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EXHIBIT 10.22
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement (this "Agreement") is made and entered
into as of the 31st day of August, 1999 by and among VSI Enterprises, Inc. (the
"Pledgor"), Thomson Kernaghan & Co., Ltd. ("TKC"), the persons and entities
executing a signature page hereto as a "Former Term Note Holder" (collectively,
the "Former Term Note Holders"), the persons and entities executing a signature
page hereto as a "New Equity Holder" (collectively, the "New Equity Holders")
(TKC, the Former Note Holders and the New Equity Holders are each sometimes
referred to herein as a "Secured Party" and collectively as the "Secured
Parties") and Xxxxxxx Xxxxxx L.L.P., as Depository Agent ("Depository Agent").
RECITALS
WHEREAS, Pledgor owns 644,901 shares (the "Shares") of common stock,
par value $0.01 per share (the "Common Stock"), of VSI Network Solutions, Inc.,
a Delaware corporation [d/b/a Eastern Telecom, Inc.] (the "Company"); and
WHEREAS, concurrently with the execution and delivery hereof, the
Pledgor has: (i) entered into a Stockholders Agreement with the Former Note
Holders and the New Equity Holders (the "Stockholders Agreement"); and (ii)
executed and delivered to TKC a 7% Secured Convertible Debenture, in the
principal amount of $1,089,750 (the "Debenture"); and
WHEREAS, Pledgor has agreed, on the terms set out herein, to secure
its obligations under the Put (as defined in the Stockholders Agreement) (the
"Put") and to secure the payment of the Debenture by granting a security
interest in the Pledged Shares (as hereinafter defined) to the Secured Parties;
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meaning indicated:
a. "Pledged Shares" means the Shares, and any and all
substitutes, replacements, accessions, attachments
and other additions thereto.
b. "Secured Indebtedness" means the Put obligation under the
Shareholders Agreement and the Debenture.
2. GRANT OF SECURITY INTEREST IN THE PLEDGED SHARES. To secure the
full and punctual payment of the Secured Indebtedness, and upon and subject to
the terms, provisions and conditions of this Security Agreement, Pledgor does
hereby grant Secured Parties and their heirs, successors and assigns, a
security interest (the "Security Interest") in the Pledged Shares. In the event
that TKC elects to exchange any principal of the Debenture for Pledged Shares
(as permitted in the Debenture),
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TKC shall become an additional shareholder with respect to such Pledged Shares,
and such Pledged Shares shall continue to be subject to the terms and
provisions of this Agreement as if they were owned by VSI Enterprises, Inc.
3. DELIVERY OF SHARE CERTIFICATE TO DEPOSITORY AGENT.
a. The stock certificate evidencing the Pledged Shares and all
other stock certificates and instruments in registered form
which may constitute or evidence at any time or from time to
time a part of the Pledged Shares shall be delivered to
Depository Agent and shall be endorsed in blank for transfer or
be accompanied by proper instruments of assignment and transfer
in blank upon delivery (and Pledgor agrees to deliver a copy of
such stock certificate to each Secured party). Depository Agent
shall hold the Pledged Shares on behalf of all Secured Parties.
Until the happening of an event of Default hereunder, all
certificates for shares of the Company included in the Pledged
Shares shall remain registered in the name of Pledgor. So long
as the Secured Indebtedness, or any part thereof, remains
outstanding and unpaid, the certificate or certificates
representing the Pledged Shares and any other certificates or
instruments which may from time to time constitute or evidence a
part of the Pledged Shares, delivered to the Secured Parties
pursuant to this Section 3, shall be held by the Secured Parties
(through Depository Agent), and Pledgor shall not have the right
to procure the release of any of the Pledged Shares from the
lien hereby created except upon and in compliance with the terms
and conditions herein set forth.
b. Pledgor agrees that it shall not sell any Pledged Shares, or
allow the Company to sell all or substantially all of its assets
outside the ordinary course of business, for less than fair
market value (as determined in good faith by the Board of
Directors of Pledgor). Depository Agent shall not release any
Pledged Shares unless the condition set forth in the above
sentence is satisfied, except with respect to any action taken
by any Secured Party pursuant to Section 5 below.
4. VOTING OF PLEDGED SHARES. Until the occurrence of an event of
Default, the Pledged Shares shall be treated as shares of Pledgor and Pledgor
shall be entitled to vote at any meeting of the stockholders of the Company or
its successor corporations. Until the occurrence of an event of Default, no
dividends shall be payable to the Secured Parties on or with respect to the
Pledged Shares. Pledgor hereby grants to the Secured Parties, upon the
occurrence of an event of Default hereunder, the right to vote the Pledged
Shares during the continuance of such event of Default whether or not the
Secured Parties seek any other remedies available to them under this Security
Agreement or any applicable law or in equity.
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5. DEFAULT AND REMEDIES.
a. The term "Default" as used herein means the occurrence of any of
the following events:
i. The failure of Pledgor to make any payment on any
of the Secured Indebtedness when the same becomes
due and payable in accordance with the terms
thereof, and such failure is not cured by Pledgor
within ten (10) days after any Secured Parties
has given Pledgor written notice of such default;
ii. The occurrence of any Event of Default under the
Debenture;
iii. The institution by Pledgor of proceedings to be
adjudicated as bankrupt or insolvent, or the
consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing
by it of a petition or consent seeking
reorganization or release under the federal
Bankruptcy Act, or any other applicable federal
or state law, or the consent by it to the filing
of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other
similar official of Pledgor, or of any
substantial part of its property, or the making
by it of an assignment for the benefit of
creditors, or the taking of corporate action by
Pledgor in furtherance of any such action; or
iv. If, within sixty (60) days after the commencement
of an action against Pledgor (and service of
process in connection therewith on Pledgor)
seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or
similar relief under any present or future
statue, law or regulation, such action shall not
have been resolved in favor of Pledgor or all
orders or proceedings thereunder affecting the
operation or the business of Pledgor stayed, or
if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60)
days after the appointment without the consent or
acquiescence of Pledgor, such appointment shall
not have been vacated.
b. If any event of Default shall occur, the Secured Parties may
seek any remedies available to them under any applicable law.
c. Except as otherwise provided herein, Pledgor hereby waives
notice of an event of Default, presentment for payment, demand,
notice of dishonor and protest of the Secured Indebtedness.
d. In addition, full power and authority are hereby given to the
Secured Parties to sell, assign and deliver the whole or any
part of the Pledged Shares at any broker's board, or at public
or private sale, at the option of the Secured Parties, either
for cash or on credit or for future delivery without assumption
of any credit risk, and without either demand or advertisement
of any kind, both of which are hereby waived, and no delay on
the part of the Secured Parties in exercising any power of sale
or any other rights
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or option hereunder, and no demand, which may be given to or
made upon Pledgor by the Secured Parties to a power of sale or
other right or option hereunder, shall constitute a waiver
thereof, or limit or impair the right of the Secured Parties to
take any action or to exercise any power of sale or any other
rights hereunder, without demand, or prejudice the rights of the
Secured Parties as against the undersigned in any respect. At
any sale of the Pledged Shares in accordance with the preceding
sentence, Pledgor may itself purchase the whole or any part of
the Pledged Shares sold. In event of any sale or other
disposition of any of the Pledged Shares, after deducting all
costs or expenses of every kind for care, safekeeping,
collection, sale, delivery or otherwise, the Secured Parties
shall, after applying the residue of the proceeds of the sale,
or other disposition thereof, as hereinabove authorized, return
any excess to Pledgor. The Secured Parties shall notify Pledgor
in writing of their intent to exercise their right to sell the
Pledged Shares in accordance with this Section at least five (5)
days prior to any such sale.
e. Notwithstanding anything herein to the contrary, the Pledged
Shares and any proceeds from the sale thereof (whether as a
result of a Default or a voluntary sale thereof), shall be
divided and/or paid by the Depository Agent as follows:
i. First, to pay for expenses (including legal and
accounting fees and expenses) of the Secured Parties
in enforcing their rights hereunder and under the
documents pertaining to the Secured Indebtedness;
ii. Second, to the New Equity Holders in an amount equal
to the amount they are to receive under the Put (an
aggregate of $1,040,000);
iii. Third, to the former Term Note Holders in an amount
equal to the amount they are to receive under the
Put (an aggregate of $1,268,152);
iv. Fourth, to TKC in an amount equal to the principal
of and accrued interest on the Debenture (or, if
converted into shares of Common Stock, in an amount
equal to the amount TKC is to receive under the
Put); and
v. The remainder, if any, to the Pledgor.
f. Because of the Securities Act of 1933, as amended, or any other
laws or regulations, there may be legal restrictions or
limitations affecting Secured Parties in any attempts to dispose
of certain portions of the Pledged Shares in the enforcement of
its rights and remedies hereunder. For these reasons Secured
Parties are hereby authorized by Pledgor, but not obligated, in
the event any Default hereunder, to sell, bid upon, and purchase
all or any part of the Pledged Shares at private sale, subject
to investment letter or in any other commercially reasonable
manner which will not require the Pledged Shares, or any part
thereof, to be registered in accordance with the Securities Act
of 1933, as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation. Pledgor acknowledges
Secured Parties may in their
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discretion approach a restricted number of potential purchasers
and that a sale under such circumstances may yield a lower price
of the Pledged Shares or any part or parts thereon than would
otherwise be obtainable if same were registered and sold in the
open market.
6. SALE OF ASSETS. In the event of a sale of all or substantially
all of the assets of the Company (an "Asset Sale"), the Company will, and VSI
will cause the Company to, direct the purchaser of such assets to directly pay
the purchase price to Depository Agent to hold as collateral hereunder to the
same extent as the Pledged Shares, and as soon as practicable thereafter, to
distribute such proceeds to the Secured Parties in accordance with Section 5(e)
above (as if a Default has occurred). Pledgor agrees to provide to the Secured
Parties at least ten (10) business days prior written notice of the closing of
any Asset Sale or the sale of any of the Pledged Shares.
7. FURTHER ASSURANCES. Pledgor agrees to execute such stock powers,
endorse such instruments, or execute such additional pledge agreements or other
documents as may be reasonably requested by Secured Parties in order
effectively to grant to Secured Parties the Security Interest in (and pledge
and assignment of) the Pledged Shares and to enforce and exercise Secured
Parties' rights regarding the same.
8. ASSIGNABILITY BY SECURED PARTIES. The rights, powers and
interests held by the Secured Parties hereunder, together with the Pledged
Shares, may be transferred and assigned by the Secured Parties in whole or in
part, upon written notice to Pledgor.
9. DELIVERY OF PLEDGED SHARES. When the Secured Indebtedness has
been paid in full or otherwise satisfied, the Depository Agent shall deliver
the Pledged Shares to Pledgor concurrently with its receipt of such payment or
satisfaction and this Agreement shall terminate.
10. DUTIES OF DEPOSITORY AGENT. The duties of Depository Agent
hereunder shall be limited to the safekeeping of the Pledged Shares and
proceeds from an Asset Sale or sale of the Pledged Shares, and to the transfer
and distribution of the same in accordance with the provisions of this
Agreement, and no implied duties or obligation shall be read into this
Agreement against the Depository Agent. Depository Agent shall be protected in
acting in accordance with the provisions of this Agreement upon any written
notice, request, waiver, consent, receipt, certificate or other document
furnished to it, as to its validity, the effectiveness of its provisions, the
identity or authority of the person executing or deposition the same, the truth
and acceptability of any information therein contained, which Depository Agent
in good faith believes to be genuine. Depository Agent will not be liable for
any error of judgment, or any act or step taken or omitted by it in good faith,
or for any mistake of fact or law or for anything it might do or refrain from
doing in connection herewith, except to the extent such action shall be proved
to constitute gross negligence or willful conduct in bad faith on the part of
Depository Agent. Depository Agent shall have not duties except those that are
expressly stated herein, and it shall not be bound by any notice of any claim,
or demand with respect thereto, or any waiver, modification, amendment or
termination of this Agreement until written notice of the same shall have been
received by it and approved by it. At any time, in the event that Depository
Agent desires to do so, in its sole discretion, Depository Agent may submit
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the Pledged Shares to a competent court of jurisdiction to determine the
parties to whom such Pledged Shares shall be delivered.
11. INDEMNIFICATION. Pledgor and each Secured Party, jointly and
severally, hereby agree to indemnify Depository Agent against and hold
Depository Agent harmless from, any costs, damages, judgments, attorneys' fees,
expenses, obligations and liabilities of any kind or nature that may be
suffered or incurred by Depository Agent as a result of, in connection with or
arising out of the acts or omissions of Depository Agent in the performance of,
or pursuant to, this Agreement. If any controversy arises between the parties
or with any other person with respect to the subject matter of this Agreement,
Depository Agent shall not be required to determine the same or to take any
action thereupon, but may await the settlement of any such controversy, which
settlement will be concluded by agreement of the parties or, failing agreement,
by final and binding arbitration in Dallas, Texas pursuant to the Commercial
Rules of the American Arbitration Association. In such event Depository Agent
shall not be liable for interest or damages, except to the extent such action
shall be proved to constitute gross negligence or willful conduct in bad faith
on the part of Depository Agent. The parties: (a) acknowledge that Depository
Agent serves as counsel to Pledgor on certain matters and as general counsel to
OHA Financial, Inc., a New Equity Holder ("OHA") and that Xxxxxxx X. Xxxxxxx, a
partner of Depository Agent, serves as a director of OHA and is involved in
certain investments with Xxxxx X. Xxxx, a director of Pledgor and a Former Term
Note Holder; and (b) hereby waive any conflicts with respect thereto and
appoint Xxxxxxx Xxxxxx L.L.P. as Depository Agent.
12. REIMBURSEMENT OF DEPOSITORY AGENT. Except as provided in section
10 above, Pledgor agrees to pay all necessary and reasonable fees and expenses
incurred by Depository Agent in connection with the operation, administration
and enforcement of this Agreement and its obligations hereunder.
13. WAIVER OF DEFAULT. The acceptance by the Secured Parties at any
time and from time to time of partial payment of the aggregate amount of the
Secured Indebtedness then matured shall not be deemed to be a waiver of any
Default then existing. No waiver by any Secured Parties of any Default shall be
deemed to be a waiver of any subsequent Default, nor shall any such waiver by
any Secured Parties be deemed to be a continuing waiver. No delay or omission
by any Secured Parties in exercising any right or power hereunder, except for
the failure by any Secured Parties to give notice as provided herein or in any
document pertaining to the Secured Indebtedness or under any other writings
executed by Pledgor as security for or in connection with the Secured
Indebtedness, shall impair such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise
of any such right or power preclude other or further exercise of any other
right or power of the Secured Parties hereunder.
14. LAWS APPLICABLE. This Agreement and the rights and obligations
of the parties hereto shall be governed, construed and enforced in accordance
with the laws of the state of Delaware.
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15. NOTICES. Any notice, request, instruction or other document to
be given hereunder or to any parties shall be delivered to the address stated
below that parties's signature hereto, and shall be deemed to have been given
and received (i) when actually received by the other parties, if delivered in
person or by facsimile or (ii) if mailed, on the earlier of the date actually
received or (whether ever received or not) three Business Days (as hereinafter
defined) after a letter containing such notice, certified or registered, with
postage prepaid, addressed to the other parties, is deposited in the United
States mail. The address of each party hereto is set forth on its signature
page to this Agreement. "Business Day" means every day which is not a Saturday,
Sunday or legal holiday. Any party may change his address for the purposes of
this Section by giving notice to the other parties in accordance with this
Section.
16. COVENANT OF ASSISTANCE. Pledgor agrees to execute all such
further documents and take all such further action as may reasonably be
requested by the Secured Parties in order to better confirm the Security
Interest herein granted in the Pledged Shares.
17. AMENDMENT. None of the terms or provisions of this Agreement may
be waived, modified or amended, except in writing signed by all parties hereto.
18. BINDING EFFECT. This Agreement shall be binding on Pledgor and
Pledgor's successors and assigns and shall inure to the benefit of the Secured
Parties and their heirs, successors and assigns.
19. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instruments.
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EXECUTED as of the day and year first above written.
VSI ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Title: CEO
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Address: 0000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
THOMSON KERNAGHAN & CO., LTD.
By: /s/ Xxxx Xxxxxxxxx
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Title: Chairman
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Address: 000 Xxx Xxxxxx
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Xxxxxxx, Xxxxxxx, MSH-202
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NEW EQUITY HOLDERS AND
FORMER EQUITY HOLDERS
(See attached signature pages)
XXXXXXX XXXXXX L.L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx,
Partner
Address: 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
ACKNOWLEDGED AND AGREED
to for the purpose of being bound by
Section 6 hereof,as of the date first
above written:
VSI NETWORK SOLUTIONS, INC.
By: /s/ Xxxxx Xxxxxx
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Title: President
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(FORMER TERM NOTE HOLDER)
SIGNATURE PAGE
TO
STOCK PLEDGE AGREEMENT
This Signature Page to the Stock Pledge Agreement (the "Agreement") by
and among VSI Enterprises, Inc., Thomson Kernaghan & Co., Ltd., and the persons
and entities executing signature pages thereto as a "New Equity Holder" or a
"Former Term Note Holder", is hereby executed by the undersigned as a "Former
Term Note Holder" as of the date of the Agreement.
If an individual:
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Printed Name:
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If a legal entity:
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(type in name)
By:
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Title:
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Address:
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(NEW EQUITY HOLDER)
SIGNATURE PAGE
TO
STOCK PLEDGE AGREEMENT
This Signature Page to the Stock Pledge Agreement (the "Agreement") by
and among VSI Enterprises, Inc., Thomson Kernaghan & Co., Ltd., and the persons
and entities executing signature pages as a "New Equity Holder" or a "Former
Term Note Holder", is hereby executed by the undersigned as a "New Equity
Holder" as of the date of the Agreement.
If an individual:
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Printed Name:
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If a legal entity:
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(type in name)
By:
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Title:
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Address:
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