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EXHIBIT 10(m)
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made as of September 1,
1998 by and among (i) SOFTWARE ACQUISITION CORP., a Delaware corporation with
principal offices at 000 Xxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxxxx
00000 (the "Company"); (ii) ALLIED CAPITAL CORPORATION, a Maryland corporation
with offices at 0000 X Xxxxxx X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000
(collectively with successors and assigns, "Lenders"); and (iii) ENTERPRISE
SOFTWARE, INC., a Delaware corporation formerly named INDENET, INC. with
principal offices at 00000 Xxxxx Xxxx Xxxx, Xxxxxxx, XX (collectively with
successors and assigns, the "Pledgor").
RECITALS
A. The Company has issued Lenders two (2) Subordinated Debentures in
aggregate principal amount of Fifteen Million Dollars ($15,000,000)
(collectively with all modifications, renewals, extensions and replacements
thereof and therefor, the "Debentures") pursuant to a certain Investment and
Loan Agreement dated March 26, 1998, and other related loan documents
(collectively with all modifications, renewals, extensions and replacements
thereof and therefor, the "Loan Agreements " ).
B. Pledgor is the sole owner of all of the issued and outstanding capital
stock of the Company.
C. The parties hereto propose that the capital stock of the Company
(collectively with all replacements, divisions and sub-divisions thereof and
therefor, the "Shares") serve as collateral to assure repayment of the
Debentures and the other obligations under the Loan Agreements.
PROVISIONS
In consideration of the premises and the covenants herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as set forth below.
1. Grant and Delivery. The Pledgor hereby grant Lenders a security interest in
the Shares to secure the Debentures and all other obligations under the Loan
Agreements the under the terms herein. Pledgor will promptly deliver to Lenders
all certificates now or hereafter evidencing the Shares. Any distribution rights
in respect to the Shares, and any additional interest of any kind or nature in
any stock of the Company acquired by Pledgor shall automatically become subject
to the pledge and security interest herein at the time the
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Pledgor obtain such interest, without any further action by any person;
nevertheless, each Pledgor shall deliver all documents evidencing such rights
and interests to Lenders promptly upon receipt by such Pledgor. Regardless of
any failure by any party to deliver any document to Lenders as required hereby,
the Shares shall at all times be subject to the security interest herein.
2. Clear Title; No New Shares. Except for the security interest granted to the
holders of certain Senior Debt (as defined in the Loan Agreement) according to
the terms of the Loan Agreement, the Company and the Pledgor represent and
warrant that the Pledgor owns the Shares free from any adverse lien, security
interest, or encumbrance and will defend the Shares against all claims and
demands of all persons claiming any interest therein.
3. Payover of Dividends. If, prior to any Default (as defined below), any cash
dividends or other cash distributions shall be paid upon the Shares lawfully,
and without violation of any existing agreements to which the Company is
subject, such amount may properly be paid to the Pledgor; provided, however,
that from and after any Default all dividends and distributions shall be paid
over to the Lenders.
4. After Default. If Pledgor or the Company breaches this Agreement or an Event
of Default occurs, as defined in the Loan Agreements (a "Default"), then the
Pledgor shall have no rights with respect to the Shares from and after such
declaration, and the Lenders may at their option exercise all rights and
privileges arising under the Shares.
5. Specific Authority. For example only, and not by limitation, the authority of
the Lenders under the Shares from and after a Default shall include the
following: (a) the rights to call a special meeting or annual meeting of
shareholders; (b) the right to vote the Shares for directors, cumulatively or
otherwise; (c) the right to amend the Company's Certificate of Incorporation or
Bylaws (or similar documents) to increase or decrease the number of members of
the Company's Board of Directors; (d) the right to vote the Shares to recall
existing directors or officers; (e) the right to seek judicial remedies through
legal process in furtherance hereof; (f) the right to retain counsel in respect
to legal proceedings hereunder; (g) the right to enact shareholder measures by
written consent in lieu of a meeting; (h) the right to waive notice of meetings;
and (i) the right to cause the directors or officers of the Company to petition
on the Company's behalf for relief under bankruptcy laws or state court
receivership laws, or to withdraw or discharge such petitions.
6. Foreclosure by Lenders. The security interest granted hereunder shall entitle
the Lenders to all the rights and remedies provided a secured party under the
Uniform Commercial Code or any other applicable law. In the event of a Default,
the Lenders may take such actions, at their option, as provided in such Code as
regards the Shares. Lenders' rights and remedies shall include, without
limitation, the right to sell or to cause to be sold
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any or all of the Shares at public auction or private sale upon ten (10) days'
notice to Pledgor.
7. Lenders Held Harmless. From and after a Default, the Company and Pledgor
shall be jointly and severally obliged to reimburse the Lenders for any
expenses, losses or liabilities they may incur under this Agreement. The Lenders
shall not be liable to any party for any breach hereof or any fault in
performance hereunder, through negligent or reckless acts or omission, but only
through intentional misconduct.
8. Compliance with Securities Laws.
a) It is understood that Lenders must, in exercising their rights to
foreclose upon and sell the Shares, comply with the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, and
state securities laws (collectively, the "Securities Laws").
Accordingly, Lenders may have difficulty, by reason of restrictions and
limitations imposed by the Securities Laws, in selling the Shares at a
price which approximates the fair market value of the Shares, were it
not for such restrictions. The Company and Pledgor acknowledge and agree
that (i) Lenders may seek to dispose of the Shares without registration
or qualification under the Securities Laws, and in any such transaction
may require the purchaser or purchasers thereof to represent and warrant
their intent not to distribute the Shares in violation of the Securities
Laws, and (ii) any disposition so effected shall not thereby be deemed
"commercially unreasonable". Lenders need not approach such number and
quality of possible buyers so as to be in violation of the Securities
Laws, and Lenders need not approach the maximum number of possible
buyers permitted by the Securities Laws.
b) Lenders may disclose any information they have obtained concerning the
Company, even if obtained in confidence, if Lenders consider such
disclosure to potential purchasers at the foreclosure sale to be useful
or necessary to comply with Federal and applicable state securities
laws.
c) By way of example and not restriction, the form of advertising in a
foreclosure sale hereunder may include provisions as follows:
Notice of Secured Party's
Restricted Public Auction of Collatcral
Notice is hereby given that the shares of stock listed below
(the "Shares") will be sold at public auction, with reserve,
on ______________________, 19__ at __________ a.m. at the offices
of _____________________, located at ______________. The
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Shares represent shares of common stock of a corporation that is owned (directly
or indirectly) by_____________________________ . All interested and qualified
prospective purchasers are invited to attend and bid at the auction.
Lot No. Issuer Number of Shares Total Number of
Shares Issued &
Outstanding
[If applicable describe Issuer]
1) This information was provided to the Secured Party orally by
__________________ and the Secured Party does not warrant and does not
indemnify for inaccuracies in, the truth of these representations as of
the date of this Notice or of the auction.
2) The Shares have not been registered, qualified, approved or disapproved
under the Securities Act of 1933, as amended (the "Act") or under any
other federal or state securities laws. The Shares may be resold,
transferred or otherwise disposed of by a purchaser only if such Shares
have been registered under the Act and, where required, under state
securities laws, or if the proposed sale, transfer or disposition is
exempt from such registration. This notice does not constitute an offer
or solicitation to anyone in any jurisdiction in which such offer or
solicitation is not authorized by applicable law.
3) The Shares will be sold as an entirety and will not be divided into
parcels. The Shares will be offered and sold without recourse against the
Secured Party and without any representations, warranties or covenants,
express or implied, being made by the Secured Party with respect to the
Shares (including, without limitation, warranties of title) or with
respect to the business prospects, financial condition or result of
operations of (Issuer), the issuer of the Shares.
4) The Secured Party reserves the right to reject any bid which it deems to
have been made by a bidder which is unable to satisfy the requirements
imposed by the Secured Party upon prospective purchasers in connection
with the auction or to whom in the Secured Party's sole Judgment a sale
may not lawfully be made.
5) The Secured Party reserves the right to bid and to become the purchaser
of the Shares and to credit against the purchase price thereof any and
all indebtedness due to the Secured Party under the Agreement.
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6) (i) An investment letter from the purchaser of the Shares (in form and
substance satisfactory to the Secured Party and its counsel) will be
required, which letter shall include representation that the Shares are
being acquired for the account of the purchaser and not with a view of
resale or distribution, and that the purchaser may not resell the same
without compliance with the registration requirements of the Act and
applicable state securities laws or pursuant to valid exemptions
therefrom.
(ii) Certificates evidencing the Shares will be appropriately legended,
and stock transfer orders may be entered on any stock transfer books of
the issuer of the Shares.
(iii) The Secured Party may require the purchaser of the Shares to
establish that such purchaser has sufficient knowledge and experience in
business and financial matters to properly evaluate the merits and risks
of investment in the Shares, to satisfactorily establish that such
purchaser is able to bear the economic risks involved in investment in
the Shares, and to give a written acknowledgment to the Secured Party
that such purchaser has had such access to information concerning the
Shares and the issuer thereof as such purchaser deems necessary to make
an informed investment decision.
(iv) The Secured Party may require the purchaser of the Shares to
satisfactorily establish that the sale of the Shares does not violate the
Act or the securities laws of any jurisdiction and to indemnify the
Secured Party against any liability arising out of any violation of the
Act or such laws in connection with the sale of the Shares or any resale
thereof by such purchaser.
9. Waiver. No delay on Lenders' part in exercising any power of sale, lien,
option or other right hereunder, and no notice or demand which may be given to
or made upon Pledgor by Lenders with respect to any power of sale, lien, option
or other right hereunder, shall constitute a waiver thereof, or limit or impair
Lenders' right to take any action or to exercise any power, remedy or any other
right hereunder without notice or demand, or prejudice Lenders' rights as
against Pledgor in any respect. In addition, no action taken by Lenders
hereunder shall in any way impair or limit Lenders' right to exercise any or all
rights or remedies Lenders may otherwise have against Pledgor with respect to
any sums payable under the Debentures or the Loan Agreements. This is an
absolute, unconditional and continuing pledge and will remain in full force and
effect until the sums payable under the Debentures and the Loan Agreements have
been fully paid to the Lenders. This Agreement will not be affected by any
surrender, exchange, acceptance or release by the Lenders of any other pledge or
any collateral held for the Debentures. Notice of acceptance of this pledge and
conveyance, notice of extensions of credit to the Company from time to time,
notice of default, diligence, presentment, protest, demand for payment, notice
of demand or protest, and any defense based upon a failure of Lenders to comply
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with the requirements of the applicable version of Uniform Commercial Code
Section 9-504 are hereby waived. Lenders, at any time and from time to time,
without the consent of Pledgor, may change the manner, place or terms of payment
of or interest rates on, or change or extend the time of payment of, or renew or
alter, any of the Debentures without impairing or releasing the liabilities of
any party hereunder. Lenders in their sole discretion may determine the
reasonableness of the period which may elapse prior to the making of demand for
any payment upon the Company or any guarantor and it need not pursue any of
their remedies against any other party before having recourse against Pledgor
under this Agreement.
10. Reconveyance Upon Satisfaction. If the Debentures are repaid in full prior
to any Default, Lenders will reconvey the Shares to the Pledgor, this Agreement
shall terminate and Lenders will redeliver the certificates to the Pledgor.
11. Miscellaneous. The Lenders may exercise their rights under the Shares in
person, through attorneys, nominees, proxies or in any other legal manner. The
captions herein are for convenience only and are not part of the text of this
Agreement. This Agreement may be signed in counterparts. None of the terms or
provisions of this Agreement may be waived, altered, modified or amended except
in writing duly signed for and on behalf of the Lenders and the Pledgor. If any
portion hereof shall be unenforceable by law it shall be severed herefrom and
the balance of this Agreement shall be enforced according to its terms.
12. Choice of Law; Venue and Jurisdiction. This Agreement shall be interpreted,
and the rights and liabilities of the parties hereto determined, in accordance
with the laws of the District of Columbia, without regard to its principles of
conflicts of law. Venue for any adjudication hereof shall be only in the courts
of the District of Columbia or the Federal courts in such District, to the
Jurisdiction of which courts all undersigned parties hereby submit as the
agreement of such parties, as not inconvenient, and as not subject to review by
any court other than such courts in the District of Columbia. All parties intend
and agree that the courts of jurisdictions in which the Company or Pledgor is
resident shall afford full faith and credit to any judgment rendered by a court
of the District of Columbia against the Company or other parties hereto, and
that such District of Columbia and federal courts shall have in personam
jurisdiction to enter a valid judgment against the Company and such other
parties. Service of any summons and/or complaint and any other process which may
be served on the Company in any action in respect hereto, may be made by mailing
via registered mail, or delivering a copy of such process to the Company at its
address specified in the Loan Agreement. The parties hereto agree that this
submission to jurisdiction and consent to service of process are reasonable and
made for the express benefit of Lender.
13. WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT WAIVES ALL RIGHT TO
TRIAL BY JURY OF ALL CLAIMS, DEFENSES COUNTERCLAIMS
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AND SUITS OF ANY KIND DIRECTLY OR INDIRECTLY ARISING FROM OR RELATING TO THIS
AGREEMENT OR THE LOAN AGREEMENTS OR THE DEALINGS OF THE PARTIES IN RESPECT
THERETO. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THIS SECTION IS A
MATERIAL TERM OF THIS AGREEMENT AND THAT THE LENDER WOULD NOT EXTEND ANY FUNDS
UNDER THE LOAN AGREEMENTS IF THIS WAIVER OF JURY TRIAL WERE NOT A PART HEREOF.
EACH PARTY HERETO ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT AND THAT
IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION WITH, OR THE
OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS CHOICE. EACH PARTY HERETO AGREES
THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS SHALL BE TRIED BEFORE A
JUDGE OF COMPETENT JURISDICTION, WITHOUT A JURY.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
PLEDGOR. Enterprise Software, Inc., formerly named
IndeNet, Inc.
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
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Title: Vice President
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[Seal]
LENDER. Allied Capital Corporation
[Seal]
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Principal
COMPANY: Software Acquisition Corp.
[Seal]
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
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Title: President
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