EXHIBIT 10.20
PLEDGE AGREEMENT
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This Pledge Agreement (the "Agreement") is made as of September 14, 1998 by
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and between Xxxxxxx Xxxxxxxxx, ("Pledgor") and Preview Systems, Inc. (the
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"Company").
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BACKGROUND
Silicon Valley Bank (the "Bank") has lent Pledgor $300,000 pursuant to a
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Promissory Note issued by Pledgor to the Bank dated on or about September 14,
1998, (the "Promissory Note"). To induce the Bank to loan money to Pledgor
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pursuant to the Promissory Note, the Company has pledged a $300,000 certificate
of deposit to the Bank pursuant to an Assignment of Deposit Account (the
"Assignment Agreement") by and between the Bank and the Company dated on or
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about September 14, 1998. In return for the pledge by the Company pursuant to
the Assignment Agreement, Pledgor has agreed to make the pledge described below.
AGREEMENT
In consideration of the foregoing and other good and valuable
consideration, receipt of which Pledgor acknowledges, it is hereby agreed as
follows:
1. Pledge; No Further Issuances; Agreement to Pledge.
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1.1 Pledge of Securities to Secure Obligations. Pledgor hereby
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pledges, assigns, hypothecates and sets over to the Company for its benefit all
of his vested shares of the Company's capital stock (such securities, together
with any certificate, option or right issued as an addition to, in substitution
for or in exchange for any of such securities, and all proceeds thereof, and any
other property required to be pledged hereunder pursuant to section 1.4, are
hereinafter collectively called the "Pledged Securities"), and hereby grants to
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the Company for its benefit a security interest in all the Pledged Securities
and in the proceeds thereof.
1.2 Deposit of Certificates. Certificates representing the Pledged
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Securities will be delivered by Pledgor duly endorsed in blank or accompanied by
blank stock powers duly signed by Pledgor to the Company, to be held by the
Company on the terms and conditions in this Agreement.
1.3 Obligations Secured. The obligations (the "Obligations") secured
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by the security interest granted herein are the amounts, if any, owed or payable
by the Company to the Bank, either directly or by offset of collateral pledged
by the Company to the Bank, pursuant to the Assignment Agreement.
1.4 Additional Property to be Pledged. If Pledgor shall at any time
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or times become entitled to receive, or shall receive (a) any sums paid as
liquidating dividends or as a return of capital with respect to the Pledged
Securities or (b) any stock certificates (including, without limitation, any
certificates representing a stock dividend, stock split or a distribution in
connection with any reclassification, increase or reduction of capital), options
or rights, whether in respect of, as an addition to, in substitution for or in
exchange for any of the Pledged Securities, or otherwise, or (c) any property
distributed on or with respect to Pledged Securities pursuant to a
recapitalization or reclassification of capital or pursuant to a reorganization
thereof, Pledgor agrees to accept the same as the Company's agent and to hold
the same in trust for the benefit of the Company and to deliver the same
forthwith to the Company in the exact form received, with Pledgor's endorsement
when necessary or appropriate or with stock powers duly executed in blank with
Pledgor's signature, to be held by the Company subject to the terms hereof as
further security for the Obligations. All sums, certificates and property
required to be pledged under this section 1.4 shall be held, applied and
disposed of as part of the Pledged Securities.
2. Representations and Warranties of Pledgor and the Company. Pledgor
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hereby represents, warrants and agrees as follows:
2.1 Ownership of Pledged Securities. Pledgor is the record and
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beneficial owner of all the Pledged Securities as of the date of the delivery of
the Pledged Securities to the Company. The Pledged Securities have been duly
and validly issued and are fully paid and nonassessable.
2.2 No Liens, Etc. The Pledged Securities are owned by Pledgor free
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and clear of any pledge, mortgage, hypothecation, lien, charge or encumbrance,
or any security interest therein or in the proceeds thereof, except the security
interest granted by this Agreement for the benefit of the Company.
2.3 Priority of Lien. This Agreement constitutes a valid first lien
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on and perfected security interest in the Pledged Securities and the proceeds
thereof, subject to no prior pledge, mortgage, hypothecation, security interest,
lien, charge, encumbrance or agreement purporting to grant to any third party a
security interest therein.
2.4 Maintain Pledge. As long as any Obligation is outstanding and
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unpaid or unperformed (or has the potential of becoming outstanding), as a whole
or in part, Pledgor will not sell, convey, or otherwise dispose of any of the
Pledged Securities, or create, incur or permit to exist any pledge, mortgage,
lien, charge, encumbrance or security interest with respect to any of the
Pledged Securities or the proceeds thereof other than that created hereby.
2.5 Defend Title. Pledgor warrants and will defend the Company's
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right, title, property and security interest in and to the Pledged Securities
and the proceeds thereof and any other property pledged hereunder against the
claims of any persons or entities.
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3. Pledgor's Rights While No Event of Default.
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3.1 Registration of Pledged Securities. Unless and until an Event of
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Default shall have occurred and be continuing, the Pledged Securities shall
remain registered in the name of Pledgor.
3.2 Exercise of Voting and Other Rights. Unless and until an Event
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of Default shall have occurred and be continuing, Pledgor shall be entitled to
exercise all voting rights and all rights to consent, ratification and waiver
pertaining to the Pledged Securities and to receive any and all ordinary cash
dividends (other than any dividend or distribution in liquidation) paid thereon;
provided that no vote shall be cast or consent, waiver or ratification given or
action taken that would violate or be inconsistent with any of the terms of this
Agreement or that would have the effect of impairing the position or interests
of the Company.
4. Events of Default; Remedies. An Event of Default under the Promissory
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Note shall constitute an Event of Default under this Agreement. After the
occurrence of an Event of Default and so long as such Event of Default
continues:
4.1 Exercise of Voting and Other Rights. The Company shall have the
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right to require that all cash dividends payable with respect to any of the
Pledged Securities be paid to it to be held by it until applied as herein
provided, and the Company or its nominee may, without notice, exercise all
voting and other rights pertaining to the Pledged Securities (and Pledgor hereby
irrevocably constitutes and appoints the Company as its proxy and attorney-in-
fact, with full power of substitution and resubstitution, to do so) and may
exercise any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any of the Pledged Securities as if
the Company or its nominee were the absolute owner thereof, including, without
limitation, the right to exchange, at the Company's or its nominee's discretion,
any and all of the Pledged Securities on a merger, consolidation,
reorganization, recapitalization or other readjustment or on the exercise by the
Company of any right, privilege or option pertaining to any of the Pledged
Securities, and, in connection therewith, to deposit and deliver any and all of
the Pledged Securities with any committee, depositary, transfer agent, registrar
or other designated agency on such terms and conditions as the Company may
determine.
4.2 Sale or Retention of Pledged Securities. The Company shall have
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all of the rights and remedies with respect to the Pledged Securities of a
secured party provided by the California Uniform Commercial Code, as well as
other applicable law, including the right to sell, assign and deliver the whole
or from time to time any part of the Pledged Securities or any interest in the
whole or any part thereof, at any private sale or at public auction, with or
(except as provided below) without demand, advertisement or notice of the time
or place of sale or adjournment thereof or otherwise (all of which are hereby
waived by Pledgor, except such notice as is required by applicable law and
cannot be waived), for cash, on credit or for other property, for immediate or
future delivery, and for such price or prices and on such terms as the Company
in its uncontrolled discretion may reasonably determine, Pledgor hereby waiving
and releasing
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any and all right or equity of redemption whether before or after sale
hereunder, provided however, that the Company shall sell only that number of
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Pledged Securities that the Company reasonably believes is necessary to satisfy
the then outstanding Obligations and, provided, further, that the Company may
sell such Pledged Securities only in compliance with applicable securities laws.
Pledgor acknowledges that if no public market for the Pledged Securities exists
on the date of any proposed sale of the Pledged Securities hereunder by the
Company, the securities laws affecting the sale of the Pledged Securities may
make the public sale of the Pledged Securities impracticable.
5. Application of Proceeds. The proceeds of any sale or sales of the
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Pledged Securities, together with all dividends or other moneys received by the
Company hereunder and with any other additional collateral security pledged
hereunder, shall be received and applied: First, to the cost and expenses of
every kind incurred in connection with the collection, recovery, receipt,
appropriation, realization or sale, or incidental to the care, safekeeping or
otherwise, of any and all Pledged Securities, other moneys and other property
pledged or received hereunder or in any way relating to the rights and remedies
of the Company hereunder, including reasonable attorneys' fees and expenses;
second, to all proper costs incurred (and not reimbursed by Pledgor) by the
Company reasonably attributable to any registration, qualification or compliance
with respect thereto under any Federal or state securities law or laws effected
at the request of the Company; and third, to the payment of amounts due in
respect of the Obligations after which the Company shall account to Pledgor for
the surplus proceeds, if any; and provided however that any Pledged Securities
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remaining in the possession of the Company after satisfaction in full of the
Obligations shall be promptly returned to Pledgor and the Company shall take all
steps to transfer and assign such remaining Pledged Securities to Pledgor.
6. Further Assurances. Pledgor agrees that at any time and from time to
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time, on written request of the Company, Pledgor will execute and deliver such
further documents and do such further acts and things as the Company reasonably
requests to effect the purposes of this Agreement.
7. Remedies Cumulative. Pledgor agrees that the rights, powers and
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remedies given to the Company by this Agreement are cumulative and concurrent
and not exclusive of any herein or of any other powers, rights or remedies
available to the Company, whether existing at law or in equity or by statute or
otherwise and shall be in addition to every other right, power or remedy
provided in this Agreement or now or hereafter existing or in equity or by
statute or otherwise, and the exercise or beginning of the exercise by the
Company of any one or more of such rights, powers and remedies shall not
preclude the simultaneous or later exercise by the Company of any or all such
other rights, powers and remedies. No failure on the part of the Company to
exercise any right, power or remedy shall operate as a waiver thereof.
8. The Pledgor's Obligations Absolute, Etc. The obligations of the
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Company and Pledgor under this Agreement shall be absolute and unconditional and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation:
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(a) any renewal, extension, amendment or modification of the Promissory Note or
any or the Obligations, or any assignment or transfer of any thereof; (b) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such instrument or any exercise or nonexercise of any right,
remedy, power or privilege under or in respect of any such instrument or this
Agreement; (c) any furnishing of any additional security to the Company or any
acceptance thereof or any release of any security by the Company; or (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Pledgor, or any action taken
with respect to this Agreement by any trustee or receiver or by any court in any
such proceeding; whether or not Pledgor shall have notice or knowledge of any of
the foregoing.
9. Termination. Upon the termination of the Company's obligations to the
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Bank pursuant to the Assignment Agreement, this Agreement shall terminate, and
Pledgor shall be entitled to the return of such of the Pledged Securities as are
owned by Pledgor and are held by the Company, together with any moneys at the
time held by the Company hereunder in respect of such Pledged Securities.
10. Notices. Any notice, consent, demand or other communication required
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or permitted to be given hereunder shall be in writing and shall be deemed duly
given and received when delivered personally, when transmitted by facsimile with
receipt acknowledged by the addressee, three days after being deposited as first
class mail with the United States Postal Service, or one day after being
deposited for next-day delivery with Federal Express or other nationally
recognized overnight delivery service, all charges or first class postage
prepaid, properly addressed, as follows:
If to the Company, to:
Preview Systems, Inc.
0000 X. Xx Xxxx Xxxx., Xxx. 000
Xxxxxxxxx, XX 00000
Attn: Chief Financial Officer
With a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
If to Pledgor, to:
Xxxxxxx Xxxxxxxxx
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Preview Systems, Inc.
0000 X. Xx Xxxx Xxxx., Xxx. 000
Xxxxxxxxx, XX 00000
Any of the above addresses may be changed by the appropriate party giving notice
of such change to the other parties hereto.
11. Miscellaneous. This Agreement shall be governed by and construed and
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interpreted accordance with the laws of the State of California, shall bind and
inure to the benefit of Pledgor and the Company and their respective successors,
assigns, heirs, legatees, executors, administrators and legal representatives,
and may not be terminated or modified orally but only in writing making specific
reference hereto, supported by new consideration and signed by all the parties
hereto. Headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one agreement.
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IN WITNESS WHEREOF, the parties hereto have each duly and delivered this
Pledge Agreement as of the date first above written.
PLEDGOR:
/s/ Xxxxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxxxxx
I, Xxxxxxxx X. Xxxxxxx, spouse of Xxxxxxx Xxxxxxxxx, have read and
hereby approve the foregoing Agreement. In consideration of the pledge by the
Company pursuant to the Assignment Agreement, I hereby agree to be bound
irrevocably by the Agreement and further agree that any community property or
similar interest that I may have in the Pledged Securities shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-
fact with respect to any amendment or exercise of any rights under the
Agreement.
/s/ Xxxxxxxx X. Xxxxxxx
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Spouse of Xxxxxxx Xxxxxxxxx
THE COMPANY: PREVIEW SYSTEMS, INC.
By /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx, Chief Financial Officer
[SIGNATURE PAGE TO PLEDGE AGREEMENT]
