PLEDGE AGREEMENT
This Pledge Agreement (as amended, supplemented, or otherwise modified
from time to time, this "Pledge Agreement"), dated as of October 8, 1999, is
made by and among XXXXXXX XXXXX, with an address at c/o Global Datatel, Inc.,
0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx Xxxxx, Xxxxxxx 00000 (the "Pledgor"),
GLOBAL DATATEL, INC., a Nevada corporation, with an address at , 0000 Xxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxx Xxxxx, Xxxxxxx 00000 ("Global"), and SURGE COMPONENTS,
INC., a New York corporation, with an address at 00000 Xxxxx Xxxxxxxxx, Xxxx
Xxxx, Xxx Xxxx 00000 ("Surge").
W I T N E S S E T H:
WHEREAS, Surge has loaned One Million ($1,000,000) Dollars to Global as
of this date and may hereafter make additional loans (the "Loans" and any
promissory notes evidencing said loans are the "Notes");
WHEREAS, as a condition to the making of the Loans, the Pledgor is
required, among other things, to execute and deliver this Pledge Agreement;
WHEREAS, it is in the best interests of the Pledgor to execute this
Pledge Agreement inasmuch as the Pledgor will derive substantial direct and
indirect benefits from the Loans made from time to time to Global by Surge; and
NOW THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce Surge to make loans to Global
pursuant to the Loans, the Pledgor and Surge agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Terms. The following terms when used in this Pledge
Agreement, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"Collateral" is defined in Section 2.1.
"Distributions" means all dividends and distributions with respect to any
Pledged Shares whether in cash, securities, property, rights to purchase
securities or properties, or otherwise.
"Event of Default" means an Event of Default as defined in the Notes and any
default by Global in the payment or performance of any of the Secured
Obligations which continues unremedied for any applicable cure period after
written notice thereof, when required, from Surge to Global and/or Pledgor.
"Material Adverse Effect" means a material adverse change in the business,
operations, assets, financial condition, income or prospects of the Pledgor or
Global.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, all other securities, all
assignments of any amounts due or to become due with respect thereto, and all
other property or instruments which may from time to time hereafter be delivered
by the Pledgor or Global to Surge for the purpose of pledge under this Pledge
Agreement, and all proceeds of any of the foregoing.
"Pledged Shares" means the 300,000 shares of capital stock of Pledgor delivered
to Surge and any additional shares of Pledgor Common Stock issued in exchange
for or in respect of such 300,000 shares of Common Stock.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
1.2. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Pledge Agreement, including its preamble
and recitals, have the meanings provided in the Notes.
1.3 U.C.C. Definitions. Unless otherwise defined herein or in the Notes
or the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
2.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, delivers and transfers to Surge and hereby
grants to Surge, a continuing security interest in, all of the following
property (collectively, the "Collateral"):
(a) the Pledged Shares;
(b) all other Pledged Shares issued from time to time;
(c) all other Pledged Property, whether now or hereafter delivered to
Surge in connection with this Pledge Agreement;
(d) all Distributions and other payments and rights with respect to any
Pledged Shares of Pledged Property; and
(e) all proceeds of any of the foregoing.
2.2 Security for Pledgor's Obligations. This Pledge Agreement secures
the payment and performance in full of all of the obligations of Global (the
"Secured Obligations") under the Loans and the Notes.
2.3 Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares shall be
delivered to and held by or on behalf of Surge pursuant hereto, shall be in
suitable form for transfer by delivery and shall be accompanied by all necessary
instruments of transfer or assignment, duly executed in blank.
2.4 Distributions on Pledged Shares. It is intended that all
Distributions with respect to any Pledged Property shall be held by Surge and
shall be part of the Collateral. If Pledgor or Global shall at any time receive
or come into possession or control of any such Distributions, it shall forthwith
deliver the same to Surge.
2.5 Continuing Security Interest; Releases of Collateral.
(a) This Pledge Agreement shall create a continuing security interest
in the Collateral and shall be binding upon the Pledgor and its successors,
transferees and assigns, and inure, together with the rights and remedies of
Surge hereunder, to the benefit of Surge, its successors and assigns.
(b) Surge will release from this Pledge Agreement the Collateral (or so
much thereof as remains in pledge hereunder) upon the earlier to occur of the
completion of the merger between Global, Surge and Global Datatel Acquisition
Corporation (the "Merger"), or the payment in full and discharge of all of
Global's obligations with respect to the Loans and the Notes (the "Termination
Date").
(c) Upon the release of Collateral from this Pledge Agreement, Surge
will, at the Pledgor's sole expense, deliver to the Pledgor the certificates and
instruments representing or evidencing the Collateral to be so released, and
will execute and deliver to the Pledgor such documents as the Pledgor shall
reasonable request to evidence such Collateral.
2.6. Waiver, etc. The Pledgor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Secured
Obligations and this Pledge Agreement and any requirement that Surge protect,
secure, perfect or insure any lien, or any property subject thereto, or exhaust
any right or take any action against any Obligor or any other Person (including
any guarantor) or entity or any collateral securing the Obligations of any
Obligor, as the case may be.
2.7 Security Interest Absolute. All rights of Surge and the liens (the
"Liens") granted to Surge hereunder, and all obligations of the Pledgor
hereunder, shall not be affected by:
(a) the failure of Surge
(i) to assert any claim or demand or to enforce any right or
remedy against the Pledgor, any other Obligor or any other Person under the
provisions of the Notes or otherwise, or
(ii) to exercise any right or remedy against any guarantor of,
or collateral securing, any Secured Obligations of the Pledgor or any other
Obligor,
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other extension,
compromise or renewal of any Obligation of Global or any other Obligor,
(c) any amendment to, rescission, waiver or other modification of, or
any consent to departure from, any of the terms of the Notes,
(d) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Pledgor, Global, any
other Obligor, any surety or any guarantor.
2.8 Postponement of Subrogation, etc. The Pledgor will not exercise any
rights which it may acquire by reason of any payment made hereunder, whether by
way of subrogation, reimbursement or otherwise, until the Termination Date. Any
amount paid to the Pledgor on account of any payment made hereunder prior to the
Termination Date shall be held in trust for the benefit of Surge and shall
immediately be paid to Surge, and credited and applied against the Secured
Obligations, whether matured or unmatured, in accordance with the terms of the
Pledgor Notes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Warranties, etc. Global and the Pledgor hereby represent and
warrant, jointly and severally, to Surge as at the date of each pledge and
delivery hereunder (including each pledge and delivery of Pledged Shares) by the
Pledgor to Surge of any Collateral, as set forth in this Article.
3.2. Non-Contravention, etc. The execution, delivery and performance by
the Pledgor of this Pledge Agreement is within the Pledgor's powers, has been
duly authorized and agreed to by Pledgor, and does not contravene (i) any
material contract binding on or affecting Pledgor, (ii) any court decree or
order binding on or affecting the Pledgor or (iii) any law or governmental
regulation binding on or affecting the Pledgor; or
3.3 Ownership, No Liens, etc. The Pledgor is the legal and beneficial
owner of, and has good and valid title to (and has full right and authority to
pledge and assign) the Collateral, free and clear of all liens or claims other
than the Lien granted pursuant hereto.
3.4 As to Pledged Shares. All of the Pledged Shares are duly authorized
and validly issued, fully paid and non-assessable. All Pledged Shares are
certificated, and have been delivered to Surge with stock powers, accompanied by
undated instruments of transfer duly executed in blank, and Surge has "control"
(as defined in the U.C.C.) of such Pledged Shares.
3.5 Authorization, Approval, etc. No authorization or, approval or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or other Person (other than those that have been, or on the
Effective Date will be, duly obtained or made and which are, or on the Effective
Date will be, in full force and effect) is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery and performance of this Pledge
Agreement by the Pledgor, or
(b) for the exercise by Surge of the voting or other rights provided
for in this Pledge Agreement, or, except with respect to any Pledged Shares as
may be required in connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally, the remedies in respect
of the Collateral pursuant to this Pledge Agreement.
3.6 Compliance with Laws. Global is in compliance with the requirements
of all applicable laws (including the provisions of the Fair Labor Standards
Act), rules, regulations and orders of every Governmental Authority, the
non-compliance with which could have a Material Adverse Effect or adversely
affect the value of the Collateral.
ARTICLE IV
COVENANTS
4.1 Protect Collateral; Further Assurances, etc. The Pledgor will not
sell, assign, transfer, pledge hypothecate or encumber in any other manner the
Collateral (except in favor of Surge hereunder). The Pledgor will warrant and
defend the right and title herein granted unto Surge in and to the Collateral
(and all right, title and interest represented by the Collateral) against the
claims and demands of all Persons whomsoever. The Pledgor agrees that at any
time, and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments, and take all further
action, that may be necessary or desirable, or that Surge may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Surge to exercise and enforce its
rights and remedies hereunder with respect to any Collateral.
4.2 Stock Powers, etc. The Pledgor agrees that all Pledged Shares
delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied
by duly executed, undated stock powers or other equivalent instruments of
transfer reasonably acceptable to Surge. The Pledgor will, from time to time
upon the reasonable request of Surge, promptly deliver to Surge such stock
powers, instruments and similar documents, reasonably satisfactory in form and
substance to Surge, with respect to the Collateral as Surge may reasonably
request and will, from time to time upon the request of Surge after the
occurrence of any Event of Default, promptly cause the Pledgor to transfer any
Pledged Shares or other capital stock constituting Collateral into the name of
any nominee designated by Surge.
4.3 Continuous Pledge. Subject to Section 2.1, the Pledgor will, at all
times, keep pledged to Surge pursuant hereto all Pledged Shares, all
Distributions with respect thereto, and all other Collateral and other capital
stock, instruments, proceeds and rights from time to time received by or
distributable to the Pledgor in respect of the Pledged Property. Any
Distributions on Pledged Shares consisting of capital stock will be
certificated.
4.4 Voting Rights; etc. The Pledgor agrees:
(a) if any Event of Default shall have occurred and be continuing and
Surge shall have notified the Pledgor of Surge's intention to exercise its
voting power under this Section:
(i) Surge may exercise (to the exclusion of the Pledgor) the
voting power and all other incidental rights of ownership with respect to any
Pledged Shares or other capital stock constituting Collateral and the Pledgor
hereby grants Surge an irrevocable proxy, exercisable under such circumstances,
to vote the Pledged Shares and such other Collateral; and
(ii) Promptly to deliver to Surge such additional proxies and
other documents as may be necessary to allow Surge to exercise such voting
power.
All Distributions and proceeds which may at any time and from time to time be
held by the Pledgor but which the Pledgor is then obligated to deliver to Surge,
shall, until delivery to Surge, be held by the Pledgor separate and apart from
its other property in trust for Surge. Surge agrees that unless an Event of
Default shall have occurred and be continuing and Surge shall have given the
notice referred to in this Section, the Pledgor shall have the exclusive power
to exercise all voting and other consensual rights with respect to any capital
stock (including any of the Pledged Shares) constituting Collateral and Surge
shall, upon the written request of the Pledgor, promptly deliver such proxies
and other documents, if any, as shall be reasonably requested by the Pledgor
which are necessary to allow the Pledgor to exercise such powers with respect to
any such capital stock (including any of the Pledged Shares) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver or
ratification given, or action taken by the Pledgor that would materially impair
the value of any Collateral or be inconsistent with or violate any provision of
the Pledgor Notes.
4.5 Maintenance of Existence; Compliance with Laws, etc. Global will
(a) preserve and maintain its legal existence; and
(b) comply in all material respects with all applicable laws, rules,
regulations and orders, including the payment (before the same become
delinquent) of all Taxes, assessments and governmental charges imposed upon
Global or upon its property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside on the books of Global.
4.6 Maintenance of Properties. Global will maintain, preserve, protect
and keep its respective properties in good repair, working order the condition
(ordinary wear and tear excepted), and make necessary repairs, renewals and
replacements so that the business carried on by Global may be property conducted
at all times, unless Global determines in good faith that the continued
maintenance of such property is no longer economically desirable.
4.7 Insurance. Global will:
(a) maintain insurance on its property with financially sound and
reputable insurance companies against loss and damage in at least the amounts
(and with only those deductibles customarily maintained, and against such risks
as are typically insured against in the same general area, by Persons of
comparable size engaged in the same or similar business as Global, and
(b) all worker's compensation, employer's liability insurance or
similar insurance as may be required under the laws of any state or jurisdiction
in which it may be engaged in business.
ARTICLE V
POWERS OF SURGE AS PLEDGEE
5.1 Surge Attorney-in-Fact. The Pledgor hereby irrevocably appoints
Surge as the Pledgor's attorney-in-fact, with full authority and in the name,
place and stead of the Pledgor or in its own name, from time to time in Surge's
discretion, to take, upon the occurrence and during the continuance of any Event
of Default, any action and to execute any instrument which Surge may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement,
including:
(a) to ask, demand, collect, xxx for, recover, compromise and receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which Surge may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Surge with respect to any of
the Collateral.
The Pledgor and Global hereby acknowledge, consent and agree that the power of
attorney granted pursuant to this Section is irrevocable and coupled with an
interest.
5.2 Surge May Perform. If the Pledgor fails to perform any agreement
contained herein, Surge may itself perform, or cause performance of, such
agreement, and the expenses of Surge incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
5.3 Surge Has No Duty. The powers conferred on Surge hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
on it to exercise any such powers. Except for reasonable care of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, Surge shall have no duty as to any Collateral or responsibility for:
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not Surge has or is deemed to have knowledge of such
matters, or
(b) taking any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral.
5.4 Reasonable Care. Surge is required to exercise reasonable care in
the custody and preservation of any of the Collateral in its possession;
provided, however, Surge shall be deemed to have exercised reasonable care in
the custody and preservation of any of the Collateral if it takes such action
for that purpose as the Pledgor reasonably requests in writing from time to
time, but failure of Surge to comply with any such request at any time shall not
in itself be deemed a failure to exercise reasonable care. If an Event of
Default has occurred and is continuing, Surge shall not be required to comply
with any request of the Pledgor with respect to the matters described in this
Section.
ARTICLE VI
REMEDIES
6.1 Certain Remedies. If any Event of Default shall have occurred and
be continuing:
(a) Surge may exercise in respect of the 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 on default under the U.C.C. (whether
or not the U.C.C. applies to the affected Collateral) and also may, without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at Surge's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as Surge may
deem commercially reasonable. The Pledgor agrees that at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Surge shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Surge may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefore, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.
(b) Surge may
(i) transfer all or any part of the Collateral into the name
of Surge or its nominee, with or without disclosing that such Collateral is
subject to the Lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to Surge of any amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any obligations of any nature of any party with respect
thereto,
(iv) endorse any checks, drafts or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of conveyance or
transfer with respect to all or any of the Collateral.
6.2. Compliance with Restrictions. The Pledgor agrees that in any sale
of any of the Collateral whenever an Event of Default shall have occurred and be
continuing, Surge is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law (including
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications and restrict such prospective bidders and purchasers
to persons who will represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any Governmental Authority, and the Pledgor further agrees that
such compliance shall not result in such sale being considered or deemed not to
have been made in a commercially reasonable manner, nor shall Surge be liable
nor accountable to the Pledgor for any discount allowed by reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.
6.3 Application of Proceeds. All cash proceeds received by Surge in
respect of any sale of, collection from or other realization upon, all or any
part of the Collateral may, in the discretion of Surge, be held by Surge as
additional collateral security for, or then or at any time thereafter be applied
(after payment of any amounts payable to Surge pursuant to Section 6.4 below) in
whole or in part by Surge against, all or any part of the Secured Obligations in
such order as Surge shall elect. Any surplus of such cash or other proceeds held
by Surge and remaining after the Fixed Assets Termination Date, shall be
promptly paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
6.4 Indemnity and Expenses. The Pledgor hereby indemnifies and holds
harmless Surge from and against any and all claims, losses and liabilities
arising out of or resulting from this Pledge Agreement (including enforcement of
this Pledge Agreement), except claims, losses or liabilities resulting from
Surge's gross negligence or willful misconduct, and will upon demand pay to
Surge the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which Surge
may incur, in each case, in connection with:
(a) the administration of this Pledge Agreement;
(b) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of Surge
hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
(e)
(f)
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Credit Document. This Pledge Agreement is a Credit Document
executed pursuant to the Notes and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
7.2 Amendments, etc. No amendment to or waiver of any provision of this
Pledge Agreement nor consent to any departure by the Pledgor here from shall in
any event be effective unless the same shall be in writing and signed by Surge
and the Pledgor, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
[PG NUMBER]
7.3 Protection of Collateral. Surge may from time to time, at its
option, and at the expense of the Pledgor, perform any act which the Pledgor
agrees hereunder to perform and which the Pledgor shall fail to perform after
being requested in writing so to perform (it being understood that no such
request need be given after the occurrence and during the continuance of an
Event of Default) and Surge may from time to time take any other action which
Surge reasonably deems necessary for the maintenance, preservation or protection
of any of the Collateral or of its security interest therein.
7.4 Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and addressed, delivered or
transmitted, if to the Pledgor, at the address or facsimile number of the
Pledgor provided above, and, if to Surge, at the address or facsimile number
provided above, or as to any such party at such other address or facsimile
number as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. Any notice,
(a)(i) if mailed and properly addressed with postage prepaid or (ii) if properly
addressed and sent by pre-paid courier service, shall be deemed given when such
notice has been received or (b) if transmitted by facsimile, shall be deemed
given when transmitted (and telephonic confirmation of receipt thereof has been
received).
7.5 Headings. The various headings of this Pledge Agreement are
inserted for convenience only, and shall not affect the meaning or
interpretation of this Pledge Agreement or any provisions hereof.
7.6 Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Pledge
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
7.7 Governing Law. THIS PLEDGE AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
EXCLUDING THE LAW OF CONFLICTS.
7.8 Counterparts. This Pledge Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
(whether such counterpart is originally executed or an electronic copy of an
original) and all of which shall constitute together but one and the same
agreement. This Pledge Agreement shall become effective and binding upon the
Pledgor when a counterpart hereof executed on behalf of the Pledgor shall have
been received by Surge.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
SURGE COMPONENTS, INC.
By: /s/ Xxx Xxxx
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Xxx Xxxx
President
GLOBAL DATATEL, INC.,
Pledgor
By: /s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
President
/s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
Pledgor
