Exhibit 10.9
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as of
November 15, 1999 (the "Effective Date"), by XXXXXXX.XXX, INC., formerly known
as Egghead, Inc. ("the Company") for the benefit of XXXXXXXX X. XXXXXXX
("Executive").
RECITALS:
The Company and Executive have entered into that certain Employment
Agreement effective as of October 25, 1999, the "Employment Agreement") pursuant
to which the Company and Executive agreed to enter into a pledge agreement.
This Agreement sets forth the terms and conditions upon which the Company
pledges to Executive the collateral described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company agrees as follows:
1. DEFINITIONS, ETC.
1.1 Terms Defined
For the purposes of this Agreement, the following terms shall have the
following meanings:
"Account" means that certain account established with Broker in the name of
the Company, currently designated as account no. 00704132241 8, together with
all replacements and substitutions for such account.
"Broker" means American Express Financial Advisors, Inc. and any successors
in interest to American Express Financial Advisors, Inc.
"Event of Default" means the failure, within ten days following demand by
Executive, to pay Executive any amount due pursuant to Section 4.2(a) of the
Employment Agreement.
"Pledged Assets" means the Account, together with (a) all assets now or
hereafter in the Account, including, without limitation, all securities
accounts, securities entitlements, investment property, financial assets,
certificated securities, and uncertificated securities (as those terms are
defined in the Uniform Commercial Code adopted in the state of Washington, as
amended from time to time), and (b) all
income, products, proceeds, dividends and distributions from any of the
foregoing, including, without limitation, proceeds in the nature of accounts,
general intangibles, and insurance proceeds.
"Required Pledge Amount" means a sum equal to the Executive's monthly gross
salary on the Effective Date hereof for a period of twelve months, less any
lawful withholding.
"Secured Obligations" means the obligation of the Company to pay Executive
all amounts due pursuant to Section 4.2(a) of the Employment Agreement.
1.2 Incorporation of Recitals and Exhibits
The foregoing recitals are incorporated into this Agreement by reference.
All references to "Exhibits" contained herein are references to exhibits
attached hereto, the terms of which are made a part hereof for all purposes.
2. PLEDGE AND CREATION OF SECURITY INTEREST
2.1 Pledge and Grant of Security Interest
As security for the full, prompt and complete payment by the Company of
each of the Secured Obligations, the Company hereby pledges, assigns,
hypothecates, and transfers to Executive the Pledged Assets and grants to
Executive a security interest under the Uniform Commercial Code of the state of
Washington, as amended, in and to the Pledged Assets.
2.2 Voting Rights
Unless and until an Event of Default occurs, the Company may exercise all
voting, corporate, consensual and other rights with respect to the Pledged
Assets, provided, however, that no vote shall be cast or corporate right
exercised or other action taken which, in Executive's reasonable judgment, would
impair the Pledged Assets or which would be inconsistent with or result in any
violation of any provision of this Agreement.
2.3 Value of Collateral
(a) Within ten days of the execution of this Agreement, the Company shall
cause to be deposited into the Account cash in the amount of the Required Pledge
Amount.
(b) If the market value of the Pledged Assets ever exceeds 110% of the
Required Pledge Amount (whether or not an Event of Default exists) during the
term
of this Agreement, the Company shall be entitled to a release and distribution
from the Account of assets selected by the Company in excess of the Required
Pledge Amount. Executive agrees to fully cooperate with the Company in obtaining
such a distribution from the Account.
(c) If the market value of the Pledged Assets is ever less than 90% of the
Required Pledge Amount during the term of this Agreement, the Company shall,
within ten days of written demand by Executive to the Company, deposit cash into
the Account in an amount necessary to bring the market value of the Pledged
Assets to the Required Pledge Amount.
(d) If Executive's monthly gross salary increases during the term of this
Agreement, then Executive may require, by written notice to the Company, that
the Required Pledge Amount be increased to reflect his then-current monthly
gross salary (the "Adjusted Required Pledge Amount"), and that the Company
deposit cash into the Account in an amount necessary to bring the market value
of the Pledged Assets to the Adjusted Required Pledge Amount.
(e) During the term of this Agreement the Company shall be permitted to
invest funds in the Account in accordance with the investment guidelines
attached to this Agreement as Exhibit A.
---------
3. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that:
3.1 No Approvals
No consent, license, permit, approval or authorization of, or filing with,
or notice or report to, or registration, filing or declaration with, any person
(including, without limitation, any governmental authority or creditors of the
Company), is required in connection with the execution, delivery, performance,
validity or enforceability by or against the Company of this Agreement.
3.2 Enforceability
This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
3.3 Other Agreements
The execution, delivery and performance of this Agreement do not and will
not violate any requirement of law or any contractual obligation applicable to
or binding upon the Company.
3.4 Ownership
The Company is the owner of and has good and marketable title to the
Pledged Assets and will, at its own expense, defend Executive's right, title and
security interest in and to the Pledged Assets against the claims of any person
or entity.
3.5 No Encumbrances
The Company represents that all of the Pledged Assets are owned by the
Company free of any pledge, mortgage, hypothecation, lien, charge, encumbrance
or security interest in such shares or the proceeds thereof, except for that
granted hereunder.
3.6 First Priority Lien
The lien against the Pledged Assets granted pursuant to this Agreement
constitutes a valid, perfected first priority lien on the Pledged Assets,
enforceable as such against all creditors of the Company and any persons
purporting to purchase any of the Pledged Assets from the Company.
4. COVENANTS
The Company covenants and agrees with Executive that, from and after the
date of this Agreement until the Secured Obligations are paid in full:
4.1 No Other Liens
The Company will not create or permit the existence of any lien on or
security interest in the Pledged Assets (other than that hereby created) without
the written consent of Executive.
4.2 Sale or Encumbrance
Without the prior written consent of Executive and except as otherwise
provided in Section 2.3(e) hereof, the Company will not (a) sell, assign,
transfer, exchange or otherwise dispose of, or grant any option with respect to,
the Pledged Assets, (b) create, incur or permit to exist any lien or option in
favor of, or any claim of any person with respect to, any of the Pledged Assets,
or any interest therein, except
for the lien provided for by this Agreement. The Company will defend the right,
title and interest of Executive in and to the Pledged Assets against the claims
and demands of all persons whomsoever. Notwithstanding the foregoing, the
Company may sell one or more of the Pledged Assets so long as the proceeds from
such sale remain in the Account subject to the security interest granted by the
Company to Executive pursuant to this Agreement.
4.3 Further Assurances
At any time and from time to time, upon the written request of Executive,
and at the sole expense of the Company, the Company will promptly and duly
execute and deliver such further instruments and documents and take such further
actions as Executive may reasonably request for the purposes of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted.
4.4 Indemnification
The Company agrees to pay, and to save Executive harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes (except for the tax imposed on the overall
net income of Executive) which may be payable or determined to be payable with
respect to any of the Pledged Assets or in connection with any of the
transactions contemplated by this Agreement.
5. RIGHTS AND REMEDIES
5.1 Remedies
Executive may exercise, in addition to all other rights and remedies
granted in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the Uniform Commercial Code of the state of Washington.
Without limiting the generality of the foregoing, Executive, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law or referred to in this Agreement) to
or upon the Company or any other person (all and each of which demands,
defenses, advertisements and notices are hereby waived to the extent not
prohibited by law), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Pledged Assets, or any part thereof, and/or may
forthwith withdraw from the Account, sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Pledged Assets or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any exchange
broker's board or
at Executive's offices or elsewhere upon such terms and conditions as he may
deem advisable, for cash or on credit or for future delivery without assumption
of any credit risk. Executive shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales
to purchase the whole or any part of the Pledged Assets so sold, free and clear
of any right or equity of redemption in the Company, which right or equity is
hereby waived or released to the extent not prohibited by law. Executive shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Pledged Assets or in any way relating to the Pledged Assets or the rights of
Executive hereunder, including, without limitation, reasonable attorneys' fees
and disbursements, to the payment in whole or in part of the Secured Obligations
in such order as Executive may elect, and only after such application and after
the payment by Executive of any other amount required by any provision of law,
including, without limitation, RCW 62A.9-504(1)(c), need Executive account for
the surplus, if any, to the Company.
5.2 Rights Regarding Pledged Assets
If an Event of Default shall occur: (a) Executive shall have the right to
receive any and all cash dividends paid in respect of the Pledged Assets and
make application thereof to the Secured Obligations in such order as he may
determine and (b) the Pledged Assets shall be registered in the name of
Executive or his nominee, and Executive or his nominee may thereafter exercise
(i) all voting, corporate, consensual and other rights pertaining to such shares
of the Pledged Assets and (ii) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Assets as if he were the absolute owner thereof
(including, without limitation, the right to exchange at his discretion any and
all of the Pledged Assets upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
issuer of the Pledged Assets, or upon the exercise by the Company or Executive
of any right, privilege or option pertaining to such Pledged Assets, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Assets with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as he may determine), all
without liability except to account for property actually received by him, but
Executive shall have no duty to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
5.3 Right to Proceed Against Pledged Assets
The rights of Executive hereunder shall not be conditioned or contingent
upon the pursuit by Executive of any right or remedy against the Company or
against any other person which may be or become liable in respect of all or any
part of the Secured Obligations or against any other collateral therefor,
guarantee thereof or right of offset with respect thereto. Executive shall not
be liable for any failure to demand, collect or realize upon all or any part of
the Pledged Assets or for any delay in doing so, nor shall he be under any
obligation to sell or otherwise dispose of any Pledged Assets upon the request
of the Company or any other person or to take any other action whatsoever with
regard to the Pledged Assets or any part thereof except that Executive shall be
required to exercise reasonable care with respect to the safe keeping of
collateral in his possession.
5.4 Waiver; Notice of Sale
To the extent permitted by applicable law, the Company waives all claims,
damages and demands it may acquire against Executive arising out of the exercise
by Executive of any of his rights hereunder. If any notice of a proposed sale
or other disposition of Pledged Assets shall be required by law, such notice
shall be deemed reasonable and proper if given at least ten days before such
sale or other disposition. To the extent not prohibited by applicable law, the
Company further waives and agrees not to assert any rights or privileges which
it may acquire under RCW 62A.9-112.
6. GENERAL PROVISIONS
6.1 Limitation on Duties Regarding Pledged Assets
Executive shall not be liable for failure to demand, collect or realize
upon any of the Pledged Assets or for any delay in doing so nor shall Executive
be under any obligation to sell or otherwise dispose of any Pledged Assets upon
the request of the Company or otherwise.
6.2 Expenses Incurred by Executive
Executive is not required to, but may at his option, pay any tax or other
charge or expense payable by the Company and any filing or recording fees, and
any amounts so paid shall be repayable by the Company upon demand. The Company
will also repay upon demand all of Executive's reasonable expenses incurred in
collecting, conserving or protecting the Pledged Assets. All such sums shall
bear interest at 8% per annum from the date of Executive's payment until the
Company's repayment. All such sums and interest thereon shall be secured by the
security interest granted herein.
The rights granted by this Section 6.2 are not a waiver of any other rights of
Executive arising from breach of any of the Company's covenants.
6.3 Nonwaivers
This Agreement shall not be qualified or supplemented by course of dealing.
No waiver or modification by Executive of any of the terms or conditions hereof
shall be effective unless in writing signed by Executive. No waiver or
indulgence by Executive as to any required performance by the Company shall
constitute a waiver as to any subsequent required performance or other
obligations of the Company hereunder.
6.4 Attorneys' Fees and Costs
In the event of an arbitration or litigation between the parties to enforce
a right or rights under this Agreement, the prevailing party shall be entitled
to recover from the nonprevailing party all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party in protecting or
enforcing rights under the terms of this Agreement. Attorneys' fees shall
include services rendered at arbitration, trial and any appeal therefrom, in
bankruptcy, as well as services rendered subsequent to judgment and obtaining
execution thereon.
6.5 Term of Agreement
This Agreement shall be a continuing agreement until such time as the
Company has paid the Secured Obligations as described in Section 4.2(a) of the
Employment Agreement. Upon payment of the Secured Obligations, the Company
shall be entitled to a distribution of all of the Pledged Assets and a written
acknowledgment in a form reasonably designated by the Company executed by
Executive that this Agreement has terminated. Executive agrees to cooperate
with the Company in obtaining such a distribution of all of the Pledged Assets
and a written acknowledgment of termination.
6.6 Successors
All obligations, rights, powers and privileges herein provided shall inure
to the benefit of and shall bind the heirs, executors, administrators and
successors of the parties hereto.
6.7 Governing Law
This Agreement and the Secured Obligations are subject to the laws of the
state of Washington and are to be construed in accordance therewith.
6.8 Consent to Jurisdiction, Service and Venue
For the purpose of performance of the obligations under or otherwise in
connection herewith, the parties hereby consent to the jurisdiction and venue of
the courts of the state of Washington or of any federal court located in such
state. The parties hereby waive the right to contest the jurisdiction and venue
of courts located in the state of Washington on the ground of inconvenience or
otherwise.
6.9 Severability
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.10 Satisfaction of Obligation
The parties agree that the execution of this Agreement and consummation of
the pledge of the Pledge Assets in accordance with the provisions of this
Agreement shall satisfy the requirement set forth in Section 4.2(d) of the
Employment Agreement.
6.11 Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original Agreement, but all of which together shall
constitute one and the same instrument.
XXXXXXX.XXX, INC.
By: /s/ XXXXXX X. XXXXX
---------------------------------
Title: CEO
--------------------------------
Accepted By:
/s/ XXXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxxx X. Xxxxxxx
