DIY Legal Forms

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Stock Pledge Agreement

1. Collateral Assignment of Contract Rights and Pledge Agreement






THIS STOCK PLEDGE AGREEMENT ("this Agreement") made and entered into [Date], by and between [Name of [Address], hereinafter referred to as ("Borrower"), and [Name of [Address], hereinafter referred to as ("Lender").


WHEREAS, Lender is making certain loans to Borrower pursuant to that certain Loan Agreement of even date herewith (the "Loan Agreement") between Borrower, as borrower, and Lender, as lender;

WHEREAS, Borrower, pursuant to the Loan Agreement, has agreed to grant to Lender a security interest in all of its presently existing or hereafter acquired shares of common stock (the "Stock") of ("#") to secure said loans.

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations and warranties hereinafter set forth and for other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto mutually agree as follows:

1. Pledge. As security for the payment and performance of any and all of Borrower's presently existing or hereafter arising obligations and liabilities owing to Lender (the "Obligations"), whether existing hereunder or by reason of the Loan Agreement or the other Loan Documents (as defined in the Loan Agreement) or whether created by reason of any other agreement between Borrower and Lender, Borrower hereby delivers, pledges and grants to Lender a continuing security interest in the following:

(a)the Stock listed on Exhibit A;

Under the Uniform Commercial Code (the "UCC"), a security interest in stock evidenced by a stock certificate is perfected by possession.

(b)stock powers (the "Powers") duly executed in blank; and

Stock powers are instruments of assignment, comparable in purpose to an endorsement on the certificate itself. They are typically executed in blank so as to permit a lender to realize on its collateral with relative ease at a time when its relationship with the borrower may have deteriorated.

(c)the proceeds of each of the foregoing, including, without limitation, any and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any of the Stock (the "Proceeds") (the Stock, the Powers and the Proceeds shall be collectively referred to as the "Stock Collateral"),

2. Lender's Duties. Subject to Section 9-207 of the Uniform Commercial Code (the "Code"), Lender shall have no duty with respect to the Stock Collateral. Without limiting the generality of the foregoing, Lender shall be under no obligation to take any steps necessary to preserve rights in the Stock Collateral against any other parties or to exercise any rights represented thereby; provided, however, that Lender may, at its option, do so, and any and all expenses incurred in connection therewith shall be for the sole account of Borrower.

3. Voting Rights; Dividends; Etc.. During the term of this Agreement and as long as no Event of Default under the Loan Agreement (an "Event of Default") shall have occurred and be continuing:

(a)Borrower shall be entitled to exercise any and all voting and other consensual rights pertaining to the Stock or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Loan Agreement or the other Loan Documents;

(b)Borrower shall not be entitled, however, to receive or retain any dividends or distributions paid in respect of the Stock whether paid or payable in cash, whether in redemption of, or in exchange for, the Stock, whether in connection with a partial or total liquidation or dissolution of the Stock, or whether in connection with a reduction of capital, capital surplus or paid-in surplus of the Stock, and any and all such dividends or distributions shall be forthwith delivered to Lender to hold as Stock Collateral and shall be, if received by Borrower, received in trust for the benefit of Lender, segregated from the other property or funds of Borrower, and forthwith delivered to Lender as Stock Collateral in the same form as so received (with any necessary endorsement);

(c)Lender shall execute and deliver (or cause to be executed and delivered) to Borrower all such proxies and other instruments as Borrower may reasonably request for the purpose of enabling Borrower to exercise those voting and other rights which it is entitled to exercise pursuant to Section 3(a) above; and

(d)If an Event of Default shall have occurred and be continuing and any amounts shall be due and payable (whether by acceleration, maturity or otherwise) under any of the Obligations, all rights of Borrower to exercise the voting and other consensual rights with respect to the Stock which it would otherwise be entitled to exercise pursuant to this Section 3 shall, at Lender's option, cease, and all such rights shall, at Lender's option, thereupon become vested in Lender so long as an Event of Default shall continue, and Lender shall, at its option, thereupon have the sole right, but no obligation, to exercise such voting and other consensual rights and to receive and hold as Stock Collateral such dividends and interest payments.

This Section deals with the respective rights of the parties in connection with voting the stock, receiving dividends, etc. The provisions relating to stock dividends or other issuances of additional shares are designed to ensure that the Lender maintains a collateral interest in all the shares owned by the Borrower.

4. Representations and Warranties. Borrower warrants and represents that:

(a)There are no restrictions upon the transfer of any of the Stock Collateral and Borrower has the right to pledge and grant a security interest in or otherwise transfer such Stock Collateral free of any encumbrances or rights of third parties;

(b)All of the Stock Collateral is and shall remain free from all liens, claims, encumbrances and purchase money or other security interests. Borrower shall not, without Lender's prior written consent, sell or otherwise dispose of any or all of the Stock Collateral;

(c)This Agreement, and the delivery to Lender of the Stock, creates a valid, perfected and first priority security interest in the Stock Collateral in favor of Lender, and all actions necessary or desirable to such perfection have been duly taken;

(d)No authorization or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the:

(i) grant by Borrower of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Borrower;

(ii) perfection of, or exercise by, Lender of its rights and remedies hereunder (except as may have been taken by or at the direction of Borrower or as may be required in connection with a disposition of Stock by laws affecting the offering and sale of securities generally); or

(iii) exercise by Lender of the voting or other rights provided for in this Agreement or the remedies in respect of the Stock pursuant to this Agreement (except as may be required in connection with a disposition of the Stock by laws affecting the offering and sale of securities generally);

Note that statutes regulating the sale or distribution of securities may impact the Lender's ability to dispose of its stock collateral. (See Section 8 below).

(e)Borrower has made its own arrangements for keeping informed of changes or potential changes affecting the Stock Collateral (including, but not limited to, rights to convert, rights to subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and Borrower agrees that Lender shall have no responsibility or liability for informing Borrower of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto;

(f)Exhibit A is an accurate and current listing of all shares of Stock presently owned or controlled by Borrower;

(g)There are no options for the purchase of the Stock and all rights represented thereby;

(h)All of the outstanding shares of Stock listed on Exhibit A have been duly and validly issued to Borrower, are fully paid and nonassessable and constitute all of the issued and outstanding shares of capital stock of ; and

(i)There are no existing agreements with respect to the Stock Collateral between Borrower and any other person or entity.

5. Stock Adjustments. During the term of this Agreement and until the Obligations have been paid in full, no reclassification, readjustment, recapitalization or other change shall be declared or made in the capital structure of .

6. Warrants. During the term of this Agreement and until the Obligations have been paid in full, no subscriptions, warrants or any other rights or options shall be issued in connection with the Stock Collateral.

The availability of Paragraphs 5 and 6 will depend upon whether the Borrower is the controlling shareholder of the company whose stock is being pledged.

7. Consent. Borrower hereby consents and agrees that, from time-to-time, before or after the occurrence or existence of any Event of Default, with or without notice to or assent from Borrower, any other security at any time held by or available to Lender of Borrower for any of the Obligations, or any other security at any time held by or available to Lender of any other person, firm or corporation secondarily or otherwise liable for any of the Obligations, may be exchanged, surrendered or released, any of the Obligations may be changed, altered, renewed, extended, continued, surrendered, compromised, waived or released, in whole or in part, and Lender may fail to take any action with respect to any of such security or may extend further credit to Borrower, all of the same as Lender may see fit, and Borrower shall remain bound under this Agreement notwithstanding any such exchange, surrender, release, change, alteration, renewal, extension, continuance, compromise, waiver, release, inaction or extension of further credit.

8. Remedies Upon Default. Upon the occurrence of an Event of Default, Lender shall have, in addition to any other rights given by law and the rights against Borrower hereunder, in the Loan Agreement, in the other Loan Documents and in any other documents executed by Borrower and Lender, all of the rights and remedies with respect to the Stock Collateral of a secured party under the Code.

In addition, with respect to the Stock Collateral, or any part thereof, Lender may sell or cause the same to be sold at any public or private sale, in one or more sales or lots, at such price as Lender may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, and the purchaser of any or all of the Stock Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever.

Borrower hereby agrees that any transfer or sale of the Stock Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies or other financial institutions disposing of property similar to the Stock Collateral shall be deemed to be commercially reasonable. Any requirement of reasonable notice shall be met if such notice is mailed to Borrower at the address set forth in the Loan Agreement at least five (5) Business Days before the time of the sale or disposition. Any other requirement of notice, demand or advertisement for sale, is, to the extent permitted by law, hereby waived by Borrower.

Lender may, in its own name, or in the name of a designee or nominee, buy the Stock Collateral at any public sale of the Stock Collateral. Lender shall have the right to execute any document or form, in its name or in the name of Borrower, which may be necessary or desirable in connection with such sale of Stock Collateral.

In view of the fact that federal and state securities laws may impose certain restrictions on the method by which a sale of the Stock Collateral may be effected after an Event of Default, Borrower agrees that upon the occurrence of an Event of Default, Lender may from time to time attempt to sell all or any part of the Stock Collateral by a private placement, restricting the bidders and prospective purchasers to those who will represent and agree that they are "accredited investors" within the meaning of Regulation D promulgated pursuant to the Securities Act of 1933, as amended, and are purchasing for investment only and not for distribution. In so doing, Lender may solicit offers to buy the Stock Collateral, or any part of it for cash, from a limited number of investors deemed by Lender, in its sole discretion, to be responsible parties who might be interested in purchasing the Stock Collateral. If Lender shall solicit such offers from not less than [ten (10)] such investors, then the acceptance by Lender of the highest offer obtained therefrom shall be deemed to be a commercially reasonable method of disposition of such Stock Collateral.

This paragraph is intended to permit the sale of the stock by the lender without the necessity of registering such stock under United States securities laws.

Notwithstanding the above, should Lender determine that, prior to any public offering of any securities contained in the Stock Collateral, such securities should be registered under the Securities Act of 1933 and/or registered or qualified under any other federal or state law, and that such registration and/or qualification is not practical, then Borrower agrees that it will be commercially reasonable if a private sale is arranged so as to avoid a public offering even if offers are solicited from fewer than ten (10) investors, and even though the sales price established and/or obtained may be substantially less than the price which would be obtained pursuant to a public offering.

9. Lender as Borrower's attorney-in-fact. Borrower hereby irrevocably appoints Lenders as its attorney-in-fact to arrange for the transfer, at any time after the existence or occurrence of an Event of Default, of the Stock Collateral on the books of [Name] to the name of Lender or to the name of Lender's nominee, all acts of such attorney being hereby ratified and confirmed and such power being coupled with an interest and irrevocable until the Obligations are paid in full.

10. Further Assurances. Borrower agrees that it will cooperate with Lender and will execute and deliver, or cause to be executed and delivered, all such other stock powers, proxies, instruments and documents and will take all such other action as Lender may reasonably request from time to time in order to carry out the provisions and purposes hereof. Borrower hereby constitutes Lender its attorney-in-fact to execute and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed and such power being coupled with an interest and irrevocable until the Obligations are paid in full.

11. Attorneys' Fees and Costs. Borrower hereby agrees to pay all reasonable attorneys' fees and disbursements and all other costs and expenses which may be incurred by Lender in the enforcement of this Agreement, whether or not suit is brought.

12. Notices. All notices or demands by any party hereto to the other party and relating to this Agreement shall be made in the manner and to the addresses set forth in the Loan Agreement.

13. Choice of Law and Venue. The validity of this Agreement, its construction, interpretation and enforcement and the rights of the parties hereto shall be determined under, governed by and construed in accordance with the internal laws of the State of [State], without regard to principles of conflicts of law. The parties agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated only in the state and federal courts located in the State of [State] or, at the sole option of Lender, in any other court in which Lender shall initiate legal or equitable proceedings and which has subject matter jurisdiction over the matter in controversy. Borrower waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this Section 13. Debtor knowingly, voluntarily and intelligently waives its constitutional right to a trial by jury with respect to any claim, dispute, conflict or contention, if any, as may arise under any of the Loan Documents, including this Security Agreement and agrees that any litigation between the parties hereto shall be heard by a court of competent jurisdiction sitting without a jury. Debtor hereby confirms to Secured Party that it has reviewed the effect of this waiver of jury trial with competent legal counsel of its choice prior to executing this Security Agreement, and acknowledges and agrees that Secured Party is relying upon this waiver in entering into the loan transactions described herein.

The thought here is that a jury will tend to favor a business proprietor or other debtor against a large institution such as a bank. While it is not clear that such a waiver is enforceable, it is customary to insert one emphasizing the understanding and access to advice of the waiving party.

14. General Provisions:

(a)This Agreement shall be binding and deemed effective when executed by Borrower and accepted and executed by Lender;

(b)This Agreement shall bind and inure to the benefit of the respective successors and assigns of Borrower and Lender; provided, however, that Borrower may not assign this Agreement or any rights hereunder without Lender's prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Lender shall release Borrower from its obligations to Lender hereunder. Lender may assign its rights and duties hereunder. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in rights and benefits hereunder. In connection therewith, Lender may disclose all documents and information which Lender now or hereafter may have relating to Borrower or Borrower's business;

(c)Section headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section hereof applies equally to this entire Agreement;

(d)Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Lender, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties and their counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto;

(e)Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision;

(f)This Agreement cannot be changed or terminated orally. All prior agreements, understandings, representations, warranties, and negotiations, if any, are merged into this Agreement, the Loan Agreement, the other Loan Documents, and any other documents and agreements entered into in connection herewith and therewith; and

(g)After termination of this Agreement, and when the Lender has received payment and performance, in full, of all Obligations, Lender shall execute and deliver to Borrower a termination of all of the security interests granted by Borrower hereunder and Lender shall return all Stock and Powers.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above.









Exhibit A

Pledged Stock

*** If Required By State Law ***

This Section for Notary:


State of _________

County of ________ [County]

On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand and official seal.

Signature ________

My commission expires: _____