STOCK PLEDGE AGREEMENT
This is a Stock Pledge Agreement ("Agreement"), dated as of December
1, 1995, among XXXX X. XXXXX ("Borrower") and INTERFACE SYSTEMS, INC.
("Company").
WHEREAS, the Company has loaned Borrower the principal sum of
$650,000 pursuant to a Secured Promissory Note, dated as of the date hereof
(the "Promissory Note").
NOW, THEREFORE, in order to induce the Company to make the loan, and
to secure Borrower's obligations under the Promissory Note, the parties
named herein agree as follows:
1. Pledge. The Borrower hereby grants a first security
interest to the Company in the following collateral ("the Collateral"):
(a) All shares of Common Stock of the Company identified on
Exhibit A ("the Pledged Shares"), represented by certificate nos. stated
therein (the "Share Certificates," whether one or more).
(b) Any securities hereafter delivered to the Borrower in
addition to or substitution for any of the Pledged Shares and all
certificates and instruments representing or evidencing such securities.
(c) All of Borrower's right to, title and interest in the
Pledged Shares, all dividends or distributions arising therefrom, payable
therein or distributed in respect thereto, whether in cash, property, stock
or otherwise and whether now or hereafter declared, paid or made, together
with the right to receive and receipt therefor; provided, however, that if
and so long as no default in the observance and performance by the Borrower
of any of the terms of this Agreement or the Promissory Note, or in the
payment of any other indebtedness now or hereafter owing by the Borrower to
the Company the Borrower shall have the right to receive all dividends in
respect to the Collateral paid in cash or in the stock of a corporation or
in other property; and provided further, that the Borrower shall pledge to
the Company any such stock or other property so distributed to Borrower to
secure Borrower's obligations to the Company and shall enter into any such
further agreements and execute any such further agreements as the Company
may require to effectuate such pledge.
2. Perfection of Security Interest. In order to perfect the
Company's security interest in the Pledged Shares, the Borrower has
delivered to the Company the Share Certificates duly endorsed for transfer
in blank (or accompanied by one or more signed stock powers in blank), to be
held by the Company pursuant to the terms of this Agreement.
3. Representations, Warranties and Covenants. The Borrower
hereby represents, warrants and agrees with the Company as follows:
(a) The Borrower has the legal capacity to execute this
Agreement and to carry out all of the terms, conditions, covenants and
provisions contained herein.
(b) The Borrower is the only and absolute owner of the Pledged
Shares and collectively has full power to make the pledge contemplated
hereby; the Pledged Shares are free from all security interests, liens and
encumbrances (other than the security interest granted by this Agreement);
immediately before granting the security interest created by this Agreement,
the Borrower was the record and beneficial owner and holder of the Pledged
Shares on the stock books and records of the Company; and the Pledged Shares
are freely transferable without restriction or limitation.
(c) During the term of this Agreement, and so long as there is
no default in the observance and performance of any of the terms of this
Agreement or the Promissory Note by the Borrower, the Borrower shall have
the right to vote the Pledged Shares on all corporate questions.
(d) If, whenever and as often as, during the term of this
Agreement, any stock dividend, reclassification, readjustment or other
change is declared or made in the capital structure of any of the applicable
corporations, all new, substituted and additional shares or other securities
issued in respect to the Pledged Shares shall be held by the Company under
the terms of this Agreement in the same manner as the Pledged Shares.
(e) If, whenever and as often as, during the term of this
Agreement, subscription warrants or any other rights or options shall be
issued in connection with the Pledged Shares or any other securities at the
time held by the Company hereunder, such warrants, rights and options shall
be immediately assigned to the Company by the Borrower, and if exercised by
the Borrower, all new stock or other securities so acquired by the Borrower
shall be immediately assigned to the Company to be held by the Company under
the terms of this Agreement in the same manner as the Pledged Shares.
(f) The Borrower has good right and lawful authority to pledge,
hypothecate, mortgage, assign, transfer, deliver, set over and confirm unto
the Company the Collateral as provided in this Agreement, and the Borrower
shall warrant and defend the title thereto and the Company's security
interest therein against the claims of all persons.
(g) So long as this Agreement shall be in effect, the Borrower
shall not sell, assign or transfer, and shall not pledge, hypothecate,
mortgage or otherwise encumber any right or rights with respect to the
Collateral or any rights or interest therein.
(h) Borrower agrees to execute Form F.R. G-3 and any other form
required to be executed pursuant to Regulation G and any other rules and
regulations of the Federal Reserve System.
(i) Borrower agrees that if at any time the Fair Market Value
(as defined below) is less than two hundred percent (200%) of the Principal
Amount outstanding under the Promissory Note and all other monies due
thereunder ("Note Indebtedness"), then Borrower shall grant to the Company
such additional collateral as the Company may deem appropriate and shall
execute any and all documents reasonably necessary in order to perfect a
security interest in such collateral in favor of the Company. The Fair
Market Value of the Collateral shall be determined by multiplying the number
of Pledged Shares times the closing price per Pledged Share as reported on
The NASDAQ Stock Market.
4. Default. Each of the following events or conditions
constitutes an "Event of Default":
(a) Failure by the Borrower to make any payment of principal
or interest under the Promissory Note on or before 30 days after the date
such payment is due.
(b) Failure by the Borrower to comply with any other
provision of the Promissory Note or this Agreement and the continuance of
such failure for thirty days or more after written notice from the Company;
provided however, that the decline in the Fair Market Value of the Pledged
Shares shall not constitute an Event of Default until such Fair Market Value
declines to 150% of the Note Indebtedness and such decline continues for 10
days or more after written notice from the Company.
(c) Any representation, warranty or other statement by or on
behalf of the Borrower contained in the Promissory Note or this Agreement is
false or misleading in any material respect when made.
(d) The Borrower becomes insolvent or bankrupt or makes an
assignment for the benefit of creditors, or consents to the appointment of a
trustee, receiver or liquidator,
(e) Bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings are instituted by or against the Borrower, which
proceedings are not dismissed or stayed within 60 days after they are
instituted.
If, whenever and as often as, there shall have occurred an Event of
Default, the Company shall have at any time thereafter the rights and
remedies provided by law, including those contained in the Uniform
Commercial Code in force in Michigan , and without limiting the generality
of the foregoing, (i) the right to declare all amounts then remaining unpaid
under the Promissory Note to be immediately due and payable, and (ii) the
right to take any available action or proceeding, at law or in equity, which
it deems necessary or advisable for its protection and security.
5. Governing Law. This transaction shall be governed by the
laws of Michigan, and the Company shall have all of the rights and remedies
granted to a secured party under the Michigan Uniform Commercial Code.
6. Authority of the Company. The Borrower hereby irrevocably
authorizes and empowers the Company, in its absolute discretion, at any time
after any Event of Default as defined herein, to complete the stock powers
and to transfer or cause to be transferred on its books all of the Pledged
Shares and the Share Certificates relating thereto.
7. Termination. When and if the Borrower's obligations under
the Promissory Note and any other indebtedness of the Borrower to the
Company have been paid in full, all rights and interests of the Company in
and to the Pledged Shares and the other Collateral shall thereupon revest in
the Borrower, and the Company thereupon shall release the security interest
granted in this Agreement, reassign the Pledged Shares and the other
Collateral to the Borrower and deliver the Share Certificates (together with
any related stock powers) to the Borrower. In addition when and if the Fair
Market Value of the pledged share exceeds 250% ("Excess Value") of the Note
Indebtedness and such Excess Value continues for a period of thirty trading
days then the security interest granted in this Agreement shall be released
and the Pledged Shares shall be reassigned to the Borrower and the Share
Certificates (together with any related stock powers) shall be returned to
the Borrower provided however, that after such release the Fair Market Value
of the Pledged Shares is at least 200% of the Note Indebtedness and such
release is approved by the Chairman of the Board of the Company.
8. Taxes. The Borrower shall pay for any and all documentary
stamps or other taxes which may be imposed on the transfer and delivery to
the Company, or the retransfer and redelivery to the Borrower, of the
Pledged Shares, the other Collateral to the Borrower and the Share
Certificates.
9. Waiver by Borrower. The Borrower hereby waives presentment,
demand, protest or notice of protest with respect to the Promissory Note.
10. Company's Rights; Exculpation. The Collateral shall be held
in the possession of the Company, and in connection therewith, Company shall
have the authority and power to take such actions and to exercise such
powers hereunder as are specifically delegated to the Company by the terms
hereof, together with such other powers as are reasonably incidental
thereto. The Company shall not be liable hereunder in its capacity as agent
or bailee for any action taken or omitted by it hereunder except for its
gross negligence or willful breach. The Company shall have no compensation
hereunder and shall be under no duty with respect to the Collateral except
to account therefor in due course, pursuant to the terms and conditions
hereof.
11. Entire Agreement. This Agreement and the Promissory Note
collectively constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and are not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder.
12. Modification of Agreement This agreement may not be
modified except in writing and executed with the same formality as this
Agreement.
13. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
14. Notices. All notices required or permitted to be given
hereunder shall be in writing and addressed:
If to Interface Systems, Inc., as follows:
Interface Systems, Inc.
0000 Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
If to the Borrower:
Xxxx X. Xxxxx
Interface Systems Inc.
0000 Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
15. Further Assurance. Each party shall execute and deliver to
the other such further documents and instruments, and shall perform such
other acts, as reasonably may be necessary or proper to carry out more
effectually the purposes of this Agreement.
BORROWER
By: -----------------------
Xxxx X. Xxxxx
INTERFACE SYSTEMS, INC.
By: -------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President & CFO
By: --------------------------
Xxxxxx X. Xxxxxx
Title:
