STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is dated as of
November __, 1997, by and between Xxxxxxxx X. Xxxxxxx ("Pledgee") and Xxxxx
Xxxxxx Multimedia Company, Inc. (the "Pledgor").
R E C I T A L S
Pursuant to a Stock Purchase Agreement of even date herewith
(the "Purchase Agreement"), the Pledgor has purchased from Pledgee 100% of the
outstanding capital stock (the "Stock") of Multi Dimentional Communications,
Inc. (the "Company"). The consideration for the purchase of the Stock includes a
6% Convertible Note of even date herewith from the Pledgor to Pledgee (the
"Note"). This Agreement is intended to induce Pledgee to sell the Stock to the
Pledgor and accept the Note as partial consideration for the Stock, by securing
repayment of the Note and performance of Pledgor's obligations thereunder.
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions. All capitalized terms which are not
specifically defined in this Agreement shall have the meanings assigned to such
terms in the Purchase Agreement or, if not defined in the Purchase Agreement, in
the Note.
"Collateral" has the meaning set forth in Section 2.1 hereof.
"Default" has the meaning set forth in Article V hereof.
"Enforcement Costs" means any and all funds, costs, expenses and
charges (including, without limitation, reasonable attorney's fees and expenses)
advanced, paid or incurred by or on behalf of Pledgee under or in connection
with the enforcement of this Agreement.
"Event of Default" means an event which, with the giving of
notice or the lapse of time, or both, could or would constitute a Default under
the provisions of this Agreement.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof, or any other entity.
"Security Interests" means the security interests in the
Collateral granted hereunder.
"UCC" means the Uniform Commercial Code of the State of New
York.
SECTION 1.2. Rules of Construction. Unless otherwise defined
herein and unless the context otherwise requires, all terms used herein which
are defined by the UCC shall have the same meanings assigned to them by the UCC
unless and to the extent varied by this Agreement. The words "hereof", "herein",
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and subsection references are references to sections or
subsections of this Agreement unless otherwise specified. As used herein, the
singular number shall include the plural, the plural the singular, and the use
of the masculine, feminine or neuter gender shall include any other gender, as
the context may require.
ARTICLE II
THE COLLATERAL
SECTION 2.1. The Pledge. In order to secure the full and
punctual payment of the Note in accordance with the terms thereof, the Pledgor
hereby transfers, pledges, assigns, sets over, delivers and grants to Pledgee,
subject to Section 2.5(a)(iv) hereof, a continuing first priority lien and
security interest in and to all of the following collateral, both now owned and
existing and hereafter created, acquired and arising (all being collectively
referred to as the "Collateral") and all right, title and interest of the
Pledgor in and to the Collateral:
(a) Stock. The shares of stock described in Schedule I
hereto (the "Pledged Stock"), the certificates representing the Pledged Stock,
all options and other rights, contractual or otherwise, in respect thereof and
all dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Stock; and
(b) Proceeds. All cash and non-cash proceeds and
products of the portion of the Collateral described in clause (a) above.
SECTION 2.2. Security Interests Only. The Security Interests are
granted as security only and shall not subject Pledgee to, or transfer or in any
way affect or modify, any obligation or liability of the Pledgor with respect to
any of the Collateral or any transaction in connection therewith.
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SECTION 2.3. Delivery, etc. On the date hereof the Pledgor shall
deliver to Pledgee (a) all certificates representing or evidencing the Pledged
Stock, which certificates shall be accompanied by undated and irrevocable stock
powers duly executed in blank by the Pledgor, and (b) all other property,
instruments and papers comprising, representing or evidencing the Collateral or
any part thereof, accompanied by proper instruments of assignment or endorsement
duly executed by the Pledgor.
SECTION 2.4. Record Owner of Collateral. Pledgee shall have the
right in his sole and absolute discretion to hold any stock certificates, notes,
instruments or securities now or hereafter included in the Collateral in the
name of the Pledgee, provided that nothing herein shall preclude Pledgee from
holding such Collateral in his own name upon the occurrence and continuation of
any Default. The Pledgor will give to Pledgee copies of any notices or other
communications received by it with respect to Collateral registered in the name
of the Pledgor.
SECTION 2.5. Voting Rights; Dividends and Interest; etc.
(a) Unless and until a Default shall have occurred and
be continuing:
(i) The Pledgor shall be entitled to exercise any
and all voting and other rights, powers and privileges accruing to an owner of
the Pledged Stock or any part thereof for any purpose consistent with the terms
of this Agreement and the Note provided that no ratification shall be given, nor
any power pertaining to the Pledged Stock exercised, nor any other action taken,
which would violate or be inconsistent with the terms of this Agreement or the
Note.
(ii) Pledgee shall execute and deliver to the
Pledgor, or cause to be executed and delivered to the Pledgor, all such proxies,
powers of attorney, and other instruments as the Pledgor may reasonably request
for the purpose of enabling the Pledgor to exercise the voting and other rights,
powers and privileges which it is entitled to exercise pursuant to subparagraph
(i) above.
(iii) The Pledgor shall be entitled to receive and
retain any and all dividends paid on the Pledged Stock to the extent and only
to the extent that such dividends are permitted by, and otherwise paid in
accordance with, the terms and conditions of this Agreement, the Note and
applicable laws.
(iv) Notwithstanding any language contained herein
to the contrary, the term "Collateral" shall not include any money and/or
property (or cash or non-cash proceeds thereof) received by the Pledgor in
conformity with Section 2.5(a) hereof at a time when no Default shall have
occurred and be continuing.
(v) Pledgee shall not sell, transfer or encumber the
Collateral, except that Pledgee may assign his interest in the Collateral in
connection with any permitted assignment of the Note.
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(b) Upon the occurrence and during the continuance of a
Default, all rights of the Pledgor to dividends and/or other payments which the
Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section
2.5 shall cease, and all such rights shall thereupon become vested in Pledgee,
who shall have the sole and exclusive right and authority to receive and retain
such payments. All payments which are received by the Pledgor contrary to the
provisions of this Section 2.5 shall be received in trust for the benefit of
Pledgee, shall be segregated from other property or funds of the Pledgor and
shall be forthwith delivered to Pledgee in the same form as so received (with
any necessary endorsement, which the Pledgor hereby agrees to make). Any and all
money and other property paid over to or received by Pledgee pursuant to the
provisions of this subparagraph (b) shall be applied to the amounts due under
the Note.
(c) Upon the occurrence and during the continuance of a
Default, all rights of the Pledgor to exercise the voting and other rights,
powers and privileges which it is entitled to exercise pursuant to paragraph
(a)(i) of this Section 2.5 shall cease, and all such rights, powers and
privileges shall thereupon become vested in Pledgee, who shall have the sole
and exclusive right and authority to exercise such voting and other rights,
powers and privileges.
SECTION 2.6. No Assumption. Notwithstanding anything contained
herein to the contrary, whether or not an Event of Default shall have occurred,
and whether or not Pledge elects to foreclose or otherwise realize on its
security interest in the Collateral as set forth herein or exercise any of its
rights under this Agreement or the Note or otherwise, neither this Agreement,
receipt by Pledgee of any distributions, the foreclosure or other realization by
Pledgee of the security interest in the Collateral nor any exercise by Pledgee
of any of its rights under this Agreement or the Note or otherwise, shall in any
way be deemed to obligate Pledgee to assume Pledgor's obligations, duties,
expenses or liabilities with respect to the Collateral or any agreement relating
thereto, and in the event of any such foreclosure, realization or other exercise
of rights, Pledgor shall remain bound and obligated to perform such obligations
and Pledgee shall not be deemed to have assumed any of such obligations.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants to Pledgee that the
following statements are accurate, assuming the accuracy of Pledgee's
representations to the Pledgor in the Purchase Agreement:
SECTION 3.1. Authority. The Pledgor has full power and authority
to grant the Security Interests to Pledgee in the Collateral pursuant hereto and
to execute, deliver and perform its obligations in accordance with the terms of
this Agreement without the consent or approval of any Person other than any
consent or approval which has been obtained.
SECTION 3.2. Pledged Stock. Subject to the terms of this Pledge
Agreement, the Pledgor is, and at all times will be, the sole legal, record and
beneficial owner of, and has good and marketable title to, all of the
Collateral. The Pledgor has not created and will not create any liens (other
than the liens created hereby), options, security interests, encumbrances or
other rights in the Collateral and is not and will not become a party to and is
not and will not become bound by any agreement (other than this Agreement) which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock.
SECTION 3.3. Survival. All representations and warranties
contained in or made under or in connection with this Agreement: (a) shall
survive the execution, delivery and performance of this Agreement, and (b) shall
be accurate at all times during which any amount remains outstanding under the
Note with the same effect as if such representations and warranties had been
made at such times.
ARTICLE IV
COVENANTS OF PLEDGOR
The Pledgor covenants and agrees with Pledgee as follows:
SECTION 4.1. Title, Liens and Taxes. The Pledgor shall, at its
cost and expense, take any and all actions reasonably necessary to defend the
Security Interests of Pledgee in the Collateral and the priority (or intended
priority) thereof against any adverse lien of any nature whatsoever, except for
liens arising from the actions or omissions of Pledgee and/or the Company prior
to the date hereof.
SECTION 4.2. Further Assurances. The Pledgor shall, from time to
time, at its expense, execute, deliver, acknowledge and cause to be duly filed,
recorded or registered any statement, assignment, endorsement, instrument,
paper, agreement or other document and take any other action that from time to
time may be necessary or desirable, or that Pledgee may reasonably request, in
order to create, preserve, continue, perfect, confirm or validate the
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Security Interests or to enable Pledgee to obtain the full benefits of this
Agreement or to exercise and enforce any of his rights, powers and remedies
hereunder. The Pledgor shall pay all costs of, and incidental to, the filing,
recording or registration of any such document as well as any recordation,
transfer or other tax required to be paid in connection with any such filing,
recordation or registration. The Pledgor agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
signed by the Pledgor in connection with this Agreement shall be sufficient as a
financing statement.
SECTION 4.3. Care and Protection of Collateral. The Pledgor
shall promptly notify Pledgee of any event causing deterioration, loss or
depreciation in value of any substantial portion of the Collateral and the
amount of such loss or depreciation.
SECTION 4.4. Liquidation, Dissolution, Etc. Without Pledgee's
prior written consent, during the term of this Agreement to the Pledgor will not
allow the Company to (a) liquidate, dissolve, merge, consolidate, sell
substantially all of its assets or engage in any material transaction outside
the ordinary course of business consistent with past practice; (b) borrow money
from any Person other than BPMC or loan money to any Person other than BPMC; (d)
declare and/or pay any cash or non-cash dividends; or (e) issue, sell or
authorize for issuance or sale, shares of any class, options, warrants, rights
or convertible securities, or enter into any agreements or commitments of any
character obligating it to issue or sell any such securities. Notwithstanding
anything to the contrary contained in this Agreement, the Pledgor may cause the
Company to merge with New Media Schoolhouse, Inc., without obtaining the consent
of Pledgee or causing a Default hereunder.
SECTION 4.5. Sale of Collateral. Without the prior written
consent of Pledgee, the Pledgor will not sell, lease, assign, transfer, dispose
of, pledge or xxxxx x xxxx on the Collateral other than the lien created by this
Agreement.
ARTICLE V
DEFAULT
The occurrence of any one or more of the following events shall
constitute a default under the provisions of this Agreement, and the term
"Default" shall mean, whenever it is used in this Agreement, any one or more of
the following events:
SECTION 5.1. Payment of Obligations; Default under Note. If
there occurs any "Event of Default" as defined in the Note, giving due
consideration to notice and cure provisions thereof;
SECTION 5.2. Breach of This Agreement. If the Pledgor fails to
perform, observe or comply with any material provision of this Agreement and
cure such breach within twenty (20) business days after written notice thereof;
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SECTION 5.3. Liquidation, Termination, Dissolution. If the
Pledgor shall liquidate, dissolve or terminate its existence without Pledgee's
prior written consent;
SECTION 5.4. Inability to Pay Debts, etc. If the Pledgor shall
admit in writing its inability to pay its debts as they mature or shall make any
assignment for the benefit of any of its creditors;
SECTION 5.5. Bankruptcy. If proceedings in bankruptcy, or for
reorganization of the Pledgor, or for the readjustment of any of its debts,
under the Bankruptcy Code, as amended, or any part thereof, or under any other
applicable laws, whether state or federal, for the relief of debtors, now or
hereafter existing, shall be commenced against or by the Pledgor and, except
with respect to any such proceedings instituted by the Pledgor, shall not be
discharged within sixty (60) days of their commencement;
SECTION 5.6. Receiver, etc. If a receiver or trustee shall be
appointed for the Pledgor or for any substantial part of its assets and, except
with respect to any such appointments requested or instituted by the Pledgor,
such receiver or trustee shall not be discharged within sixty (60) days of his
or her appointment;
SECTION 5.7. Dissolution Proceedings. If any proceedings shall
be instituted for the dissolution or the full or partial liquidation of the
Pledgor and, except with respect to any such proceedings instituted by the
Pledgor, such proceedings shall not be discharged within sixty (60) days of
their commencement.
ARTICLE VI
RIGHTS AND REMEDIES
SECTION 6.1. Rights and Remedies of Pledgee.
(a) Subject to the limitations set forth in Section 6.4
hereof, upon and after the occurrence of a Default, Pledgee may sell the
Collateral, or any part thereof, for cash at such price or prices as Pledgee may
deem commercially reasonable. Pledgee shall be authorized in connection with any
such sale (if he deems it advisable to do so) to require potential purchasers to
execute confidentiality agreements reasonably satisfactory to Pledgee and/or to
restrict the prospective bidders or purchasers of any of the Collateral to
Persons who will represent and agree that they are qualified investors and upon
consummationof any such sale Pledgee shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold.
(b) Pledgee shall give the Pledgor sixty (60) days
prior written notice (which the Pledgor agrees is reasonable notice within the
meaning of Section 9-504(3) of the UCC) of Pledgee's intention to make any sale
or other disposition of Collateral and shall afford to the Pledgor's investment
bankers an opportunity to seek purchasers for the Collateral during
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such period, subject to any confidentiality agreements and representation
letters reasonably required by Pledgee and authorized by Section 6.1(a) hereof.
Such notice shall state the date after which such sale or other disposition may
be made. In case any sale of all or any part of the Collateral is made on
credit, the Collateral so sold may be retained by Pledgee until the sale price
is paid in full by the purchaser or purchasers thereof, but Pledgee shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. After the date specified in the
notice given under this Section 6.1(b), and subject to Section 6.4 hereof,
Pledgee may bid for or purchase, free from any right of redemption, stay or
appraisal on the part of the Pledgor (all of such rights being also hereby
waived and released by the Pledgor), the Collateral or any part thereof offered
for sale, provided that Pledgee bids for or purchases such Collateral for an
amount not less than the amount offered by the highest bona fide competing
purchaser willing to purchase the Collateral for cash. Pledgee may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to the Pledgor therefor.
(c) As an alternative to or in addition to exercising
the power of sale herein conferred upon it, Pledgee may exercise any right, not
inconsistent with the terms of this Agreement, afforded by the UCC or applicable
law.
SECTION 6.2. Application. The proceeds of collection, sale or
other disposition of all or any part of the Collateral coming into Pledgee's
possession may be applied by Pledgee to the amounts outstanding under the Note
and to the Enforcement Costs, whether matured or unmatured, in such order and
manner as Pledgee may determine in his sole discretion.
SECTION 6.3. No Waiver, etc. No failure or delay by Pledgee to
insist upon the strict performance of any term, condition, covenant or agreement
of this Agreement or the Note, or to exercise any right, power or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach, or preclude Pledgee from
exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement
or the Note, Pledgee shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or the
Note, or to declare a Default for failure to effect such prompt payment of any
such other amount. The payment by the Pledgor or any other Person and the
acceptance by Pledgee of any other amount due and payable under the provisions
of this Agreement or the Note during which a Default exists shall not in any way
or manner be construed as a waiver of such Default by Pledgee or preclude
Pledgee from exercising any right of power or remedy consequent upon such
Default.
SECTION 6.4. Vote. In the event of a Default, Pledgee may vote
all or any part of the Pledged Stock (whether or not transferred into the name
of the Pledgee) and give all consents, waivers and ratifications in respect to
the Pledge Stock and otherwise act with respect thereto as though he were the
outright owner thereof.
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SECTION 6.5. Acknowledgement. The Pledgor and Pledgee each
acknowledge and agree that any sale of the Collateral effected in conformity
with the procedures outlined herein shall be "commercially reasonable" within
the meaning of the UCC.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Course of Dealing; Amendment. The failure of
Pledgee at any time or times to enforce his rights under such provisions,
strictly in accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
the Note or as having in any way or manner modified or waived the same. This
Agreement may not be amended, modified, or changed in any respect except by an
agreement, in writing, signed by Pledgee and the Pledgor.
SECTION 7.2. Waiver of Default. Pledgee may, at any time and
from time to time, execute and deliver to the Pledgor a written instrument
waiving, on such terms and conditions as Pledgee may specify in such written
instrument, any of the requirements of this Agreement or any Event of Default or
Default and its consequences, provided that any such waiver shall be for such
period and subject to such conditions as shall be specified in any such
instrument. In the case of any such waiver, the Pledgor and Pledgee shall be
restored to their former positions prior to such Event of Default or Default and
shall have the same rights as they had hereunder. No such waiver shall extend to
any subsequent or other Event of Default or Default, or impair any right
consequent thereto and shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 7.3. Notices. All notices, requests and demands to or
upon the parties to this Agreement shall be deemed to have been given or made
when made in accordance with the requirements set forth in the Purchase
Agreement.
SECTION 7.4. Additional Provisions Concerning the Pledged
Collateral. The Pledgor hereby irrevocably appoints the Pledgee the Pledgor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Pledgee 's discretion, to take any action and to execute any instrument which
the Pledgee may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, indorse and collect all
instruments made payable to the Pledgor representing any dividend or other
distribution in respect of any Pledged Collateral and to give full discharge for
the same. The powers of attorney granted pursuant to this Agreement shall not
impose any duty upon the attorney-in-fact to exercise such powers. Such powers
of attorney are coupled with an interest and are irrevocable.
SECTION 7.5 Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the indefeasible payment or satisfaction in full of
the Note, (ii) be binding upon Pledgor, its
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permitted transferees, representatives, successors and assigns, and (iii) inure,
together with the rights and remedies of Pledgee hereunder, to the benefit of
Pledgee and its permitted transferees, representatives, successors and assigns.
Upon the indefeasible payment or satisfaction in full of the Note, (x) Pledgor
shall be entitled to the return, upon their request and at the expense, of such
portion of the Collateral as shall not have been sold or otherwise applied or
forfeited pursuant to the terms hereof, and (y) this Agreement shall be of no
further force or effect.
SECTION 7.6. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of Pledgee in order
to carry out the intentions of the parties hereto as nearly as may be possible,
(b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction, and (c) the parties hereto shall endeavor in good
faith negotiations to replace the invalid or unenforceable provisions with valid
and enforceable provisions, the economic effect of which comes as close as
possible to that of the invalid or unenforceable provisions.
SECTION 7.7. Survival. All representations, warranties and
covenants contained herein shall survive the execution and delivery of this
Agreement and the Note.
SECTION 7.8. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Pledgor and Pledgee and their respective
personal representatives, successors and assigns, except that the Pledgor shall
not have the right to assign its rights hereunder or any interest herein without
the prior written consent of Pledgee.
SECTION 7.9. Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the substantive laws of the State of New York, both in
interpretation and performance, without regard to any conflicting conflict of
laws rules of the State of New York.
SECTION 7.10. Duplicate Originals and Counterparts. This
Agreement may be executed in any number of duplicate originals or counterparts,
each of such duplicate originals or counterparts shall be deemed to be an
original and all taken together shall constitute but one and the same
instrument.
SECTION 7.11. Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only, shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
SECTION 7.12. Expenses. Upon demand, Pledgor will pay to Pledgee
the amount of any and all expenses, including reasonable attorney's fee and fees
of any experts and agents, which the Pledgee may reasonably incur in connection
with (i) the sale of, collection from, or other realization upon, any of the
Collateral or (ii) the exercise or enforcement of any of the Pledgee's rights
hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first written above.
XXXXX XXXXXX MULTIMEDIA
COMPANY, INC.
BY:
---------------------------
------------------------------
XXXXXXXX X. XXXXXXX
Intending to be legally bound hereby,
the Company agrees not to take any action
that would cause the Pledgor to breach its
obligations under Section 4.4 of this
Agreement.
Multi Dimensional Communications, Inc.
BY:_______________________________________
Xxxxxxxx X. Xxxxxxx, President
