EXHIBIT 10.7
SECURITY AGREEMENT
This Security Agreement is made as of April 1, 1999 between Interpet, Inc., a
Delaware corporation ("Pledgee"), and Xxx XxXxxxxx ("Pledgor").
Recitals
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Pursuant to Pledgor's purchase of 400,000 shares of the Pledgee's Common Stock
under the Common Stock Purchase Agreement dated April 1, 1999 (the "Purchase
Agreement"), between Pledgor and Pledgee, Pledgor's desires to pay for 200,000
of such shares of Pledgee's Common Stock (the "Shares") with this promissory
note (the "Note"), for a total loan of $50,000. The Note and the obligations
thereunder are as set forth as Exhibit A to this Security Agreement.
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NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Securitv Interest. In consideration of the
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transfer of the Shares to Pledgor under the Purchase Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number C-___, duly endorsed in blank or with executed stock powers, and herewith
delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who
shall hold said certificate subject to the terms and conditions of this Security
Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, and the Pledgeholder shall not encumber or dispose of such Shares
except in accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
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into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
Payment of Indebtedness. Pledgor will pay the principal sum of
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the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
Encumbrances. The Shares are free of all other encumbrances,
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defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
Margin Regulations. In the event that Pledgee's Common Stock is
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now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
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payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
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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 Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder 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 Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge,
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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
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
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this Security Agreement in the event:
Payment of principal or interest on the Note shall be delinquent
for a period of l0 days or more; or
Pledgor fails to perform any of the covenants contained in this
Security Agreement for a period of l0 days after written notice thereof from
Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
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Regulation G, there shall be released from this pledge a portion of the pledged
Shares
held by Pledgeholder hereunder upon payments of the principal of the 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 Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
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withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
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all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
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proceeding is instituted by or against it, 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.
1l. Pledgeholder Liability. In the absence of willful or gross negligence,
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Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
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the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
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of this Security 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.
14. Governing Law. This Security Agreement shall be interpreted and
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governed under the internal substantive laws, but not the choice of law rules,
of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"PLEDGOR" /s/ Xxx XxXxxxxx
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Xxx XxXxxxxx
"PLEDGEE" Interpet, Inc.,
a Delaware corporation
/s/ Xxx XxXxxxxx
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Xxx XxXxxxxx, President
"PLEDGEHOLDER" /s/ Xxxxxx Xxxxxxxxx
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Xxxxxx Xxxxxxxxx, Secretary of Interpet, Inc.
EXHIBIT A
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NOTE
$50,000 Pasadena, CA
April 1, 1999
FOR VALUE RECEIVED, Xxx XxXxxxx promises to pay to Interpet, Inc., a Delaware
corporation (the "Company"), or order, the principal sum of Fifty Thousand
Dollars ($50,000), together with interest on the unpaid principal hereof from
the date hereof at the rate of seven percent (7%) per annum, compounded
semiannually.
Principal and interest shall be due and payable on April 1, 2004. Payment of
principal and interest shall be made in lawful money of the United States of
America.
The undersigned may at any time prepay all or any portion of the principal or
interest owing hereunder.
This Note is secured solely by a pledge of the Company's Common Stock under the
terms of a Security Agreement of even date herewith and is subject to all the
provisions thereof.
The holder of this Note shall have no recourse against the undersigned, and
shall be required to proceed solely against the collateral securing this Note in
the event of default.
Should any action be instituted for the collection of this Note, the reasonable
costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ Xxx XxXxxxxx
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Xxx XxXxxxxx
