EXHIBIT 10.17
STOCK PLEDGE AGREEMENT
In order to secure payment of the promissory note dated August 6, 1998
(the "Note") payable to Forte Software, Inc., a Delaware corporation (the
"Company"), at its principal offices in the principal amount of up to one
million three hundred thousand dollars ($1,300,000), 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 and pledges to the Company, the following securities and other
property:
THE 383,158 SHARES OF THE COMPANY'S COMMON STOCK (THE "COMMON STOCK") DELIVERED
TO AND DEPOSITED WITH THE COMPANY AS COLLATERAL FOR THE NOTE; AND
ANY AND ALL NEW, ADDITIONAL OR DIFFERENT SECURITIES OR OTHER PROPERTY
SUBSEQUENTLY DISTRIBUTED WITH RESPECT TO THE SHARES IDENTIFIED IN SUBSECTION (a)
ABOVE THAT ARE TO BE DELIVERED TO AND DEPOSITED WITH THE COMPANY PURSUANT TO THE
REQUIREMENTS OF SECTION 3 OF THIS AGREEMENT; AND
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
THE PROCEEDS OF ANY SALE, EXCHANGE OR DISPOSITION OF THE PROPERTY AND SECURITIES
DESCRIBED IN SUBSECTION (a), (b) OR (c) 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:
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).
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:
ACCEPT IN ITS DISCRETION, BUT SUBJECT TO THE APPLICABLE LIMITATIONS OF
SECTION 7, 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;
PERFORM SUCH ACTS AS ARE NECESSARY TO PRESERVE AND PROTECT THE COLLATERAL AND
THE RIGHTS,
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POWERS AND REMEDIES GRANTED WITH RESPECT TO SUCH COLLATERAL BY THIS
AGREEMENT; AND
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, BUT ONLY IF THERE EXISTS AT THE TIME AN OUTSTANDING EVENT OF DEFAULT
UNDER SECTION 8 OF THIS AGREEMENT.
Any action by the Company pursuant to the provisions of this Section 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 Section 9.
So long as there exists no event of default under Section 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 this Section 2 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.
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.
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 releases
of the Collateral shall be effected in compliance with the applicable
limitations of Section 7(a) and (c).
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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.
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.
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 SECTION 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:
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 LIMITATION OF SUBSECTION (d) BELOW)
BE RELEASED TO THE BORROWER WITHIN THREE 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, 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.
ONE OR MORE SHARES OF COMMON STOCK HELD AS COLLATERAL HEREUNDER SHALL (SUBJECT
TO THE LIMITATION OF SUBSECTION (d) BELOW) BE RELEASED TO A STOCKBROKER
DESIGNATED IN WRITING BY THE BORROWER AND ACCEPTABLE TO THE COMPANY FOR THE SOLE
PURPOSE OF EFFECTING AN IMMEDIATE SALE OF THE RELEASED SHARES, PROVIDED THAT
SUCH STOCKBROKER 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.
ANY ADDITIONAL COLLATERAL THAT MAY HEREAFTER BE PLEDGED AND DEPOSITED WITH THE
COMPANY (PURSUANT TO THE REQUIREMENTS OF SECTION 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 ACCORDANCE WITH THE APPLICABLE PROVISIONS OF SUBSECTION (a) OR
(b) ABOVE. 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.
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IN NO EVENT SHALL ANY SHARES OF COMMON STOCK BE RELEASED PURSUANT TO THE
PROVISIONS OF SUBSECTIONS (a), (b) AND (c) ABOVE 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 IS EFFECTED WOULD BE LESS THAN THE
UNPAID BALANCE OF THE NOTE (PRINCIPAL AND ACCRUED INTEREST).
EVENTS OF DEFAULT. THE OCCURRENCE OF ONE OR MORE OF THE FOLLOWING EVENTS SHALL
CONSTITUTE AN EVENT OF DEFAULT UNDER THIS AGREEMENT:
THE FAILURE OF THE BORROWER TO PAY THE PRINCIPAL AND ACCRUED INTEREST WHEN DUE
UNDER THE NOTE;
THE FAILURE OF THE BORROWER TO PERFORM A MATERIAL OBLIGATION IMPOSED UPON THE
BORROWER BY REASON OF THIS AGREEMENT; OR
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 be
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, then the Borrower shall remain personally liable for
the resulting deficiency.
OTHER REMEDIES. THE RIGHTS, POWERS AND REMEDIES GRANTED TO THE COMPANY AND THE
BORROWER PURSUANT TO THE PROVISIONS OF THIS AGREEMENT SHALL BE IN ADDITION TO
ALL RIGHTS, POWERS AND REMEDIES GRANTED TO THE COMPANY AND THE BORROWER UNDER
ANY STATUTE OR RULE OF LAW. ANY FORBEARANCE, FAILURE OR DELAY BY THE COMPANY OR
THE 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 THE 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 THE BORROWER, AS THE CASE MAY BE.
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
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DEPOSITS.
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.
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 OAKLAND, CALIFORNIA, IN ACCORDANCE
WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION 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.
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 August, 1998.
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Xxxxxx X. Xxxxxxxx
Agreed to and Accepted by:
FORTE SOFTWARE, INC.
By:___________________________
Title:________________________
Dated: ________ ___, _____
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