Exhibit 2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of May
13, 1998, is executed by Xxxxx Xxxxxxx ("Pledgor") in favor of The North Face,
Inc., a Delaware corporation ("Company").
RECITALS
A. Pledgor has purchased from Company 665,060 shares of Common Stock of
Company pursuant to an Employment Agreement dated as of May 13, 1998, among
Company and Pledgor (the "Employment Agreement"), for an aggregate purchase
price of $14,049,392.50, and has executed a full recourse promissory note, a
copy of which is attached hereto as Exhibit A (the "Note"), in favor of Company
for the principal sum of $6,549,392.50.
B. To secure the payment when due of all amounts under the Note,
Pledgor is pledging 310,030 shares of the Common Stock of the Company pursuant
to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Company as follows:
1. Definitions. When used in this Pledge Agreement, the following terms
shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in Paragraph
2 hereof.
"Obligations" shall mean and include all obligations owed by Pledgor
to Company under the Note including without limitation all interest,
fees, charges, expenses, attorneys' fees and accountants' fees and
costs chargeable to Pledgor or payable by Pledgor.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of California from time to time.
2. Pledge. As security for the payment and performance of the
Obligations, Pledgor hereby pledges and assigns to Company and grants to Company
a security interest in all right, title
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and interest of Pledgor in and to 310,030 shares of Common Stock of the Company
(the "Shares"), and all proceeds of the foregoing, including, without
limitation, all dividends, additional shares of stock, certificates and other
money and property received and receivable by Pledgor in connection with the
foregoing (the "Collateral"). Upon payment in full of all such Obligations, the
Company shall release its security interests in the Collateral and the Pledgor
shall be entitled to the return of the Shares.
3. Representations and Warranties. Pledgor represents and warrants to
Company that (a) upon delivery of the Shares to the Pledgor by the Company
pursuant to the Employment Agreement, Pledgor is and will be the record and
beneficial owner of the Collateral (or, in the case of after-acquired
Collateral, at the time Pledgor acquires rights in the Collateral, will be the
record and beneficial owner thereof) and no other person has (or, in the case of
after-acquired Collateral, at the time Pledgor acquires rights therein, will
have) any right, title, claim or interest (by way of lien or otherwise) in,
against or to the Collateral; (b) upon delivery to Company of all Collateral
consisting of securities, Company will have a first priority perfected security
interest in such Collateral; (c) Pledgor currently owns the Shares, which Shares
have been duly and validly issued and are fully paid and nonassessable; and (d)
Pledgor maintains his or her primary residence in the State of California.
4. Covenants. Pledgor hereby agrees (a) to perform all acts that may be
necessary to maintain, preserve, protect and perfect the Collateral, the lien
granted to Company therein and the first priority of such lien; (b) promptly to
deliver to Company all originals of certificates and other documents,
instruments and agreements evidencing the Shares, together with such blank stock
powers executed by Pledgor as Company may request; (c) to procure, execute and
deliver from time to time any endorsements, assignments, financing statements
and other documents, instruments and agreements and take other actions deemed
necessary or appropriate by Company to perfect, maintain and protect its lien
hereunder and the priority thereof; (d) to appear in and defend any action or
proceeding which may affect its title to or Company's interest in the
Collateral; and (e) not to surrender or lose possession of (other than to
Company), sell, encumber, lease, rent, or otherwise dispose of or transfer any
Collateral or right or interest therein and to keep the Collateral free of all
liens.
5. Voting Rights Prior to Default. Unless an Event of Default (as
defined in Subparagraph 6(a) hereof) shall have occurred and Company shall have
given notice to Pledgor of Company's intent to exercise its rights pursuant to
Subparagraph 6(b) below, Pledgor shall be permitted to exercise all voting with
respect to the Shares; provided, however, that no vote shall be cast or other
action taken which could impair the Collateral or which would be inconsistent
with or which could result in a default in the payment of principal or interest
under the Note.
6. Default and Remedies.
(a) Events of Default. Pledgor shall be deemed in default under this
Pledge Agreement upon the breach of any term of, or the occurrence of a default
in the payment when due of principal or interest under the Note (each an "Event
of Default").
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(b) Dividends, Voting Rights, Etc. Upon the occurrence of any Event
of Default, Company may, upon notice to Pledgor, to the extent permissible under
applicable law, (i) pay all dividends on Shares to the account of Company,
receive and collect all such dividends and make application thereof to the
obligations in such order as Company may determine, and (ii) register the Shares
in its name or the name of the Company's nominee, and the Company or the
Company's nominee may thereafter exercise (A) all voting, corporate and other
rights pertaining to the Shares at any meeting of shareholders of Company or
otherwise and (B) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Shares as if they were
the absolute owner thereof (including, without limitation, the right to exchange
at its discretion any and all of the Shares upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Company, or upon the exercise by Pledgor or Company of any
right, privilege or option pertaining to the Shares, and in connection
therewith, the right to deposit and deliver any and all of the Shares with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine), all without liability except to
account for property actually received by them, but Company shall have no duty
to Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Additional Remedies. Upon the occurrence of an Event of Default,
Company may exercise, in addition to all other rights and remedies granted in
this Pledge Agreement and in the Note, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, Company
may, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind to or upon Pledgor or any other person
(except notice of time and place of sale and any other notice required by law
referred to below) forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give an
option or options to purchase or otherwise dispose of and deliver the Collateral
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 office of Company or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. Company 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 Collateral so sold, free of any right or equity of
redemption in Pledgor, which right or equity is hereby waived and released.
Company shall apply any proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred in respect thereof or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of Company
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to Company, to the payment in whole or in part of the
Obligations, in such order as Company may elect, and only after such application
and after the payment by Company of any other amount required by any provision
of law, need Company account for the surplus, if any, to Pledgor. To the extent
permitted by applicable law, Pledgor waives all claims, damages and demands it
may acquire against Company arising out of the exercise by it of any rights
hereunder except as may arise solely from Company's gross negligence or willful
misconduct. If any notice of a proposed sale or other
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disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.
7. Sale of Shares.
(a) Private Sale. Pledgor recognizes that Company may be unable to
effect a public sale of any or all of the Shares, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for its own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. Company shall be under no obligation to delay a sale of any of the
Shares for the period of time necessary to register such securities for public
sale under the Securities Act, or under applicable state securities laws.
(b) Further Assurances. Pledgor further agrees to use its best
efforts to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Shares pursuant to this
Pledge Agreement valid and binding and in compliance with any and all other
applicable laws, rules and regulations of all governmental authorities. Pledgor
further agrees that a breach of any of the covenants contained in this Paragraph
7 will cause irreparable injury to Company, that Company has no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Paragraph 7 shall be specifically enforceable against
Pledgor.
8. Limitation on Duties Regarding Collateral. Company's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9207 of the UCC or otherwise, shall be to deal
with it in the same manner as Company deals with similar securities and property
for its own account. Neither Company nor any of its employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of Pledgor or otherwise.
9. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Company or Pledgor under this Pledge Agreement shall be duly given or made if
sent in writing by certified mail, recognized overnight courier or hand delivery
and shall be effective upon delivery to the recipient.
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(b) Nonwaiver. No failure or delay on Company's part in exercising
any right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.
(c) Amendments and Waivers. This Pledge Agreement may not be amended
or modified, nor may any of its terms be waived, except by written instruments
signed by Pledgor and Company. Each waiver or consent under any provision hereof
shall be effective only in the specific instances for the purpose for which
given.
(d) Assignments. This Pledge Agreement shall be binding upon and
inure to the benefit of Company and Pledgor and their respective successors and
assigns; provided that Pledgor may not assign its obligations hereunder without
the written consent of Company.
(e) Cumulative Rights, etc. The rights, powers and remedies of
Company under this Pledge Agreement shall be in addition to all rights, powers
and remedies given to Company by virtue of any applicable law, rule or
regulation of any governmental entity, the Note, any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Company's rights hereunder.
Pledgor waives any right to require Company to proceed against any person or to
exhaust any Collateral or to pursue any remedy in Company's power.
(f) Payments Free of Taxes, Etc. All payments made by Pledgor under
this Pledge Agreement shall be made by Pledgor free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, Pledgor shall pay upon demand any stamp or other
taxes, levies or charges of any jurisdiction with respect to the execution,
delivery, registration, performance and enforcement of this Pledge Agreement.
(g) Partial Invalidity. If at any time any provision of this Pledge
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Pledge Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
(h) Governing Law. This Pledge Agreement shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
(i) Authorized Action by Company. Upon the occurrence and during the
continuance of an Event of Default, Pledgor hereby irrevocably appoints Company
as its attorney-in-fact and agree that Company may perform (but Company shall
not be obligated to and shall incur no liability to Pledgor or any third party
for failure so to do) any act which Pledgor is obligated by this Pledge
Agreement to perform and to exercise such rights and powers as Pledgor might
exercise with respect to the Collateral, including, without limitation, the
right to (a) exercise (1) all voting, corporate and other rights pertaining to
the Shares at any meeting of shareholders of the Company or otherwise and (2)
any and all rights of conversion, exchange, subscription and any
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other rights, privileges or options pertaining to the Shares; (b) collect by
legal proceedings or otherwise and endorse, receive and receipt for all
dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (c) enter into any
extension, reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for the Collateral; (d) insure, process and preserve the Collateral;
(e) make any compromise or settlement, and take any action it deems advisable,
with respect to the Collateral and (f) pay any indebtedness of Pledgor relating
to the Collateral. Pledgor agrees to reimburse Company upon demand for any
reasonable costs and expenses, including, without limitation, attorneys' fees
and costs, Company may incur while acting as Pledgor's attorney-in-fact
hereunder, all of which costs and expenses are included in the Obligations.
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be
executed as of the day and year first above written.
PLEDGOR
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, an individual
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