Exhibit A
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of November 1, 1999, is by and between
COYOTE NETWORK SYSTEMS, INC., a Delaware corporation ("CNS"), and
_____________________ ("Lender").
RECITALS
CNS and Lender acknowledge the following:
A. Lender has agreed to provide a loan to CNS in the principal amount of
$_______ pursuant to the Term Loan Agreement dated even date herewith (the "Term
Loan Agreement") between Lender and CNS.
B. Lender requires, as a condition to making the Loan that CNS execute and
deliver this Pledge Agreement.
AGREEMENTS
In consideration of the Recitals and in order to induce Lender to extend
credit to CNS, CNS hereby agrees with Lender as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings assigned to them in the Term Loan Agreement. All terms defined in
the California Uniform Commercial Code (the "UCC") and used herein shall have
the meanings assigned in the UCC.
2. Pledge. To secure the payment and performance by CNS of all of its
obligations, debts and liabilities to Lender under the Term Loan Agreement (the
"Secured Obligations"), CNS hereby pledges to Lender for the benefit of Lender
and grants to Lender for the benefit of Lender a first priority security
interest in all its right, title and interest in and to the collateral described
in section 3 below (the "Pledged Collateral").
3. Description of Pledged Collateral. The Pledged Collateral consists of:
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(a) ________ shares of common stock (the "Shares") of INET
Acquisition, Inc. (n/k/a INET Interactive Network System, Inc.), a
California corporation ("INET"); and
(b) All right, title and interest of CNS in and to all present and
future payments, proceeds, dividends, distributions, instruments,
compensation, property, assets, interests and rights, and all monies, due
or to become due and payable to CNS in connection with the Pledged
Collateral or otherwise paid, issued or distributed from time to time in
respect of or in exchange therefor, and any certificate, instrument or
other document evidencing or representing the same (including all proceeds
of dissolution or liquidation).
4. Delivery of Pledged Collateral. CNS shall deliver to Lender or its
designated agent:
(a) The Shares on or before the date hereof; and
(b) Any other original shares of stock, certificates, instruments or
other documents constituting Pledged Collateral within five days after
CNS's receipt thereof.
All Pledged Collateral which are certificated securities shall be in
bearer form and accompanied by blank stock powers, duly executed by CNS, in
the name of Lender.
5. Representations, Warranties and Covenants of CNS. CNS hereby represents,
warrants and covenants that:
(a) Pledged Collateral. Set forth on Schedule I is a complete and
accurate list and description of all Pledged Collateral as of the date of
this Agreement. The Shares are unregistered and have endorsed thereon a
restricted legend relating thereto.
(b) Due Authorization, Etc., of Shares. The Shares have been duly
authorized and validly issued and are fully paid and nonassessable and
constitute ___% of the authorized, issued and outstanding shares of common
stock of INET.
(c) Sale or Other Disposition of Pledged Collateral. CNS will not
assign (by operation of law or otherwise), sell, lease, transfer, pledge or
grant a security interest in or otherwise dispose of or abandon any Pledged
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Collateral, and the inclusion of "proceeds" of the Pledged Collateral under
the security interest granted herein shall not be deemed a consent by
Lender to any sale or other disposition of any Pledged Collateral except as
expressly permitted herein.
(d) Required Consents. Except for any consents as may be required in
connection with any disposition of any portion of the Pledged Collateral by
laws affecting the offering and sale of securities generally, no consent of
any other person or entity (including stockholders and creditors of CNS) is
required in connection with (i) the execution, delivery, performance,
validity or enforceability of this Pledge Agreement; (ii) the perfection or
maintenance of the security interest created hereby (including the first
priority nature of such security interest); or (iii) the exercise by Lender
of the voting or other rights provided for in this Pledge Agreement.
(e) Nature of Security Interest. When the Pledged Collateral are
delivered to Lender, Lender will obtain a valid and perfected first
security interest in such Pledged Collateral for the benefit of Lender as
security for the repayment of the Secured Obligations, prior to all other
liens and encumbrances thereon and security interests therein.
(f) Action Impairing Value of Pledged Collateral. CNS has not and will
not, without the prior written consent of Lender, execute any document or
instrument or take any other action in connection with any of the Pledged
Collateral which would impair the value of the interest or rights of CNS or
Lender therein. None of the Pledged Collateral is subject to an option to
purchase or similar right of any person or entity.
(g) Further Assurances. CNS will, at its sole cost and expense,
perform all acts and execute all documents requested by Lender from time to
time to evidence, perfect, maintain or enforce Lender's first priority
security interest in the Pledged Collateral or otherwise in furtherance of
the provisions of this Pledge Agreement.
6. Remedies.
(a) If CNS shall fail to pay its obligations under the Term Loan
Agreement when due, Lender may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
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on default under the UCC (whether or not applicable to the affected Pledged
Collateral) and may also, without obligation to resort to other security,
at any time and from time to time sell, resell, assign and deliver, in its
discretion, all or any of the Pledged Collateral, in one or more parcels at
the same or different times, and all right, title and interest, claim and
demand therein and right of redemption thereof, on any securities exchange
on which any Pledged Collateral or any of them may be listed, or at public
or private sale, for cash, upon credit or for future delivery, and in
connection therewith Lender may grant options, CNS hereby waiving and
releasing any and all equity or right of redemption.
(b) If any of the Pledged Collateral is sold by Lender upon credit or
for future delivery, Lender shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such
failure, Lender may resell such Pledged Collateral. In no event shall any
part of the proceeds of sale of any Pledged Collateral be credited against
the Secured Obligations until the payment therefor has actually been
received by Lender.
(c) Lender may apply the cash proceeds actually received from any sale
or other disposition of the Pledged Collateral to the Secured Obligations
in any order or manner which Lender may determine, and CNS shall remain
liable and will pay Lender on demand any deficiency remaining.
(d) CNS recognizes that Lender may be unable to effect a public sale
of the Pledged Collateral consisting of securities by reason of certain
prohibitions contained in the Securities Act, or in applicable Blue Sky or
other state securities laws, as now or hereafter in effect, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire
such securities for their own account, for investment and not with a view
to the distribution or resale thereof. CNS agrees that any such Collateral
sold at any such private sale may be sold at a price and upon other terms
less favorable to the seller than if sold at public sale and that each such
private sale shall be deemed to have been made in a commercially reasonable
manner. Lender shall have no obligation to delay sale of any such
securities for the period of time necessary to permit CNS, even if CNS
would agree, to register such securities for public sale under the
Securities Act. CNS agrees that private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially
reasonable manner.
(e) Lender shall give CNS thirty days' prior notice of the time and
place that any sale or other disposition is to be made, which notice CNS
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agrees is reasonable, all other demands, advertisements and notices being
hereby waived. Within such 30 day period, Lender and Lender agree that CNS
may repurchase or cause another to purchase the Shares at a price equal to
or better than the price set forth in the above-referenced notice.
(f) Unless CNS exercises its right to repurchase the Shares set forth
in subsection (e) above, Lender shall not be obligated to make any sale of
Pledged Collateral if it shall determine not to do so, regardless of the
fact that notice of sale may have been given. Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and
place to which the same was so adjourned.
(g) The remedies provided herein in favor of Lender shall not be
exclusive, but shall be cumulative and in addition to all other remedies in
favor of Lender existing at law or in equity.
7. Lender Appointed Attorney-in-Fact.
(a) To effectuate the terms and provisions hereof, CNS hereby appoints
Lender as CNS's attorney-in-fact upon the occurrence and during the
continuance of a default under the Term Loan Agreement for the purpose of
carrying out the provisions of this Pledge Agreement and taking any action
and executing any instrument which Lender may deem necessary or advisable
to accomplish the purposes hereof. Without limiting the generality of the
foregoing, Lender shall have the right and power to:
(i) receive, endorse and collect all checks and other orders for
the payment of money made payable to CNS representing any interest or
dividend or other distribution or amount payable in respect of the
Pledged Collateral or any part thereof and to give full discharge for
the same; and
(ii) execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged
Collateral.
(b) Other than any action which constitutes gross negligence or
willful misconduct, all acts done under the foregoing authorization are
hereby ratified and approved and neither Lender nor any designee or Lender
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thereof shall be liable for any act or omission, for any error of judgment
or for any mistake of fact or law.
(c) This power of attorney, being coupled with an interest, is
irrevocable while any Secured Obligations remain unpaid or unperformed.
8. Lender's Duties; Reasonable Care.
(a) Lender shall have the duty to exercise reasonable care in the
custody and preservation of any Pledged Collateral in its possession, which
duty shall be fully satisfied if Lender maintains safe custody of such
Pledged Collateral.
(b) Lender shall have no further obligation to ascertain the
occurrence of, or to notify CNS with respect to, any events and shall not
be deemed to assume any such further obligation as a result of the
establishment by Lender of any internal procedures with respect to any
securities in its possession, nor shall Lender shall not be deemed to
assume any other responsibility for, or obligation or duty with respect to,
any Pledged Collateral, or its use, of any nature or kind, or any matter or
proceedings arising out of or relating thereto, including any obligation or
duty to take any action to collect, preserve or protect its or CNS's rights
in the Pledged Collateral or against any prior parties thereto, but the
same shall be at CNS's sole risk and responsibility at all times.
(c) CNS hereby releases Lender, Lender, and their respective officers,
directors, employees and agents, from any claims, causes of action and
demands at any time arising out of or with respect to this Pledge
Agreement, the Pledged Collateral and/or any actions taken or omitted to be
taken by Lender with respect thereto (except, in the case of Lender, such
claims, causes of action and demands arising from the gross negligence or
willful misconduct of Lender), and CNS hereby agrees to hold Lender, Lender
and their respective officers, directors, employees and agents harmless
from and with respect to any and all such claims, causes of action and
demands (except such claims, causes of action and demands arising from the
gross negligence or willful misconduct of Lender).
9. Governing Law. This Agreement is being delivered in and shall be deemed
to be a contract governed by the laws of the State of California and shall be
interpreted and enforced in accordance with the laws of that state without
regard to the principles of conflicts of laws.
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10. Admissibility of Pledge Agreement. CNS agrees that a copy of this
Pledge Agreement signed by CNS and transmitted by facsimile for delivery to
Lender shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
11. Notices. All notices provided herein shall be in writing and shall be
(a) delivered; (b) sent by express or first class mail; or (c) sent by facsimile
transmission and confirmed in writing provided to the recipient in a manner
described in (a) or (b), and, if to CNS, addressed to it at 0000 Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxxxx, 00000, Facsimile No. 000-000-0000 and if to
Lender, addressed to it at ____________________________________________________,
Facsimile No. _______________, or to such other address with respect to either
party as such party shall notify the other in writing; such notices shall be
deemed given when so delivered, mailed or transmitted.
12. Entire Agreement; Amendments and Modification. This Pledge Agreement is
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior understandings and agreements. No provision of this
Agreement shall be amended or modified except by a written instrument executed
by CNS and Lender.
13. Continuing Pledge Agreement.
(a) This Pledge Agreement shall create a continuing security interest
in the Pledged Collateral and shall be binding upon CNS and its successors
and assigns and inure to the benefit of, and be enforceable by, Lender,
Lender and their respective successors, transferees and assigns.
(b) Upon the payment in full of the Loan and all other amounts payable
under this Pledge Agreement, the security interest granted hereby shall
terminate and all rights to the Pledged Collateral shall revert to CNS.
Upon any such termination, Lender will, at CNS's expense and without
representation or warranty of any nature whatsoever and wholly without
recourse, return to CNS such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof and execute and
deliver to CNS such documents as CNS shall reasonably request to evidence
such termination.
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14. Captions; Separability. The captions of the sections and subsections of
this Pledge Agreement have been inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Pledge
Agreement. If any term of this Pledge Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
BORROWER:
COYOTE NETWORK SYSTEMS, INC.
BY /s/ Xxxxx X. Xxxxxxx
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Its Chairman of the Board and
Chief Executive Officer
LENDER:
____________________________________
Name: ____________________________
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SCHEDULE I
Pledged Collateral
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Owner Description Certificate No(s).
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Coyote Network Systems, Inc. _________ shares of common _______
stock of INET Acquisition, Inc.
(n/k/a INET Interactive Network
System, Inc.), a California
corporation
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