EXHIBIT 10.40
FORM OF
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made as of
April ______, 1996 by and between __________________, as pledgor ("Pledgor"),
and America's Favorite Chicken Company ("Pledgee").
R E C I T A L S:
- - - - - - - -
A. Pledgor has acquired shares of Common Stock, $0.01 par value per
share, of Pledgee (the "Shares") pursuant to that certain Stock Bonus Agreement
dated April _______, 1996, by and between Pledgor and Pledgee (the "Bonus
Agreement").
B. In order to induce Pledgee to make the loan evidenced by that
certain Secured Promissory Note (the "Note") of even date herewith delivered by
Pledgor to Pledgee, Pledgor agrees to have any and all of Pledgor's Shares
subject to this Pledge Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties hereto agree as
follows:
1. Grant of Security Interest. Pledgor hereby grants to Pledgee a
--------------------------
security interest in the Shares, pledges and hypothecates the Shares to Pledgee,
and deposits the certificates evidencing the Shares (the "Certificates") with
Pledgee as collateral security for the payment by Pledgor of all obligations
existing under the Note, whether for principal, interest, fees, expenses or
otherwise, and the satisfaction of all obligations of Pledgor under this Pledge
Agreement. The Certificates, together with one or more stock assignments duly
executed in blank with signatures appropriately guaranteed or witnessed, are
being delivered herewith to Pledgee, to be retained by Pledgee as the
pledgeholder for the Shares.
2. Representations and Warranties of Pledgor. Pledgor represents
-----------------------------------------
and warrants to Pledgee that the Shares are free and clear of all claims,
mortgages, pledges, liens and other encumbrances of any nature whatsoever,
except (a) the liens and restrictions set forth herein and in the Note and (b)
any restrictions upon sale and distribution imposed by the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws.
3. Voting of Shares. So long as there shall exist no Event of
----------------
Default (as hereinafter defined), Pledgor shall be entitled to exercise, as
Pledgor deems proper but in a manner not inconsistent with the terms hereof,
Pledgor's rights to voting power with respect to the Shares. Pledgee, and not
Pledgor, shall be entitled to vote the Shares at any time that there exists an
Event of Default.
4. Dividends and Other Distributions. So long as there shall exist
---------------------------------
no Event of Default and except as provided in Section 5 of this Pledge
Agreement, Pledgor shall be entitled to receive any dividend or other
distribution with respect to the Shares. If there exists an Event of Default,
such dividend or distribution shall be delivered to Pledgee to be held as
additional collateral security under this Pledge Agreement.
5. Stock Dividends. In the event of any dividend or distribution in
---------------
shares of capital stock or other securities of Pledgee or any successor or
assign of Pledgee which is issued in respect of, in exchange for or in
substitution of, the Shares by reason of any stock dividend, stock split,
reverse split, recapitalization, reclassification, combination, merger,
consolidation or otherwise, the shares or other securities to be distributed to
Pledgor shall be held by Pledgee as additional collateral security under this
Pledge Agreement and shall be encompassed within the term "Shares" for purposes
of this Pledge Agreement.
6. Pledgee's Duties. So long as Pledgee exercises reasonable care
----------------
with respect to the Shares in its possession, Pledgee shall have no liability
for any loss or damage to such Shares, and in no event shall Pledgee have
liability for any diminution in value of the Shares occasioned by economic or
market conditions or events. Pledgee shall be deemed to have exercised
reasonable care within the meaning of the preceding sentence if the Shares in
its possession are accorded treatment substantially equal to that which Pledgee
accords its own property, it being understood that Pledgee shall not have any
responsibility under this Pledge Agreement for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to the Shares, whether or not Pledgee has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any person or entity with respect to the Shares.
7. Release from Pledge; Transfers to Permitted Transferees. In the
-------------------------------------------------------
event of a purchase by the Company of any or all of the Shares pursuant to the
Bonus Agreement, such purchased Shares shall be released from this Pledge
Agreement.
In the event of a Transfer (as defined in the Bonus Agreement) to a
party other than Pledgee pursuant to Section 4 of the Bonus Agreement, the
Shares so Transferred shall be released from this Pledge Agreement only upon
payment to Pledgee of an amount at least equal to the Net Proceeds (as defined
below) of such Transfer. "Net Proceeds" shall mean the gross proceeds received
upon a Transfer of Shares less the tax liability of the Pledgor with respect to
such Transfer, as such liability is determined by the board of directors of the
Company, which determination shall be final and binding.
In the event of a Transfer pursuant to Section 5 of the Bonus
Agreement, the Pledgor authorizes the Pledgee to cause the certificate or
certificates evidencing the Shares to be reissued in the name of the Permitted
Transferee or Transferees (as defined in the Bonus Agreement); provided that (a)
the Shares shall continue to be subject to this Agreement and the Permitted
Transferee(s) shall execute an undertaking to be bound by this Pledge Agreement
in accordance with Section 5 of the Bonus Agreement, (b) the reissued
certificate or certificates shall
2
continue to be held by the Pledgee pursuant hereto, and (c) the Permitted
Transferee or Transferees shall execute and deliver to the Pledgee stock
assignments in blank with respect to the Shares.
8. Sale of Collateral. Upon the occurrence of any Event of Default,
------------------
Pledgee shall have all the rights and remedies of a secured party under the
Uniform Commercial Code (the "UCC") and also may, without notice, except as
specified below, at its option, sell all or any part of the Shares, for cash,
notes or other property upon credit for future delivery or upon such other terms
as Pledgee may deem commercially reasonable. Upon such sale, Pledgee, unless
prohibited by a provision of any applicable statute, may purchase all or any
part of the Shares being sold, free from and discharged of all trusts, claims,
rights of redemption and equities of Pledgor. If the proceeds of any sale of
the Shares shall be insufficient to pay all amounts due under the Note and
satisfy the obligations of Pledgor under the Bonus Agreement and this Pledge
Agreement, including collection costs and expenses of such sale, Pledgor shall
remain obligated and liable for any deficiency with respect thereto. If, at any
time when Pledgee shall determine to exercise its rights to sell all or any part
of the Shares pursuant to this Section 8, such Shares, or the part thereof to be
sold, shall not be effectively registered under the Act as then in effect or any
similar statute then in force, subject to the provisions of Section 9 hereof,
Pledgee, in its sole and absolute discretion, is hereby expressly authorized to
sell such Shares, or any part thereof, by private sale in such manner and under
such circumstances as Pledgee may deem necessary or advisable in order that such
sale may be effectuated legally without such registration. Without limiting the
generality of the foregoing, Pledgee, in its sole and absolute discretion, may
approach and negotiate with a restricted number of potential purchasers to
effectuate such sale or restrict such sale to a purchaser or purchasers who
shall represent and agree that such purchaser or purchasers are purchasing for
its or their own account, for investment only, and not with a view to the
distribution or sale of such Shares or any part thereof. Any sale conducted in
the manner described in the foregoing sentence shall be deemed to be a sale
conducted in a commercially reasonable manner within the meaning of the UCC, and
Pledgor hereby consents and agrees that Pledgee shall incur no responsibility or
liability for selling all or any part of the Shares at a price which is not
unreasonably low, notwithstanding the possibility that a substantially higher
price might be realized if the sale were public. Pledgee shall not be obligated
to make any sale of the Shares regardless of notice of sale having been given.
Pledgee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and any such sale may, without further
notice, be made at the time and place to which it was so adjourned.
9. Redemption of Collateral. Notwithstanding any other provision of
------------------------
this Pledge Agreement, upon the occurrence of an Event of Default, Pledgee shall
give Pledgor written notice of the time and place of any public sale or of the
time on or after which any private sale or other Transfer is to be made at least
five days before the date fixed for any public sale or before the day on or
after which any private sale or other Transfer is to be made. Pledgor agrees
that, to the extent notice of sale shall be required by law, such five days'
notice shall constitute reasonable notification. This notice shall also specify
the aggregate outstanding monetary obligations of the Pledgor to Pledgee at the
date of such notice (the "Total Obligation"). At any time during such five-day
period, Pledgor shall have the right to redeem the Shares by the payment by
certified or bank cashier's check of an amount equal to the Total Obligation.
3
10. Events of Default. At the option of Pledgee, the principal
-----------------
balance of the Note and all accrued and unpaid interest thereon, and all other
obligations of Pledgor to Pledgee thereunder, under the Bonus Agreement and
hereunder, shall become and be immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind (all of which are hereby
expressly waived by Pledgor), upon the occurrence of any of the events set forth
below (individually, an "Event of Default"):
(a) Pledgor shall fail to make complete payment of principal and
accrued interest when due under the Note;
(b) Pledgor shall fail to make the prepayment of principal and
accrued interest on the Note as required by the seventh paragraph of the Note;
or
(c) Pledgor shall commit a breach of or default under this Pledge
Agreement.
11. Termination. This Pledge Agreement shall terminate only upon
-----------
payment to Pledgee of all unpaid obligations existing under the Note, whether
for principal, interest, fees, expenses or otherwise and all unsatisfied
obligations of Pledgor under this Pledge Agreement. Upon termination of this
Pledge Agreement, Pledgor shall be entitled to the return of the Certificates
then held by Pledgee and any other collateral security then held by Pledgee
pursuant to Section 4 or 5 of this Pledge Agreement.
12. Cumulation of Remedies; Waiver of Rights. The remedies provided
----------------------------------------
herein in favor of Pledgee shall not be deemed exclusive but shall be cumulative
and shall be in addition to all of the remedies in favor of Pledgee existing at
law or in equity. Nothing in this Pledge Agreement shall require Pledgee to
proceed against or exhaust its remedies against the Shares before proceeding
against Pledgor or executing against any other security or collateral securing
performance of Pledgor's obligations to Pledgee under the Note or this Pledge
Agreement. No delay on the part of Pledgee in exercising any of its options,
powers or rights, or the partial or single exercise thereof, shall constitute a
waiver thereof.
13. Execution of Endorsements, Assignments, Etc. Upon the occurrence
-------------------------------------------
of an Event of Default, Pledgee shall have the right for and in the name, place
and stead of Pledgor to execute endorsements, assignments or other instruments
of conveyance or transfer with respect to all or any of the Shares and any other
shares of the capital stock of Pledgee or other property which is held by
Pledgee as collateral security pursuant to this Pledge Agreement.
14. Miscellaneous.
-------------
(a) Further Assurances. Each party hereto agrees to perform any
------------------
further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Pledge Agreement.
4
(b) Notice. All notices, requests and other communications
------
hereunder shall be in writing and, if given by telegram, telecopy or telex,
shall be deemed to have been validly served, given or delivered when sent, if
given by personal delivery, shall be deemed to have been validly served, given
or delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mail, as registered or certified mail, with proper postage prepaid
and addressed to the party or parties to be notified, at the following addresses
(or such other address(es) as a party may designate for itself by like notice):
If to Pledgee:
America's Favorite Chicken Company
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Pledgor, at the address appearing on the signature page
hereof.
(c) Amendments. This Pledge Agreement may be amended only by a
----------
written agreement executed by the parties hereto.
(d) Governing Law. This Pledge Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Georgia.
(e) Disputes. In the event of any dispute between the parties
--------
arising out of this Pledge Agreement, the prevailing party shall be entitled to
recover from the nonprevailing party the reasonable expenses of the prevailing
party including, without limitation, reasonable attorneys' fees and expenses.
(f) Entire Agreement. This Pledge Agreement and the instruments
----------------
and agreements referred to herein constitute the entire agreement and
understanding among the parties pertaining to the subject matter hereof and
supersede any and all prior agreements, whether written or oral, relating
hereto.
(g) Successors and Assigns. Pledgee shall have the right to assign
----------------------
with absolute discretion any or all of its rights and/or obligations and/or
delegate any or all of its duties under this Pledge Agreement to any of its
affiliates, successors and/or assigns, including, without limitation to any of
its banks or lending institutions as collateral security, and this Pledge
Agreement shall inure to the benefit of, and be binding upon, such respective
affiliates, successors and/or assigns of Pledgee in the same manner and to the
same extent as if such affiliates, successors and/or assigns were original
parties hereto. Unless specifically provided herein to the contrary, Pledgor
may not assign any or all of its rights and/or obligations and/or delegate any
or all of its duties under this Pledge Agreement without the prior written
consent of Pledgee. Upon an assignment of any or all of Pledgor's rights and/or
obligations and/or a delegation of any or all of its
5
duties under this Pledge Agreement in accordance with the terms of this Pledge
Agreement, this Pledge Agreement shall inure to the benefit of, and be binding
upon, Pledgor's respective affiliates, successors and/or assigns in the same
manner and to the same extent as if such affiliates, successors and/or assigns
were original parties hereto.
(h) Headings. Introductory headings at the beginning of each
--------
section and subsection of this Pledge Agreement are solely for the convenience
of the parties and shall not be deemed to be a limitation upon or description of
the contents of any such section and subsection of this Pledge Agreement.
(i) Counterparts. This Pledge Agreement may be executed in two
------------
counterparts, each of which shall be deemed an original and both of which, when
taken together, shall constitute one and the same Pledge Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge
Agreement as of the day and year first above written.
PLEDGEE:
AMERICA'S FAVORITE CHICKEN COMPANY
By:
----------------------------------
Name:
Title:
PLEDGOR:
-------------------------------------
ADDRESS:
--------------------------------------
--------------------------------------
--------------------------------------
6