Exhibit 10.32
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as from time to time amended,
supplemented, restated, or otherwise modified, this "Agreement") is
entered into effective November 23, 1998 (the "Effective Date") by and
among ONSALE, Inc., a Delaware corporation ("Lender") and ▇▇▇▇ ▇▇▇▇▇▇▇, an
individual and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ , his spouse (collectively, "Borrower").
This Agreement, the Note (defined in Section 1.2), the Second Deed of
Trust (defined in Section 1.3), the Stock Pledge Agreement (defined in
Section 1.4) and any other documents entered into pursuant to this
Agreement or in connection with this Loan (defined in Section 1.1) are
hereinafter sometimes collectively referred to as the "Loan Documents."
WHEREAS, Lender desires to loan a certain sum to Borrower and
Borrower wishes to borrow a certain sum from Lender in order that Borrower
may purchase a primary residence in northern California, located at APN
▇▇▇-▇▇▇-▇▇▇, commonly known as ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Property");
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties and covenants set forth in this Agreement,
Lender and Borrower hereby agree as follows:
1. AMOUNT AND TERMS OF LOAN.
1.1 Loan. Subject to the terms and conditions of this
Agreement, and in reliance on the representations, warranties and
covenants of Borrower in this Agreement, Lender shall loan Borrower the
principal amount of Two Hundred Fifty Thousand Dollars ($250,000) (this
"Loan") for the purchase of the Property.
1.2 Note; Interest. Borrower's indebtedness to Lender under
the Loan Documents will be evidenced by a Secured Promissory Note executed
by Borrower substantially in the form attached as Exhibit A (the "Note").
The Note will provide that semi-annually compounded interest on the unpaid
principal of this Loan will accrue at a rate equal to four and forty-six
hundredths percent (4.46%) per annum. Accrued interest is payable on the
date that is three months after the date of the Note and every three
months thereafter until this Loan has been repaid in full. Interest will
continue to accrue until the date on which all amounts owing under the
Loan Documents have been repaid in full.
1.3 Security. Borrower's indebtedness to Lender under the
Loan Documents will be secured by a second deed of trust in customary form
(the "Second Deed of Trust") on the Property. The Second Deed of Trust
will be executed by Borrower in favor of Lender, with North American Title
Company acting as trustee. In the event that Borrower has a first lender
for the Property, Lender agrees not to file the Second Deed of Trust with
the County Recorder until Borrower's first lender has filed its deed of
trust on the Property.
1.4 Additional Security. Borrower's indebtedness to Lender
under the Loan Documents will also be secured by Borrower's pledge of
certain shares of Lender equity securities (the "Pledged Shares") in
accordance with the terms of a stock pledge agreement, dated November 23,
1998, substantially in the form attached as Exhibit B (the "Stock Pledge
Agreement"). Borrower shall immediately submit to Lender upon issuance
all Lender equity securities that Borrower acquires pursuant to: (a)
Borrower's exercise of options to purchase Lender equity securities under
Lender's 1995 Equity Incentive Plan or any subsequent or similar stock
option plan of Lender, or (b) any employee stock purchase agreement or
other similar plan of Lender.
1.5 Maturity of Loan. The unpaid principal amount of this
Loan and all unpaid interest accrued thereon, together with any other
related fees, expenses or costs, will be immediately due and payable to
Lender in full on the date (the "Maturity Date") that is the earlier to
occur of: (a) five years after the date of the Note, or (b) the date on
which the unpaid principal amount and interest due under this Loan becomes
due and payable in full under Section 5.1.
1.6 Prepayment. Borrower may prepay the unpaid principal
and interest due under this Loan at any time, without penalty, in whole or
in part in amounts of at least Ten Thousand Dollars ($10,000). Each
prepayment will be applied as follows: (a) first to the payment of accrued
interest, and (b) second, to the extent that the amount of such prepayment
exceeds the amount of all such accrued interest, to the payment of
principal on this Loan. Borrower also agrees that, until this Loan is
paid in full, Borrower shall immediately apply: (a) if no default event
has occurred under the Loan Documents and is continuing, fifty percent
(50%) of the net before tax proceeds from any sale by Borrower of the
Pledged Shares, or (b) if a default event has occurred and is continuing,
one hundred percent (100%) of the net before tax proceeds from any sale by
Borrower of the Pledged Shares, to pay down this Loan in accordance with
this Agreement.
1.7 At Will Employment. Borrower is an "at will" employee
of Lender, and nothing in this Agreement or any exhibit shall be construed
as a promise of continued employment.
2. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby
represents and warrants to Lender that:
2.1 Use of Loan Proceeds. Borrower has applied the entire
Loan proceeds towards the purchase of the Property.
2.2 Nature of Purchase. Borrower's purchase of the Property
was an arm's length transaction.
2.3 Title to Property. The Property is free and clear of
all mortgages, deeds of trust, liens, encumbrances and security interests,
except for: (a) if Borrower has a first lender for the Property, the first
deed of trust filed by such first lender; (b) statutory liens for the
payment of current taxes that are not yet delinquent; and (c) subject to
approval by Lender, encumbrances identified in the preliminary title
report attached as Exhibit C.
2.4 Balloon Payment. Borrower acknowledges that the unpaid
principal amount of this Loan and all unpaid interest accrued thereon will
be immediately due and payable to Lender in full as one balloon payment on
the Maturity Date.
3. COVENANTS OF BORROWER.
3.1 Insurance Covering Collateral. Borrower shall maintain
all risk property damage insurance policies covering the Property in an
amount at least equal to the value of the dwelling on the Property.
3.2 Further Assurances. In addition to the obligations and
documents that this Agreement expressly requires Borrower to execute,
deliver and perform, Borrower will execute, deliver and perform any and
all further acts or documents which Lender may reasonably require in order
to carry out the purposes of this Agreement or any of the other Loan
Documents.
4. CONDITIONS PRECEDENT TO OBLIGATIONS OF LENDER. The obligation
of Lender to make this Loan is subject to the satisfaction (or written
waiver by Lender) of each and all of the following conditions precedent:
4.1 Representations True. All representations and
warranties of Borrower contained in this Agreement and in all other Loan
Documents will be true, correct and complete in all respects.
4.2 Note, Second Deed of Trust and Stock Pledge Agreement.
Lender will have received from Borrower the Note, the Second Deed of Trust
and the Stock Pledge Agreement, each duly executed by Borrower.
4.3 Loan Effective Date. The Effective Date of this Loan
must be earlier than November 2, 1999.
5. DEFAULT BY BORROWER.
5.1 Acceleration. The unpaid principal and interest due
under this Loan will become immediately due and payable, without the need
for any further action on the part of Lender or any other holder of the
Note: (a) upon Borrower's sale, gift, assignment or other transfer of the
Property, except for transfers which, by law, cannot be restricted by a
due-on-sale clause, (b) upon termination of Borrower's employment with
Lender for any reason other than termination without cause by Lender or
(c) upon Borrower's failure to apply the appropriate proceeds of any sale
of Pledged Shares to pay down this Loan in accordance with Section 1.6.
In the event that Lender terminates Borrower's employment with Lender
without cause, the unpaid principal and interest due under this Loan will
become immediately due and payable, without the need for any further
action on the part of Lender or any other holder of the Note, on the date
that is the earlier of: (a) five years after the date of the Note, or (b)
two years after the date of termination of Borrower's employment with
Lender. In any case, this Loan shall become due and payable in full no
later than five years after the date of the Note.
5.2 Default. Borrower will be deemed to be in default of
this Loan if: (a) Borrower fails to pay Lender (or, in the event another
party holds the Note, such holder) the full amount of unpaid principal and
interest due under this Loan on or before the Maturity Date, and (b)
Borrower does not cure this failure to pay within five (5) calendar days
after Lender gives Borrower written notice of such failure to pay.
5.3 Remedies Upon Default. Upon Borrower's default of this
Loan, Lender may pursue its rights under the Note, the Second Deed of
Trust and the Stock Pledge Agreement. The rights and remedies of Lender
herein provided will be cumulative and not exclusive of any other rights
or remedies provided by law or otherwise.
6. MISCELLANEOUS.
6.1 Entire Agreement. The Loan Documents constitute the
entire agreement and understanding among the parties with respect to the
subject matter thereof and supersedes any prior understandings or
agreements of the parties with respect to such subject matter.
6.2 Successors and Assigns. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon the
respective successors and assigns of the parties, including any subsequent
holders of the Note; provided, however, that Borrower may not assign or
delegate any of its rights or obligations hereunder or under any other
Loan Document or any interest herein or therein without Lender's prior
written consent.
6.3 No Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended to confer upon any third party
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
6.4 Construction. This Agreement and its exhibits are the
result of negotiations between the parties and have been reviewed by each
party hereto. Accordingly, this Agreement will be deemed to be the
product of the parties hereto and no ambiguity will be construed in favor
of or against any party.
6.5 Modification; Waiver. This Agreement may be modified or
amended only by a writing signed by both parties hereto. No waiver or
consent with respect to this Agreement will be binding unless it is set
forth in writing and signed by the party against whom such waiver is
asserted. No course of dealing between Borrower and Lender will operate
as a waiver or modification of any party's rights under this Agreement or
any other Loan Document. No delay or failure on the part of either party
in exercising any right or remedy under this Agreement or any other Loan
Document will operate as a waiver of such right or any other right. A
waiver given on one occasion will not be construed as a bar to, or as a
waiver of, any right or remedy on any future occasion.
6.6 Severability. The invalidity or unenforceability of any
term or provision of this Agreement will not affect the validity or
enforceability of any other term or provision.
6.7 Governing Law. This Agreement will be exclusively
governed by and construed in accordance with the internal laws of the
State of California, as applied to agreements entered into solely between
residents of and to be performed entirely in the State of California,
without reference to that body of law relating to conflicts of law or
choice of law.
6.8 Jurisdiction. The parties agree that any controversy or
claim arising out of or relating to this Agreement shall be tried and
litigated exclusively in a state or federal court with jurisdiction
located in San Mateo County in the State of California.
6.9 Waiver of Jury Trial. The parties waive any right they
may have to a trial by jury in respect of any litigation based on, or
arising out of, under or in connection with, this Agreement or any other
Loan Document, or any course of conduct, course of dealing, verbal or
written statement or other action of any loan party or any secured party.
6.10 Attorneys' Fees. If either party hereto commences or
maintains any action at law or in equity (including counterclaims or
cross-complaints) against the other party hereto by reason of the breach
or default or claimed breach or default of any term or provision of this
Agreement or any other Loan Document, then the prevailing party in said
action will be entitled to recover its reasonable attorneys' fees and
court costs incurred therein. This provision does not limit Lender's
ability to recover additional expenses under the Note.
6.11 Counterparts. This Agreement may be executed in one or
two counterparts, each of which will be deemed an original, but together
will constitute one and the same instrument.
6.12 Section Titles. The Section titles contained in this
Agreement are and will be without substantive meaning or content of any
kind and are not part of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the Effective Date.
BORROWER: LENDER:
ONSALE, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
President and
Chief Executive Officer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attachments:
Exhibit A - Secured Promissory Note
Exhibit B - Stock Pledge Agreement
Exhibit C - List of Encumbrances on ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PROMISSORY NOTE
Palo Alto, California
$250,000 November 23, 1998
For value received, ▇▇▇▇ ▇▇▇▇▇▇▇, an individual, and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, his spouse (collectively, "Borrower") hereby promise to pay to
the order of ONSALE, Inc., a Delaware corporation (the "Company") on or
before November 23, 2003, at the Company's principal place of business at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ #▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place as the
Company may direct, the principal sum of Two Hundred Fifty Thousand
Dollars ($250,000), together with interest at the rate of four and forty-
six hundredths percent (4.46%) compounded semi-annually, which rate is the
minimum rate established pursuant to Section 1274(d) of the Internal
Revenue Code of 1986, as amended, on this date; provided, however, that
the rate at which interest will accrue on unpaid principal under this
secured promissory note (as may be amended, restated, supplemented, or
otherwise modified from time to time, this "Note") will not exceed the
highest rate permitted by applicable law. Accrued interest is payable on
the date that is three months after the date of this Note and every three
months thereafter until this Note has been repaid in full. Interest will
continue to accrue until the date on which all amounts owing on this Note
have been repaid in full.
This Note is issued pursuant to that certain Loan and Security
Agreement dated November 23, 1998, between the Company and Borrower (the
"Loan Agreement"). The following is a statement of the additional
rights and obligations of the holder of this Note and the terms and
conditions to which this note is subject, and to which the holder, by the
acceptance of this Note, agrees:
1. Security. Payment of this Note is secured by: (a) a
second deed of trust on certain real property located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Property"), and (b) Borrower's pledge of
certain shares of Company equity securities (the "Pledged Shares") in
accordance with the terms of a stock pledge agreement between the Company
and Borrower.
2. Acceleration. The unpaid principal and interest due
under this Note will become immediately due and payable, without the need
for any further action on the part of the Company or any other holder of
this Note: (a) upon Borrower's sale, gift, assignment or other transfer of
the Property, except for transfers which, by law, cannot be restricted by
a due-on-sale clause, (b) upon termination of Borrower's employment with
the Company for any reason other than termination without cause by the
Company or (c) upon Borrower's failure to apply the appropriate proceeds
of any sale of Pledged Shares to pay down this Note in accordance with
Section 4. In the event that the Company terminates Borrower's employment
with the Company without cause, the unpaid principal and interest due
under this Note will become immediately due and payable, without the need
for any further action on the part of the Company or any other holder of
this Note, on the date that is the earlier of: (a) five years after the
date of this Note, or (b) two years after the date of termination of
Borrower's employment with the Company. Each of the events described in
this Section 2 constitutes an "Acceleration Event". In any case, this
Note shall become due and payable in full no later than five years after
the date of this Note.
3. Default. Borrower will be deemed to be in default under this
Note if: (a) Borrower fails to pay the holder of this Note the full amount
of unpaid principal and interest due under this Note on or before: (i) the
date that is five years after the date of this Note, or (ii) such earlier
date as dictated by the occurrence of an Acceleration Event; and (b)
Borrower does not cure this failure to pay within five (5) calendar days
after the Company gives Borrower written notice of such failure to pay.
4. Prepayment. Borrower may prepay the unpaid principal and
interest due under this Note at any time, without penalty, in whole or in
part in amounts of at least Ten Thousand Dollars ($10,000). Each
prepayment will be applied as follows: (a) first to the payment of accrued
interest, and (b) second, to the extent that the amount of such prepayment
exceeds the amount of all such accrued interest, to the payment of
principal on this Note. Borrower also agrees that, until this Note is
paid in full, Borrower shall immediately apply: (a) if no default event
has occurred and is continuing, fifty percent (50%) of the net before tax
proceeds from any sale by Borrower of the Pledged Shares, or (b) if a
default event has occurred and is continuing, one hundred percent (100%)
of the net before tax proceeds from any sale by Borrower of the Pledged
Shares, to pay down this Note in accordance with this Note and the Loan
Agreement.
5. Assignment. This Note is freely transferable and assignable
by the Company and each subsequent holder, provided that such transfer is
made in compliance with all applicable state and federal securities laws.
Any reference to the Company herein will be deemed to refer to any
subsequent transferee of this Note at such time as such transferee holds
this Note. Borrower may not assign or delegate this Note, whether by
voluntary assignment or transfer, operation of law or otherwise.
6. Governing Law. This Note will be exclusively governed by and
construed in accordance with the internal laws of the State of California,
as applied to agreements entered into solely between residents of and to
be performed entirely in the State of California, without reference to
that body of law relating to conflicts of law or choice of law.
7. Waivers. Borrower hereby waives presentment, notice of non-
payment, notice of dishonor, protest, demand and diligence. This Note may
be amended only by a writing executed by Borrower and the Company.
IN WITNESS WHEREOF, Borrower has executed this Note as of the date
and year first above written.
BORROWER:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ACCEPTED AND ACKNOWLEDGED:
THE COMPANY
ONSALE, Inc.
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President and
Chief Executive Officer
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement is entered into effective November
23, 1998 (as from time to time amended, restated, supplemented, or
otherwise modified, this "Agreement"), by ▇▇▇▇ ▇▇▇▇▇▇▇, an individual
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, his spouse (collectively, "Pledgor") in favor of
ONSALE, Inc., a Delaware corporation ("Secured Party").
WHEREAS, Pledgor and Secured Party have entered into that
certain Loan and Security Agreement, dated November 23, 1998 (as may be
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"). The term "Loan Documents" and all other capitalized terms
used in this Agreement that are not otherwise defined in this Agreement
shall have the meanings ascribed to such terms in the Loan Agreement; and
WHEREAS, all shares of Secured Party capital stock or other
equity securities that Borrower acquires pursuant to: (a) Borrower's
exercise of options to purchase Secured Party equity securities under
Secured Party's 1995 Equity Incentive Plan or any subsequent or similar
stock option plan of Secured Party, or (b) any employee stock purchase
agreement or other similar plan of Secured Party, are to be issued by
Secured Party subject to the terms of this Agreement immediately upon
their issuance. All such Secured Party equity securities shall be
identified on Schedule 1 or on an Addendum to Schedule 1 upon their
issuance; and
WHEREAS, Pledgor is the legal and beneficial owner of the
shares of capital stock or other equity securities identified on such
Schedule 1 or addenda as being owned by Pledgor (collectively, the
"Pledged Shares"); and
WHEREAS, it is a condition precedent under the Loan Agreement
to making the Loan that Pledgor shall agree to make the pledges
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the promises set forth in
this Agreement and to induce Secured Party to make the Loan, Pledgor
hereby agrees with Secured Party as follows:
1. STOCK PLEDGE PROVISIONS.
1.1 Pledge. Pledgor hereby pledges to Secured Party, and
grants to Secured Party a security interest in, all of Pledgor's, right,
title, and interest in and to the following (the "Pledged Collateral"):
(a) all of the Pledged Shares; (b) the certificates, if any, representing
the Pledged Shares; and (c) all dividends, cash, instruments and other
property or proceeds, from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares.
1.2 Security Interest. This Agreement secures, and the
Pledged Collateral is security for, the full and prompt payment by Pledgor
when due (whether at stated maturity, by acceleration or otherwise) of,
and the performance by Pledgor of, all of Pledgor's current and future
obligations under this Agreement and each of the Loan Documents to which
Pledgor is a party, including without limitation principal, interest,
fees, and expenses (including any interest, fees, or expenses that, but
for the provisions of the Bankruptcy code, would have accrued). The
security interest in the Pledged Collateral created by this Agreement will
continue, and the provisions of this Agreement will remain in full force
and effect, until the termination of this Agreement pursuant to Section
1.7.
1.3 Representations and Warranties. Pledgor hereby
represents and warrants to the Secured Party that, as of the date each of
the Pledged Shares is issued: (a) Pledgor is the legal and beneficial
owner of the Pledged Collateral free and clear of any lien, and (b)
Pledgor has the right to pledge and grant to the Secured Party a security
interest in the Pledged Collateral.
1.4 Transfers and Other Liens. Pledgor agrees that it will
not: (a) sell or otherwise dispose of, or grant any option or warrant with
respect to, any of the Pledged Collateral except as permitted by the Loan
Agreement, or (b) create or permit to exist any lien upon or with respect
to any of the Pledged Collateral, except for the lien created pursuant to
this Agreement.
1.5 Further Assurances. Pledgor agrees to promptly execute
and deliver all further instruments and documents, and take all further
action that may be necessary or desirable, or that Secured Party may
reasonably request, in order to perfect and protect the lien granted or
purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies with respect to any Pledged Collateral.
Pledgor agrees to defend the title to the Pledged Collateral and Secured
Party's lien on the Pledged Collateral against the claim of any other
person and to maintain and preserve such lien until indefeasible payment
in full of all obligations.
1.6 Secured Party May Perform. If Pledgor fails to perform
any agreement contained in this Agreement, Secured Party may itself
perform, or cause performance of such agreement, and the expenses of
Secured Party incurred in connection therewith shall be payable by Pledgor
under Section 3.1 and constitute obligations secured by this Agreement.
1.7 Termination of Security Interest. This Agreement, and
the security interests created or granted by this Agreement, shall
automatically terminate and be released on the date at which the Loan has
been fully and finally paid in cash. Upon any release of the security
interest created by this Agreement in any of the Pledged Collateral
pursuant to this Section 1.7, Secured Party (without recourse upon, or any
representation or warranty whatsoever by, Secured Party) shall promptly:
(a) return, transfer and deliver to Pledgor all
certificates, instruments and other property held by Secured Party
pursuant to this Agreement representing or evidencing such Pledged
Collateral as shall not have been sold or otherwise applied pursuant to
the terms of this Agreement, all without recourse upon, or representation
or warranty whatsoever by, Secured Party, except that the same shall be
free and clear of any claims, liens or encumbrances created by or in
respect of Secured Party, and at the cost and expense of Pledgor, and
(b) execute and deliver to Pledgor such instruments as
may be reasonably requested by Pledgor acknowledging the release of such
security interest with respect to such Pledged Collateral.
2. DELIVERY AND POSSESSION OF PLEDGED COLLATERAL.
2.1 Delivery of Pledged Collateral. All certificates or
instruments, if any, representing or evidencing the Pledged Collateral
shall be issued to and held by or on behalf of Secured Party pursuant to
this Agreement and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
2.2 Rights to Vote, Receive Dividends from and Sell (No
Default). As long as no event of default shall have occurred under the
Loan Agreement and be continuing:
(a) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of this
Agreement or any other Loan Documents;
(b) Pledgor shall be entitled to receive and retain
(subject to any lien thereon in favor of Secured Party) any and all
dividends or distributions paid in respect of the Pledged Collateral,
other than any and all:
(i) dividends paid or payable other than in cash
in respect of, and instruments and other property received receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(ii) dividends and other distributions paid or
payable in cash in respect of any Pledged Shares in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus and
(iii) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Pledged Collateral,
all of which shall be forthwith delivered to Secured Party;
(c) Secured Party shall execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies and other
instruments as Pledgor may reasonably request for the purpose of enabling
Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 2.2(a) and to receive the dividends or
distributions which it is authorized to receive and retain pursuant to
Section 2.2(b); and
(d) Pledgor shall have the power to require Secured
Party to sell any or all of the Pledged Shares in an arms length
transaction through a securities brokerage firm, provided that such sale
complies with and does not violate any applicable law, and further
provided that Pledgor shall pay fifty percent (50%) of the net before tax
proceeds from any such sale directly to Secured Party to pay down the Loan
in accordance with the Loan Agreement.
2.3 Adjustments. Secured Party shall have the right at any
time to exchange certificates representing or evidencing any of the
Pledged Collateral for certificates of smaller or larger denominations.
2.4 Reasonable Care. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property, it being understood that Secured Party shall not have any
responsibility for: (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters
relative to any Pledged Collateral, whether or not Secured Party has or is
deemed to have knowledge of any such matter, or (b) taking any necessary
steps to preserve rights against any person with respect to any Pledged
Collateral.
3. ADDITIONAL PROVISIONS UPON DEFAULT.
3.1 Remedies Upon Default. The rights and remedies granted
to Secured Party by this Article 3 will be in addition to all the rights,
powers and remedies of Secured Party under the Loan Documents. All such
rights and remedies will be cumulative and not exclusive of any other
rights or remedies provided by law or otherwise. If any event of default
under the Loan Agreement shall have occurred and be continuing:
(a) Secured Party may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for
in this Agreement or otherwise available to it, all the rights and
remedies of a secured party after default under the California Commercial
Code or any other applicable law in effect in the State of California at
that time, and Secured Party may also, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at
any office of Secured Party or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as Secured Party may deem
commercially reasonable. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Pledgor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Secured Party
shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public
or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Pledgor hereby waives any
claims against Secured Party arising by reason of the fact that the price
at which any Pledged Collateral may have been sold at such a private sale
was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not
officer such Pledged Collateral to more than one offeree. With respect to
Pledged Collateral consisting of securities registered under the
Securities Act of 1933, as amended (the "Securities Act"), Secured Party
will comply with applicable securities laws in connection with any
foreclosure sale.
(b) Pledgor recognizes that by reason of certain
prohibitions contained in the Securities Act and applicable state
securities laws, Secured Party may be compelled, with respect to any sale
of all or any part of the Pledged Collateral, to limit purchasers to those
which will agree, among other things, to acquire such securities for their
own account, for investment, and not with a view to the distribution or
resale. Pledgor acknowledges and agrees that any such sale may result in
prices and other terms less favorable to the seller than if such sale were
a public sale without such restrictions and, notwithstanding such
circumstances, agrees that any such sale shall be deemed to have been made
in a commercially reasonable manner. Secured Party shall be under no
obligation to delay the sale of any of the Pledged Collateral for the
period of time necessary to permit Pledgor to register such securities for
public sale under the Securities Act, or under applicable state securities
laws, even if Pledgor would agree to do so.
(c) In the event of a sale of Pledged Collateral in
accordance with the provisions of this Section 3.1, notwithstanding
anything to the contrary contained in Section 2.2(d) or elsewhere in this
Agreement, all of the net before tax proceeds from any such sale shall be
applied by Secured Party, or paid directly to Secured Party, to pay down
the Loan in accordance with the Loan Agreement.
3.2 Rights in Pledged Collateral Upon Default. Upon the
occurrence and during the continuance of an event of default under the
Loan Agreement:
(a) upon notice by Secured Party to Pledgor, all
rights of Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 2.2(a)
shall cease, and all such rights shall thereupon become vested in Secured
Party who shall thereupon have the sole right to exercise such voting and
other consensual rights;
(b) all rights of Pledgor to receive the dividends or
distributions which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(b) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends or
distributions;
(c) All dividends or distributions which are received
by Pledgor contrary to the provisions of Section 3.2(b) shall be received
in trust for the benefit of Secured Party, shall be segregated from other
property or funds of Pledgor and shall be forthwith delivered to Secured
Party;
(d) Pledgor shall, if necessary to permit Secured
Party to exercise the voting and other rights which it may be entitled to
exercise pursuant to Section 2.2(a) and to receive all dividends and
distributions which it may be entitled to receive under Section 2.2(b),
execute and deliver to Secured Party, from time to time and upon written
notice of Secured Party, appropriate proxies and other instruments as
Secured Party may reasonably request; and
(e) Secured Party shall have the right to the extent
permitted under any applicable law, at any time in its discretion and
without notice to Pledgor, to transfer to or to register in its name or in
the name of any of its nominees any or all of the Pledged Collateral.
The foregoing shall not in any way limit Secured Party's power
and authority granted pursuant to Section 3.3.
3.3 Secured Party Appointed Attorney-in-Fact and Proxy.
Subject to Section 3.1, Pledgor hereby irrevocably constitutes and
appoints Secured Party and any officer or agent of Secured Party,
effective upon the occurrence and during the continuance of an event of
default under the Loan Agreement, with full power of substitution, as its
true and lawful attorney-in-fact and proxy with full irrevocable power and
authority in the place and stead of Pledgor and in the name of Pledgor or
in its own name, from time to time in Secured Party's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement. Without limiting the generality
of the foregoing, Pledgor hereby gives Secured Party the power and right,
on behalf of Pledgor, upon the occurrence and during the continuance of an
event of default under the Loan Agreement, to receive, endorse and collect
all instruments made payable to Pledgor representing any dividend or
distribution in respect of the Pledged Collateral or any part thereof, to
give full discharge for the same, and to vote or grant any consent in
respect of the Pledged Shares authorized by Section 3.1. Pledgor hereby
ratifies, to the extent permitted by law, all that any said attorney shall
lawfully do or cause to be done by virtue hereof. This power, being
coupled with an interest, is irrevocable until, and shall automatically
terminate upon, the termination of this Agreement pursuant to Section 1.7.
4. GENERAL PROVISIONS.
4.1 Successors and Assigns. The terms and conditions of
this Agreement will be binding upon Pledgor, its successors and assigns,
and inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of and be enforceable by Secured Party and its
successors, transferees and assigns.
4.2 Modification; Waiver. This Agreement may be modified or
amended only by a writing signed by both parties hereto. No waiver or
consent with respect to this Agreement will be binding unless it is set
forth in writing and signed by the party against whom such waiver is
asserted. No course of dealing between Borrower and Secured Party will
operate as a waiver or modification of any party's rights under this
Agreement or any other Loan Document. No delay or failure on the part of
either party in exercising any right or remedy under this Agreement or any
other Loan Document will operate as a waiver of such right or any other
right. A waiver given on one occasion will not be construed as a bar to,
or as a waiver of, any right or remedy on any future occasion.
4.3 Severability. The invalidity or unenforceability of any
term or provision of this Agreement will not affect the validity or
enforceability of any other term or provision.
4.4 Governing Law. This Agreement will be exclusively
governed by and construed in accordance with the internal laws of the
State of California, as applied to agreements entered into solely between
residents of and to be performed entirely in the State of California,
without reference to that body of law relating to conflicts of law or
choice of law.
4.5 Jurisdiction. The parties agree that any controversy or
claim arising out of or relating to this Agreement shall be tried and
litigated exclusively in a state or federal court with jurisdiction
located in San Mateo County in the State of California.
4.6 Waiver of Jury Trial. Pledgor and Secured Party waive
any right they may have to a trial by jury in respect of any litigation
based on, or arising out of, under or in connection with, this Agreement
or any other Loan Document, or any course of conduct, course of dealing,
verbal or written statement or other action of any loan party or any
secured party.
4.7 Section Titles. The Section titles contained in this
Agreement are and will be without substantive meaning or content of any
kind and are not part of this Agreement.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed and delivered by its duly authorized officer on the date first
above written.
PLEDGOR:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ACCEPTED AND ACKNOWLEDGED:
SECURED PARTY
ONSALE, Inc.
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President and
Chief Executive Officer