1
EXHIBIT 10.12
PROMISSORY NOTE
$__________ ______, 1999
Larkspur, California
FOR VALUE RECEIVED, the undersigned Xxxxxxxx promises to pay to
ObjectSwitch Corporation (the "Company"), at its principal offices at 000
Xxxxxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 the principal sum of
$__________, together with interest from the date of this Note on the unpaid
principal balance upon the terms and conditions specified below.
1. Principal and Interest. The principal balance of this Note together
with interest accrued and unpaid to date shall be due and payable five (5) years
from the date of this Note.
2. Rate of Interest. Interest shall accrue under the Note on any unpaid
principal balance at the rate of ___% per annum, compounded annually.
3. Prepayment. Prepayment of principal and interest may be made at any
time without penalty.
4. Events of Acceleration. The entire unpaid principal sum and unpaid
interest of this Note shall become immediately due and payable upon one or more
of the following events:
A. the date that Borrower shall cease to be employed
by ObjectSwitch Corporation;
B. the failure of the Borrower to pay when due the
principal balance and accrued interest on this Note and the continuation of such
default for more than thirty (30) days; or
C. the insolvency of the Borrower, the commission of
an act of bankruptcy by the Borrower, the execution by the Borrower of a general
assignment for the benefit of creditors, the filing by or against the Borrower
of a petition in bankruptcy or a petition for relief under the provisions of the
federal bankruptcy act or another state or federal law for the relief of debtors
and the continuation of such petition without dismissal for a period of ninety
(90) days or more; or
D. the occurrence of a material event of default
under the Stock Pledge Agreement securing this Note or any obligation secured
thereby.
2
5. Security. Payment of this Note shall be secured by a Stock Pledge
Agreement to be executed by Xxxxxxxx and covering shares of Company common
stock. Borrower, however, shall remain personally liable for payment of this
Note, and assets of the Borrower, in addition to the collateral under the Stock
Pledge Agreement, may be applied to the satisfaction of the Borrower's
obligations hereunder.
6. Collection. If action is instituted to collect this Note, the Borrower
promises to pay all reasonable costs and expenses (including reasonable attorney
fees) incurred in connection with such action.
7. Waiver. No previous waiver and no failure or delay by the Company or
Borrower in acting with respect to the terms of this Note or the Stock Pledge
Agreement shall constitute a waiver of any breach, default, or failure of
condition under this Note, the Stock Pledge Agreement, or the obligations
secured thereby. A waiver of any term of this Note, the Stock Pledge Agreement,
or of any of the obligations secured thereby must be made in writing and signed
by a duly authorized officer of the Company and shall be limited to the express
terms of such waiver.
Borrower hereby expressly waives presentment and demand for payment at
such time as any payments are due under this Note.
8. Conflicting Agreements. In the event of any inconsistencies between the
terms of this Note and the terms of any other document related to the loan
evidenced by the Note, the terms of this Note shall prevail.
9. Governing Law. This Note shall be construed in accordance with the laws
of the State of California.
________________________________________________
Signature of Borrower
________________________________________________
Print Name of Borrower
Address: ______________________________________
______________________________________
2
3
STOCK PLEDGE AGREEMENT
In order to secure payment of that certain ______, 1999
promissory note (the "Note") payable to ObjectSwitch Corporation, a Delaware
corporation (the "Company") having its corporate offices at 000 Xxxxxxxx Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000, in the principal amount of $__________,
which Note the Borrower delivered in connection with a loan extended to the
Borrower by the Company, the Borrower hereby grants the Company a security
interest in, and assigns, transfers to and pledges with the Company, the
following securities and other property:
(i) the ______ shares of Company common stock
("Common Stock") delivered to and deposited with the Company as collateral for
the Note; and
(ii) any and all new, additional or different
securities or other property subsequently distributed with respect to the shares
identified in subparagraph (i) that are to be delivered to and deposited with
the Company pursuant to the requirements of paragraph 3 of this Agreement; and
(iii) any and all other property and money that is
delivered to or comes into the possession of the Company pursuant to the terms
and provisions of this Agreement; and
(iv) the proceeds of any sale, exchange or disposition
of the property and securities described in subparagraphs (i), (ii) or
(iii) above.
All securities, property and money to be assigned to, transferred to and
pledged with the Company shall be herein referred to as the "Collateral" and
shall be accompanied by one or more stock power assignments properly endorsed by
the Borrower. The Company shall hold the Collateral in accordance with the
following terms and provisions:
1. Warranties. The Borrower hereby warrants that the Borrower is the owner
of the Collateral and has the right to pledge the Collateral and that the
Collateral is free from all liens, advance claims and other security interests
(other than those created hereby).
2. Rights and Powers. The Company may, without obligation to do so,
exercise one or more of the following rights and powers with respect to the
Collateral:
(a) accept in its discretion, but subject to the
applicable limitations of paragraphs 7(a), (c) and (d), other property of the
Borrower in exchange for all or part of the Collateral and release Collateral to
the Borrower to the extent necessary to effect such exchange, and in such event
the money, property or securities received in the exchange shall be held by the
Company as substitute security for the Note and all other indebtedness secured
hereunder;
(b) perform such acts as are necessary to preserve and
protect the Collateral and the rights, powers and remedies granted with respect
to such Collateral by this Agreement; and
1
4
(c) transfer record ownership of the Collateral to the
Company or its nominee and receive, endorse and give receipt for, or collect by
legal proceedings or otherwise, dividends or other distributions made or paid
with respect to the Collateral, provided and only if there exists at the time an
outstanding event of default under paragraph 8 of this Agreement.
Any action by the Company pursuant to the provisions of this
paragraph 2 may be taken without notice to the Borrower. Expenses reasonably
incurred in connection with such action shall be payable by the Borrower and
form part of the indebtedness secured hereunder as provided in paragraph 9.
So long as there exists no event of default under paragraph 8 of
this Agreement, the Borrower may exercise all shareholder voting rights and be
entitled to receive any and all regular cash dividends paid on the Collateral.
Accordingly, until such time as an event of default occurs under this Agreement,
all proxy statements and other shareholder materials pertaining to the
Collateral shall be delivered to the Borrower at the address indicated below.
Any cash sums that the Company may receive in the exercise of its
rights and powers under paragraph 2(b) above shall be applied to the payment of
the Note and any other indebtedness secured hereunder, in such order of
application as the Company deems appropriate. Any remaining cash shall be paid
over to the Borrower.
3. Duty to Deliver. Any new, additional or different securities
that may now or hereafter become distributable with respect to the Collateral by
reason of (i) any stock dividend, stock split or reclassification of the capital
stock of the Company, or (ii) any merger, consolidation or other reorganization
affecting the capital structure of the Company, shall, upon receipt by the
Borrower, be promptly delivered to and deposited with the Company as part of the
Collateral hereunder. Such securities shall be accompanied by one or more
properly-endorsed stock power assignments.
4. Care of Collateral. The Company shall exercise reasonable care
in the custody and preservation of the Collateral, but shall have no obligation
to initiate any action with respect to, or otherwise inform the Borrower of, any
conversion, call, exchange right, preemptive right, subscription right, purchase
offer or other right or privilege relating to or affecting the Collateral;
provided, however, that the Company will notify the Borrower of any such rights
of the Borrower to protect against adverse claims or to protect the Collateral
against the possibility of a decline in market value. The Company shall not be
obligated to take any action with respect to the Collateral requested by the
Borrower unless the request is made in writing and the Company determines that
the requested action will not unreasonably jeopardize the value of the
Collateral as security for the note and other indebtedness secured hereunder.
The Company may at any time release and deliver all or part of the
Collateral to the Borrower, and the receipt thereof by the Borrower shall
constitute a complete and full acquittance for the Collateral so released and
delivered. The Company shall accordingly be discharged from any further
liability or responsibility for the Collateral, and the released Collateral
shall no longer be subject to the provisions of this Agreement. However, any and
all
2
5
releases of the Collateral shall be effected in compliance with the applicable
limitations of paragraphs 7(a) and 7(c).
5. Payment of Taxes and Other Charges. The Borrower shall pay,
prior to the delinquency date, all taxes, liens, assessments and other charges
against the Collateral, and in the event of the Borrower's failure to do so, the
Company may at its election pay any or all of such taxes and charges without
contesting the validity or legality thereof. The payments so made shall become
part of the indebtedness secured hereunder and until paid shall bear interest at
the minimum per annum rate, compounded annually, required to avoid the
imputation of interest income to the Company and compensation income to the
Borrower under the federal tax laws.
6. Transfer of Collateral. In connection with the transfer or
assignment of the note (whether by negotiation, discount or otherwise), the
Company may transfer all or any part of the Collateral, and the transferee shall
thereupon succeed to all the rights, powers and remedies granted the Company
hereunder with respect to the Collateral so transferred. Upon such transfer, the
Company shall be fully discharged from all liability and responsibility for the
transferred Collateral.
7. Release of Collateral. Provided (i) all indebtedness secured
hereunder (other than payments not yet due and payable under the Note) shall at
the time have been paid in full or cancelled and (ii) there does not otherwise
exist any event of default under paragraph 8, the pledged shares of Common
Stock, together with any additional Collateral that may hereafter be pledged and
deposited hereunder, shall be released from pledge and returned to the Borrower
in accordance with the following provisions:
(a) Upon payment or prepayment of principal under the
Note, together with payment of all accrued interest to date, one or more shares
of Common Stock held as Collateral hereunder shall (subject to the applicable
limitations of paragraphs 7(c) and (d) below) be released to the Borrower within
three (3) days after such payment or prepayment. The number of shares to be so
released shall be equal to the number obtained by multiplying (i) the total
number of shares of Common Stock held under this Agreement at the time of the
payment or prepayment, by (ii) a fraction of the numerator of which shall be the
amount of the principal paid or prepaid and the denominator of which shall be
the unpaid principal balance of the Note immediately prior to such payment or
prepayment. In no event, however, shall any fractional shares be released. In
addition, one or more shares of Common Stock held as Collateral hereunder shall
(subject to the applicable limitations of paragraphs 7(c) and (d) below) be
released to a stock broker designated in writing by the Borrower and acceptable
to the Company for the sole purpose of effecting an immediate sale of the
released shares and provided that such stock broker agrees to forward any
proceeds (up to the balance of principal and interest due under the Note)
directly to the Company to be used to satisfy the Note.
(b) Any additional Collateral that may hereafter be
pledged and deposited with the Company (pursuant to the requirements of
paragraph 3) with respect to the shares of Common Stock pledged hereunder shall
be released at the same time the particular shares of Common Stock to which the
additional Collateral relates are to be released in
3
6
accordance with the applicable provisions of paragraph 7(a). Under no
circumstances, however, shall any shares of Common Stock or any other Collateral
be released if previously applied to the payment of any indebtedness secured
hereunder.
(c) In no event, however, shall any shares of Common
Stock be released pursuant to the provisions of paragraphs 7(a) or 7(b) if, and
to the extent, the fair market value of the Common Stock and all other
Collateral that would otherwise remain in pledge hereunder after such release
were affected would be less than the unpaid balance of the Note (principal and
accrued interest).
(d) In the event the securities constituting the
Collateral become "margin securities" (within the meaning of Section 207.2(i) of
Regulation G of the Federal Reserve Board), then the value of the Collateral
securing the note shall not be less than fifty percent (50%) of the current
market value of such securities. Accordingly, the number of shares to be
released pursuant to paragraph 7(a) or (b) shall be reduced to the extent
necessary to comply with Regulation G.
8. Events of Default. The occurrence of one or more of the
following events shall constitute an event of default under this agreement:
(a) the failure of the Borrower to pay the principal
and accrued interest when due under the Note;
(b) the failure of the Borrower to perform a material
obligation imposed upon the Borrower by reason of this agreement; or
(c) the breach of any warranty of the Borrower
contained in this agreement.
Upon the occurrence of any such event of default, the Company
may, at its election, declare the Note and all other indebtedness secured
hereunder to become immediately due and payable and may exercise any or all of
the rights and remedies granted to a secured party under the provisions of the
California Uniform Commercial Code (as now or hereafter in effect), including
(without limitation) the power to dispose of the Collateral by public or private
sale or to accept the Collateral in full payment of the Note and all other
indebtedness secured hereunder.
Any proceeds realized from the disposition of the Collateral
pursuant to the foregoing power of sale shall be applied first to the payment of
reasonable expenses incurred by the Company in connection with the disposition,
then to the payment of the Note and finally to any other indebtedness secured
hereunder. Any surplus proceeds shall be paid over to the Borrower. However, in
the event such proceeds prove insufficient to satisfy all obligations of the
Borrower under the Note, than the Borrower shall remain personally liable for
the resulting deficiency.
9. Other Remedies. The rights, powers and remedies granted to
the Company and Borrower pursuant to the provisions of this agreement shall be
in addition to all
4
7
rights, powers and remedies granted to the Company and Borrower under any
statute or rule of law. Any forbearance, failure or delay by the Company or
Borrower in exercising any right, power or remedy under this agreement shall not
be deemed to be a waiver of such right, power or remedy. Any single or partial
exercise of any right, power or remedy under this agreement shall not preclude
the further exercise thereof, and every right, power and remedy of the Company
and Borrower under this agreement shall continue in full force and effect unless
such right, power or remedy is specifically waived by an instrument executed by
the Company or Borrower, as the case may be.
10. Costs and Expenses. All reasonable costs and expenses
(including reasonable attorneys fees) incurred by the Company in the exercise or
enforcement of any right, power or remedy granted it under this Agreement shall
become part of the indebtedness secured hereunder and shall constitute a
personal liability of the Borrower payable immediately upon demand and bearing
interest until paid at the Company's bank interest rate then being earned by the
Company on its deposits.
11. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California and shall be
binding upon the executors, administrators, heirs and assigns of the Borrower.
12. Arbitration. Any controversy between the parties hereto
involving the construction or application of any terms, covenants or conditions
of this Agreement or the Note, or any claims arising out of or relating to this
Agreement or the Note, or the breach hereof or thereof, will be submitted to and
settled by final and binding arbitration in San Francisco, California, in
accordance with the rules of the American Arbitration then in effect, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. In the event of any arbitration under this
Agreement or the Note, the prevailing party shall be entitled to recover from
the losing party reasonable expenses, attorneys' fees, and costs incurred
therein or in the enforcement or collection of any judgment or award rendered
therein. The "prevailing party" means the party determined by the arbitrator to
have most nearly prevailed, even if such party did not prevail in all matters,
not necessarily the one in whose favor a judgment is rendered.
5
8
13. Severability. If any provision of this Agreement is held to
be invalid under applicable law, then such provision shall be ineffective only
to the extent of such invalidity, and neither the remainder of such provision
nor any other provisions of this Agreement shall be affected thereby.
IN WITNESS WHEREOF, this Agreement has been executed by the
Borrower on this _____ day of _______, 1999.
rights, powers and remedies granted to the Company and
Borrower under any statute or rule of law. Any forbearance, failure or delay by
the Company or Borrower in exercising any right,
__________________________________________
Signature of Borrower
__________________________________________
Print Name of Borrower
Address: _______________________________
_______________________________
Agreed to and Accepted by:
OBJECTSWITCH CORPORATION
By: ______________________________
Title: ___________________________
Dated: _______, 199__
6
