Exhibit 10.7
STOCK PLEDGE AND SECURITY AGREEMENT
THIS STOCK PLEDGE AND SECURITY AGREEMENT ("Agreement") is made and
entered into as of the 19th day of December, 2001, by XXXXX X. XXXXXX
("Pledgor") to USA BROADBAND, INC. (the "Company").
RECITALS
WHEREAS, Pledgor has executed and delivered to the Company a written
promissory note (the "Note") of even date herewith as consideration for a loan
(the Note is attached hereto as EXHIBIT A) the proceeds of which were used to
purchase 166,667 shares of the Company's Series A Convertible Preferred Stock
($0.001 par value) (the "Purchased Shares"); and
WHEREAS, to induce the Company to make the loan evidenced by the Note,
Pledgor has agreed to pledge and deposit all Purchased Shares to Company to
secure Pledgor's obligation under the Note.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree as follows:
1. PLEDGE. As security for the prompt and complete payment and performance
when due of Pledgor's obligations with respect to the Note, Pledgor
does hereby grant to Company a continuing security interest of first
priority in the Purchased Shares and hereby deposits with the Company
share certificates representing the number of Purchased Shares
purchased by the Pledgor with the proceeds of the loan referred to in
the preamble hereof, duly endorsed in blank for transfer or
accompanied by undated stock powers duly endorsed in blank (and
accompanied by any transfer tax stamps required in connection with the
pledge of the Purchased Shares with signatures appropriately
guaranteed to the extent required). Pledgor also hereby assigns,
transfers, hypothecates and sets over to the Company all of the
Pledgor's right, title and interest in and to the Purchased Shares
including, without limitation, all income and profits on the Purchased
Shares and all dividends and other payments and distributions with
respect thereto (the "Collateral"); provided, however, that unless an
Event of Default as defined in the Note has occurred, all voting
rights with respect to the Purchased Shares will continue to reside
with Pledgor. The security interest shall continue until all of the
obligations due to the Company under the Note are timely paid in full.
Notwithstanding the above, on the occurrence of the Principal
Reduction Event, as defined in the Note, the number of Purchased
Shares pledged hereunder shall be reduced from 166,667 to 85,000. From
and after that date, Purchased Shares shall mean 85,000 shares of
Series A Convertible Preferred Stock. On the occurrence of the
Principal Reduction Event, the Company will deliver a certificate or
certificates representing the Purchased Shares released from the
pledge, and these shares shall no longer be subject to the lien
created by this Agreement.
2. SECURITY FOR OBLIGATIONS. The pledge herein granted shall be as
security for payment of all obligations of Pledgor now or hereafter
existing under the Note, whether for principal, interest, fees or
otherwise and all amounts presently or hereafter becoming due to the
Company or its successors and assigns (all such amounts being
collectively referred to herein as the "Obligations").
3. DIVIDENDS. During the term of this Agreement, the Company shall hold
and apply all cash dividends or distributions payable in respect of
the Purchased Shares first to pay any interest due on the Note, and
second to pay any principal due on the Note.
4. VOTING RIGHTS. During the term of this Agreement, and so long as
Pledgor is not in default in the performance of any of the terms of
this Agreement or the Note, Pledgor shall be entitled to exercise all
voting and other consensual rights pertaining to the Purchased Shares
or any part thereof for any purpose not inconsistent with the terms of
this Agreement, provided that Pledgor shall not exercise any such
right if, in the Company's judgment, such action would nullify or in
any way adversely change the Company's rights under the Purchased
Shares. To this end, the Company shall execute and deliver to the
Pledgor all proxies and other instruments as the Pledgor may
reasonably request. Upon the occurrence and during the continuance of
a default under this Agreement all rights of the Pledgor to exercise
the voting and other consensual rights which the Pledgor would
otherwise be entitled to exercise pursuant to this SECTION 4 shall
cease and all such rights shall thereupon become vested in the
Company, who shall thereupon be appointed the attorney-in-fact of
Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instruments that the
Company may deem necessary or advisable to accomplish the purposes
hereof, including the exercise of voting and other consensual rights,
which appointment as attorney-in-fact is irrevocable and coupled with
an interest.
5. SALE OF PURCHASED SHARES. So long as no default exists under this
Agreement or under the Note, Pledgor may sell or transfer for cash all
or any part of the Purchased Shares; provided that the sale or
transfer is not otherwise prohibited or restricted and provided
further that Pledgor may not sell or transfer all or any part of the
Purchased Shares unless the per share net proceeds from such sale or
transfer will be equal to or greater than the outstanding balance of
the Note divided by the number of Purchased Shares securing the Note.
If Pledgor desires to effect a sale or transfer in accordance with
this Section, the Company will deliver certificates for the Purchased
Shares to be sold or transferred free of the lien created by this
Agreement to Pledgor at Pledgor's direction upon receipt by the
Company of a duly executed and delivered assignment of the net
proceeds signed by the Pledgor and the Company shall apply such net
proceeds as provided in the Note.
6. SUBSEQUENTLY ACQUIRED SECURITIES. In the event the Purchased Shares
should, as a result of a stock split or conversion of the Purchased
Shares or any other change or exchange of securities, or by reason of
any share dividend, recapitalization, merger, consolidation,
reorganization or otherwise be increased or decreased or changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company or any other entity, this pledge shall
automatically extend to such other or additional securities, and
Pledgor shall immediately deliver to the Company any certificate
representing such securities, together with a stock power appropriately
executed, but not dated.
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7. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Pledgor hereby
represents, warrants and covenants to and with the Company that:
a. OWNERSHIP. Except for the security interest granted hereunder
(the "Security Interest") and transfers or assignments made in
accordance with this Agreement, the Pledgor (i) is and will at
all times continue to be the direct owner, beneficially and of
record, of the Collateral, (ii) holds the same free and clear
of all liens, adverse claims, levies, charges or other
encumbrances of any kind (collectively, "Liens"), and (iii)
will make no assignment, pledge, hypothecation or transfer of
or create any security interest in or lien upon the Collateral.
b. PERFECTION AND PRIORITY. Pledgor shall take such actions as shall
be requested by the Company to cause the Security Interest to
constitute a first priority perfected pledge and security
interest in and to all of the Collateral. With respect to any
shares, securities, or property constituting Collateral in the
possession of or later received by Pledgor, Pledgor shall either
(i) transfer and deliver to the Company such shares or securities
(together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock
powers duly executed in blank), or (ii) take such other action as
the Company shall deem necessary or appropriate to duly record
the Security Interest therein created hereby. Without limiting
the foregoing, Pledgor shall give, execute, deliver, file and
record any financing statement, notice, instrument, document
agreement or other papers that may be necessary to create,
preserve, perfect or validate the Security Interest or to enable
the Company to exercise and enforce its rights hereunder,
including, without limitation, causing any or all of the
Collateral to be transferred of record into the name of the
Company or its nominee.
c. FURTHER ASSURANCES. Pledgor agrees that, from time to time upon the
written request of the Company, he will execute and deliver such
further documents and do such other acts and things as the Company
may reasonably request in order to fully effect the purposes of
this Agreement.
8. DEFAULT. If Pledgor shall default on the obligations on the Note and
fail to cure such default within ten (10) days' notice of the default
from the Company, then Pledgor shall be deemed to be in default under
this Agreement. In the event of such default, the Company may, at its
sole discretion, complete the stock power delivered herewith and
transfer the Purchased Shares on its books to the Company pursuant to
the stock power. This remedy shall be in addition to, and not
substitution for, all other remedies otherwise available to the Company
in the event of a default by Pledgor under the Obligations.
9. RELEASE OF COLLATERAL. Upon timely satisfaction of the Obligations, the
Company shall release its security interest from the Purchased Shares
and the certificates representing the Purchased Shares, together with
any stock powers, shall be delivered to Pledgor.
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10. NOTICES. All notices, demands, requests and other communications
hereunder shall be in writing and shall be delivered to the following
addresses or such other address as either party may designate in
writing:
If to the Company: USA Broadband, Inc.
000 Xxxxxxxxx Xxx
Xxxxx 0
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: 707-769-1622
If to Pledgor: Xxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
11. GOVERNING LAW. This Agreement shall be construed under the laws of the
State of Illinois.
12. BINDING EFFECT. This Agreement is binding upon and inures to the
benefit of the heirs, executors, administrators and permitted assigns
of the parties hereto. During the term of this Agreement and so long
as there is no default hereunder, the Company shall hold the Purchased
Shares only as security as provided herein and shall not sell, assign,
transfer or otherwise dispose of or in any way encumber the Purchased
Shares or any interest therein; provided, however, that the Company
may transfer the Purchased Shares by devise or operation of law to or
for the use and benefit of Pledgor's spouse, lineal descendants,
ancestors or other blood relatives so long as said transferees agree
to be bound by all of the terms and conditions of this Agreement.
13. WAIVER. No failure on the part of the Company to exercise and no delay
in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
14. AMENDMENT, MODIFICATION OR WAIVER. No provision of this Agreement may
be amended, modified or waived except by an instrument in writing
signed by Pledgor and the Company.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken
together, shall constitute one and the same instrument, and each of
the parties hereto may execute this Agreement by signing any such
counterpart.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
PLEDGOR:
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Xxxxx X. Xxxxxx
USA BROADBAND, INC.
By:
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Xxxxxx Xxxxxx
Its:
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EXHIBIT A: [ATTACH PROMISSORY NOTE]
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STOCK POWER
FOR VALUE RECEIVED, I, Xxxxx X. Xxxxxx, do hereby sell, assign and
transfer unto USA Broadband, Inc., a Delaware corporation, 166,667 shares of
Series A Convertible Preferred Stock (reduced to 116,667 upon the Principal
Reduction Event, as defined in the Promissory Note of even date hereof) of USA
Broadband, Inc. (the "Company"), standing in my name on the books of the
Company, and do hereby irrevocably constitute and hereby direct the Company to
transfer the shares on its books and records.
Dated as of the _____ day of ________________, 20___.
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Xxxxx X. Xxxxxx
