EXHIBIT 10.41
PLEDGE AGREEMENT
This Pledge Agreement is made as of January 22, 2001 between IPG
Photonics Corporation, a Delaware corporation ("Pledgee"), and Xxxxxxx Au-Xxxxx
("Pledgor").
Recitals
Pursuant to Pledgor's purchase of Restricted Stock under the Notice of
Award of Restricted Stock and Stock Issuance Agreement for Awards of Restricted
Stock (the "Restricted Stock Agreement") dated as of January 22, 2001, between
Pledgor and Pledgee under Pledgee's 2000 Incentive Compensation Plan, Pledgor
has purchased 500,000 shares of Pledgee's Common Stock at a price of $1.00 per
share, for a total purchase price of $500,000 and Pledgor has delivered 250,000
of such shares to Pledgee herewith (the "Shares"). The Pledgee has determined
that the aggregate fair market value of the Shares as of January 22, 2001 is
$2,500,000, and the Pledgor has notified the Pledgee that he intends to make an
election under Section 83(b) of the Internal Revenue Code to recognize taxable
income in the amount of $2,000,000 as of January 22, 2001, resulting in a U.S.
federal, California and medicare withholding tax obligation in the amount of
$786,381. The Pledgee has agreed to make a loan to Pledgor in the amount of
$786,381 to discharge this withholding tax payment obligation, which loan is
evidenced by a promissory note from Pledgee ("Note") in favor of Pledgor.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Pledge Interest. In consideration of
the above loan by Pledgee to Pledgor, Pledgor, pursuant to the Massachusetts
Uniform Commercial Code, hereby pledges all of such Shares (herein sometimes
referred to as the "Collateral") represented by certificate number 53, duly
endorsed in blank or with executed stock powers, and herewith delivers said
certificate to Pledgee, who shall hold said certificate subject to the terms and
conditions of this Pledge Agreement.
The Collateral (together with an executed blank stock assignment for
use in transferring title to all or a portion of the Shares to Pledgee if, as
and when required pursuant to this Pledge Agreement) shall be held by the
Pledgee as security for the repayment of the Note, and any extensions or
renewals thereof, and neither the Pledgor nor Pledgee shall encumber or dispose
of such Collateral except in accordance with the provisions of this Pledge
Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Pledge Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances
(other than the terms of the Restricted Stock Issuance Agreement to which the
Shares are subject), defenses and liens, and Pledgor will not further encumber
the Shares without the prior written consent of Pledgee.
c Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Pledge Agreement in
the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor and Pledgee shall cooperate and execute
such documents as are reasonable so as to provide for the substitution of such
Collateral and, upon such substitution, references to "Shares" in this Pledge
Agreement shall include the substituted shares of capital stock of Pledgor as a
result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such rights and options shall be the
property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgee shall be immediately delivered to Pledgee, to be held under the terms
of this Pledge Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and
of this Pledge Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more;
b. Pledgor fails to perform any of the covenants set forth in the
Restricted Stock Issuance Agreement or contained in this Pledge Agreement for a
period of 10 days after written notice thereof from Pledgee; or
c. Pledgor ceases to be an employee of Pledgee for any reason
constituting Cause within the meaning of Section 8 of the Employment Agreement
between the Pledgor and Pledgee dated November 29, 2000 or, in the event of
Maker's termination for other than Good Reason, within the meaning of Section 9
of such Employment Agreement.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the
Massachusetts Uniform Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be
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released shall be that number of full Shares which bears the same proportion to
the initial number of Shares pledged hereunder as the payment of principal bears
to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee which shall make
specific reference to this Agreement.
9. Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining Collateral shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against him, or if a receiver is appointed for
the property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Invalidity of Particular Provisions. Pledgor and Pledgee agree
that the enforceability or invalidity of any provision or provisions of this
Pledge Agreement shall not render any other provision or provisions herein
contained unenforceable or invalid.
12. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Pledge Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
13. Governing Law; Entire Agreement. This Pledge Agreement shall be
interpreted and governed under the laws of the State of Massachusetts, without
giving effect to choice of law principles thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement as of the day and year first above written.
"PLEDGOR" By: /s/ Xxxxxxx Au-Xxxxx
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Xxxxxxx Au-Xxxxx
Address: 00000 Xx Xxxx Xxxxx
Xxx Xxxxx, XX 00000
"PLEDGEE" IPG PHOTONICS CORPORATION
By: /s/ Xxxxxxx X.X. Xxxxxx
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Name: Xxxxxxx X.X. Xxxxxx
Title: VP and Chief Financial Officer
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