HYPOTHECATION AND
PLEDGE AGREEMENT
AGREEMENT made this 30th day of October, 1996 by and among
XXXX X. XXX, 00 Xxxxxx Xxxxxxxxx, Xxx. 0X, Xxxx Xxxxx, Xxx Xxxx 00000 (the
"Pledgor") and Compu-XXXX, Inc., a Delaware Corporation (formerly Coastal
Computer Systems, Inc. a New York Corporation) with offices at 000 Xxxx Xxxx
Xxxxxx, Xxxx Xxxxx, Xxx Xxxx 00000 (the "Lender");
WHEREAS Pledgor is indebted to Lender on account of a loan in
the amount of Seventy Thousand ($70,000.00) Dollars made by the Lender on
October 30, 1996 as evidenced by a certain Promissory Note of even date herewith
(the "Promissory Note").
WHEREAS in order to induce Lender to make the loan and accept
the Promissory Note, the Pledgor has agreed to pledge and hypothecate 28,000
shares of Common Stock of the Lender (the "Pledged Stock") to the Lender for the
performance of all of its obligations under the Promissory Note;
NOW, THEREFORE, in consideration of the foregoing, the Pledgor
hereby agrees with the Lenders as follows:
1. The term "Pledged Stock" as used herein shall mean and include:
REGISTERED OWNER SHARES CERTIFICATE NUMBER
XXXX X. XXX 28,000 # 26 of Coastal Computer Systems in the amount of
250 shares of Common Stock which represents 81,250
shares of Compu-XXXX, Inc, following the
recapitalization and merger.
2. (a) As collateral security for the due payment and performance of all
indebtedness and other liabilities and obligations of the Pledgor to the Lender
under the Promissory Note as they may come due (all hereinafter called the
"Obligations"), the Pledgor hereby pledges, assigns, hypothecates, delivers and
sets over to the Lender all the Pledged Stock, and hereby grants to the Lenders
a security interest in all the Pledged Stock and in the proceeds thereof.
(b) If the Pledgor shall become entitled to receive or shall receive
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital), option or rights, as an
addition to, in substitution of, or in exchange for any shares of the Pledged
Stock, or otherwise relating to the Pledged Stock, the Pledgor shall accept any
such instruments as the Lender's agent, shall hold them in trust for the Lender,
and shall deliver them forthwith to the Lender in the exact form received, with
the Pledgor's endorsement when necessary and/or appropriate stock powers duly
executed in blank, to be held by the Lender, subject to the terms hereof, as
further collateral security for the Obligations.
(c) Any or all shares of the Pledged Stock held by the Lender hereunder
may, at the option of the Lender, be registered in the name of the Lender or
nominee, and the Lender or its nominee may thereafter, with notice, but only
after the occurrence of an event of default under the Promissory Note, or
hereunder which shall not be cured ("Event of Default") exercise all voting and
corporate rights at any meeting of stockholders thereof and exercise any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any shares of the Pledged Stock as if they were the
absolute owner thereof, including, without limitation, the right to exchange, at
their discretion, any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization, or other readjustment of
Pledgor or upon the exercise by Pledgor of any right, privilege or option
pertaining to any shares of the Pledged Stock, and in connection therewith, to
deposit and deliver any and all of the Pledged Stock with any committee,
depository, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to account for
property actually received by it, but the Lender shall have no duty to exercise
any of the aforesaid rights, privileges or options and shall not be responsible
to do so or delay in so doing. At any time when the Pledged Stock is registered
in the name of the Lender or nominee and the Lender are not entitled to vote,
pursuant to the foregoing provisions of this subparagraph (c) the Lender shall
deliver to the Pledgor upon request from time to time a proxy to vote the
Pledged Stock at any meeting of the Stockholders of the corporation provided,
however, that any such proxy shall terminate forthwith upon the occurrence of
any Event of Default.
(d) In the event of the occurrence, and during the continuance, of any
Event of Default, the Lender shall have the right to require that all cash
dividends payable with respect to any part of the Pledged Stock be paid to the
Lender to be held by the Lender as additional collateral security hereunder
until applied to the Obligations. In the event that any cash dividends or cash
distributions are paid to the Lender or nominee at a time when the Lender is not
entitled thereto pursuant to the foregoing provisions of this subparagraph (d),
the Lender shall forthwith pay over such dividends to the Pledgor.
(e) In the event of the occurrence, and during the continuance, of any
Event of Default, the Lender without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other person
(all and each of which demands, advertisements and/or notices are, to the extent
permitted by law, hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Pledged Stock, or any part hereof, and/or may
forthwith sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver said Pledged Stock, or any part hereof, in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or at any of the Lender's offices or elsewhere at such prices and
on such terms (including, without limitations, a requirement that any purchaser
of all or any party of the Pledged Stock shall be required to purchase the
shares constituting the Pledged Stock for investment and without any intention
to make a distribution thereof) as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk, with the right to any
purchaser upon any such sale or sales public or private, to purchase the whole
or any part of the Pledged Stock so sold, free of any right or equity or
redemption in the Pledgor, which right or equity is hereby expressly waived and
released.
(f) The proceeds of any collection, recovery, receipt, appropriation,
realization or sale as aforesaid, shall be applied as follows:
First, to the costs and expenses of every kind incurred in
connection therewith or incidental to the care, safekeeping or otherwise of any
and all of the Pledged Stock or in any relating to the rights of the Lender
hereunder, including reasonable attorneys' fees and legal expenses;
Second, to the satisfaction of the obligations;
Third, to the payment of any other amounts required by
applicable law (including without limitation Section 9-504(1)(c) of the Uniform
Commercial Code); and
Fourth, to the Pledgor to the extent of the surplus proceeds,
if any.
(g) The Lender need not give more than thirty days' notice of the time
and place of any public sale or of the time after which a private sale may take
place and such notice shall be deemed to be reasonable notification of such
matters.
(h) The Lender's rights pursuant to this Agreement and the Promissory
Note to vote and/or realize upon the pledged stock shall be subject to a right
of offset and is subject to any obligations owed to the Pledgor by the Lender
pursuant to any agreements or understandings including but not limited to any
employment agreement.
3. The Pledgor represents and warrants that:
(a) It is the direct and beneficial owner of each share of the Pledged
Stock as of the date hereof;
(b) All of the shares of the Pledged Stock have been duly and validly
issued, are fully paid and non-assessable and are owned by the Pledgor free and
clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance or any
security interest in such shares or the proceeds thereof except for the security
interest granted to the Lender hereunder; and
(c) Upon delivery of the Pledged Stock and the Promissory Note to the
Lender, this Agreement creates and grants a valid first lien on the perfected
security interest in the shares of the Pledged Stock and then proceeds thereof,
subject to no prior security interest, lien, charge, or encumbrance nor to any
agreement purporting to grant to any third party a security interest in the
property or assets of the Pledgor which would include the Pledged Stock.
4. The Pledgor hereby covenants that so long as the Obligations shall be
outstanding and unpaid, in whole or in Part, the Pledgor will not sell, convey
or otherwise dispose of any shares of the Pledged Stock or any interest therein,
nor will the Pledgor create, incur or permit to exist any pledge, mortgage,
lien, charge, encumbrance or any security interest whatsoever with respect to
any of the Pledged Stock or the proceeds thereof other than that created hereby;
5. The Pledgor shall at any time and from time to time upon the written
request of the Lender, execute and deliver such further documents and do such
further acts and things as the Lender may reasonably request in order to
effect the purposes of this Agreement.
6. (a) The Pledged Stock will be held in escrow by XXXXXX X.XXXXXXX, ESQ.,
00 Xxxx Xxxx Xxxxxx, Xxxx Xxxxx, Xxx Xxxx ("Escrow Agent") until the performance
in full of the Obligations or such time as Lender shall be entitled to the
delivery thereof pursuant to an Event of Default hereunder, at which time the
Escrow Agent shall deliver the Pledged Stock then entitled thereto without
further authorization. Said Escrow Agent has agreed to act as Escrowee as a
convenience to both parties and not as agent to either and Escrowee shall not be
liable for any action taken by him as such in good faith, absent gross
negligence or willful wrongdoing. The Escrowee shall act only as a Stakeholder
and in the event of litigation involving the Pledged Stock, he shall deposit
same in court whereupon Escrowee will be completely discharged and released from
any further obligation or liability with respect thereto. Beyond the exercise
of reasonable care to assure the safe custody of the Pledged Stock while held
hereunder, the Escrow Agent shall have not duty or liability to preserve rights
pertaining thereto.
(b) No course of dealing between the Pledgor and the Lender, nor any
failure to exercise, nor any delay in exercising, on the part of the Lender, any
right, power or privilege hereunder or under the Promissory Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) The rights and remedies herein provided, and provided in the
Promissory Note, cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law including, without limitation, the rights and
remedies of a secured party under the Uniform Commercial Code.
(d) The provisions of this Agreement are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part hereof, in such jurisdiction and shall not in any
manner affect such clause or provisions in any other jurisdiction, or any other
clause or provision in this Agreement in any jurisdiction.
7. This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto.
8. This Agreement shall be construed in accordance with the laws of the
State of New York.
9. The term of this Agreement shall commence on the date hereof and this
Agreement shall continue in full force and effect, and be binding upon the
Pledgor, until all of the payments due under this Agreement have been paid
according to the terms of the Promissory Note, and such payments have been
acknowledged in writing by the Lender or proof provided to the Escrow Agent of
such payments, whereupon this Agreement shall terminate and the Agent shall
return the Pledged Stock to the Pledgor.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be duly executed and delivered the day and year first above written.
/s/ Xxxx X. Xxx
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XXXX X. XXX
COMPU-XXXX, INC.
By:/s/ Xxxx Xxxxxxxxxx
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Xxxx Xxxxxxxxxx
Chairman of the Board
