WITNESS WHEREOF,
each
Pledgor has executed this Pledge Agreement as of the date first set forth
above.
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DIOMED
HOLDINGS, INC.
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By:
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Name:
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Title:
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DIOMED,
INC.
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By:
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Name:
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Title:
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1.
Exhibit
A
Pledgor:
Diomed Holdings, Inc.
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Name of
Pledged
Share
Issuer
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Jurisdiction
of
Organization
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Number of
Shares
Authorized
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Number of
Shares
Issued
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Number of
Shares
Outstanding
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Number of
Shares
Owned by
Pledgor
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% of
Outstanding
Shares
Pledged
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Certificate
Number
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|||||||
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Diomed,
Inc.
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Delaware
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3,500,000
Preferred
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3,500,000
Preferred
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3,500,000
Preferred
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3,500,000
Preferred
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100%
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P-1
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Diomed,
Inc.
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Delaware
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40,000,000
Common
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40,000,000
Common
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40,000,000
Common
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40,000,000
Common
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100%
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1
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Pledgor:
Diomed, Inc.
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Name of
Pledged
Share
Issuer
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Jurisdiction
of
Organization
|
Number of
Shares
Authorized
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Number of
Shares
Issued
|
Number of
Shares
Outstanding
|
Number of
Shares
Owned by
Pledgor
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% of
Outstanding
Shares
Pledged
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Certificate
Number
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|||||||
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Diomed
PDT, Inc.
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Delaware
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100
Common
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100
Common
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100
Common
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100
Common
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100%
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1
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Diomed
Acquisition Corp.
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Delaware
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1,000
Common
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1,000
Common
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1,000
Common
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1,000
Common
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100%
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1
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2.
Schedule
1
Pledge
Agreement Supplement
This
Pledge Agreement Supplement, dated as of _____________, 20__, is delivered
pursuant to Section 6(d) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Agreement Supplement may be attached
to the Pledge Agreement, dated as of September 28, 2007 (as amended, restated,
modified, renewed, supplemented or extended from time to time, the “Pledge
Agreement”;
the
terms defined therein and not otherwise defined herein being used as therein
defined), made by the undersigned, as Pledgor in favor of Hercules Technology
Growth Capital, Inc., as Pledgee, and that the shares of capital stock or other
equity securities listed on this Pledge Agreement Supplement shall be and become
part of the Pledged Collateral pledged by the undersigned and referred to in
the
Pledge Agreement and shall secure all Secured Obligations.
The
undersigned agree that the shares of capital stock and other equity securities
listed below shall for all purposes constitute Pledged Collateral pledged by
the
undersigned and shall be subject to the security interest created by the Pledge
Agreement.
The
undersigned hereby certify that the representation and warranties set forth
in
Section 3 of the Pledge Agreement are true and complete in all material respects
with respect to the Pledged Shares listed below on and as of the date
hereof.
3.
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Name of
Pledged
Share
Issuer
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Jurisdiction
of
Organization
|
Number of
Shares
Authorized
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Number of
Shares
Issued
|
Number of
Shares
Outstanding
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Number of
Shares
Owned by
Pledgor
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% of
Outstanding
Shares
Pledged
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Certificate
Number
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4.
