EXHIBIT 10.5
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is entered into as of June 2, 2000
by and between DANIEL O. JENSEN and BEVERLY A. JENSEN, as Trustees for the
Jensen Family Living Trust ("Pledgors"), a shareholder of JIA, Inc., a
Washington corporation ("Borrower"), and JENKON INTERNATIONAL, INC., a
Washington corporation (the "Lender").
WHEREAS, reference is hereby made to that certain Stock Purchase Agreement
(the "Stock Purchase Agreement"), dated as of April 6, 2000 and entered into by
and among the Lender, JIA, Inc., a Washington corporation ("Borrower"), Jenkon
International, Inc., a Delaware corporation ("Parent") and Summit V, Inc., a
Washington corporation (the "Company");
WHEREAS, Lender owns 5,000 shares of common stock of the Company (the
"Shares"), and intends to sell the Shares to Borrower and Borrower intends to
purchase such Shares from Lender;
WHEREAS, pursuant to the Stock Purchase Agreement, the aggregate purchase
price for the Shares is $1,175,000, $326,738 of which shall be delivered to
Lender by the Borrower in the form of that certain Promissory Note of even date
herewith (the "Loan") (the "Note");
WHEREAS, Pledgors are the legal and beneficial owner of 100,000 shares of the
issued and outstanding shares of common stock of Parent evidenced by the
certificates set forth on Exhibit "A" attached hereto and made a part hereof
(the "Pledged Shares");
WHEREAS, Pledgors are also a legal and beneficial owner of shares of
legally issued and outstanding shares of common stock of Borrower;
WHEREAS, in order to induce Lender to enter into the Stock Purchase
Agreement and to accept the Note, and to make advances and otherwise extend
credit to Borrower thereunder, Pledgors have agreed to secure the payment and
performance of the Secured Obligations (as hereinafter defined); and
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and in order to induce the Lender to make the Loan, the parties
hereto agree as follows:
SECTION 1. GRANTS OF SECURITY. Pledgors hereby assign, pledge and grant to
the Lender a first priority security interest in all of such Pledgors' right,
title and interest in
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and to the following (the "Collateral") to secure the Secured Obligations (as
defined in Section 2):
(i) the Pledged Shares and the certificates representing the Pledged Shares
and any interest of such Pledgors in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, 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; and
(ii) all proceeds of the foregoing items described in the preceding clause
(i).
SECTION 2. SECURED OBLIGATIONS. This Agreement secures, and the Collateral
is collateral security for, the prompt payment or performance in full when due,
whether upon demand, at stated maturity, by acceleration or otherwise, of: (a)
all obligations of Borrower in respect of the Note, whether for principal,
interest (including, without limitation, interest that, but for the filing of a
petition in bankruptcy with respect to Borrower, would accrue on such
obligations), fees, expenses or otherwise; and (b) all obligations of Borrower
or Pledgors, now or hereafter existing under this Agreement, the Stock Purchase
Agreement and the Note and any and all damages and claims (including any third
party claims) suffered by Lender which may result from any breach by Pledgors or
Borrower of, or any misrepresentation contained in this Agreement, the Stock
Purchase Agreement or the Note (all such combined obligations of both Pledgors
and Borrower are collectively referred to herein as the "Secured Obligations").
SECTION 3. DELIVERY OF PLEDGED SHARES. All certificates or instruments
representing or evidencing the Pledged Shares shall be delivered to and held by
or on behalf of the Lender pursuant hereto 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 the
Lender. The Lender shall have the right, at any time in its discretion and
without notice to Pledgors, following the occurrence of an Event of Default (as
defined herein), to transfer to or to register in the name of the Lender or any
of its nominees any or all of the Pledged Shares.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgors represent and warrant
to the Lender that the following statements are true, correct and complete:
(a) Pledgors are the legal and beneficial owner of the Collateral, free and
clear of any lien or security interest except for the security interest created
by this Agreement. Pledgors shall defend the Collateral against all claims and
demands of all persons at any time claiming any interest therein adverse to the
Lender;
(b) Pledgors are the legal and beneficial stockholder of Borrower and, as
such, will benefit from the completion of sale of the Shares to Borrower;
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(c) Pledgors have full power, authority, and legal right to pledge the
Collateral pursuant to this Agreement;
(d) The pledge and delivery of the Collateral to the Lender pursuant to
this Agreement creates a valid and perfected first priority security interest in
the Collateral, securing the payment and performance of the Secured Obligations;
(e) Except as already has been made or obtained, no consent of any other
party (including, without limitation, creditors of Pledgors) and no consent,
authorization, approval, or other action by, and no notice to or filing with any
governmental authority or regulatory body is required either (i) for the pledge
by Pledgors of the Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Pledgors or (ii) for the perfection
of or exercise by the Lender of the rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement;
(f) The pledge of the Pledged Shares does not violate Regulations T, U or X
of the Board of Governors of the Federal Reserve System; and
(g) Except as permitted under this Agreement, the Pledgors at all times
will be the sole beneficial owner of the Pledged Shares.
SECTION 5. FURTHER ASSURANCES. Pledgors agree that at any time and from
time to time, at the expense of Pledgors, they will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Lender may request, in order to perfect and
protect any security interest granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 6. VOTING RIGHTS, DIVIDENDS, ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement; PROVIDED, HOWEVER,
that Pledgors shall give the Lender at least five days' written notice of the
manner in which they intend to exercise, or the reasons for refraining from
exercising, any such right;
(ii) Pledgors shall be entitled to receive and retain any and all
dividends and other distributions paid in respect of the Collateral; PROVIDED,
HOWEVER, that any and all
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(A) dividends and other distributions 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 Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Collateral 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
(C) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Lender to hold as, Collateral
and shall, if received by Pledgors, be received in trust for the benefit of the
Lender, be segregated from the other property or funds of Pledgors, and be
forthwith delivered to the Lender as Collateral in the same form as so received
(with any necessary endorsement); and
(iii) the Lender shall execute and deliver (or cause to be
executed and delivered) to Pledgors all such proxies and other instruments as
Pledgors may reasonably request for the purpose of enabling Pledgors to exercise
the voting and other rights which they are entitled to exercise pursuant to
subsection 6(a)(i) and to receive the dividends and other distributions which
they are authorized to receive and retain pursuant to subsection 6(a)(ii).
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) Upon written notice from the Lender to Pledgors, all rights of
Pledgors to exercise the voting and other consensual rights which they would
otherwise be entitled to exercise pursuant to subsection 6(a)(i) shall cease,
and all such rights shall thereupon become vested in the Lender which shall
thereupon have the sole right to exercise such voting and other consensual
rights.
(ii) All rights of Pledgors to receive the dividends and other
distributions which they would otherwise be authorized to receive and retain
pursuant to subsection 6(a)(ii) shall cease and all such rights shall thereupon
become vested in the Lender which shall thereupon have the sole right to receive
such dividends and other distributions and the right to hold such dividends and
other distributions as Collateral during the continuance of such Event of
Default. All dividends and other distributions which are received by Pledgors
contrary to the provisions of this subsection 6(b)(ii) shall be received in
trust for the benefit of the Lender, shall be segregated from other funds of
Pledgors and shall be forthwith paid over to the Lender as Collateral in the
same form as so received (with any necessary endorsement).
(iii) Pledgors shall execute and deliver (or cause to be executed and
delivered) to the Lender all such proxies and other instruments as the Lender
may reasonably request for the purpose of enabling the Lender to exercise the
voting and other rights which it
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is entitled to exercise pursuant to subsection 6(b)(i) and to receive the
dividends and other distributions which it is authorized to receive and retain
pursuant to subsection 6(b)(ii).
SECTION 7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES. Pledgors agree
that they will not (i) sell or otherwise dispose of, or grant any option with
respect to, any Collateral, or (ii) create or permit to exist any lien or
security interest upon or with respect to any Collateral, except for the
security interest under this Agreement.
SECTION 8. LENDER APPOINTED ATTORNEY-IN-FACT. Pledgors hereby
appoint the Lender as Pledgors' attorney-in-fact, with full authority in the
place and stead of Pledgors and in the name of Pledgors or otherwise, from time
to time upon the occurrence and continuation of an Event of Default, in the
Lender's discretion to take any action and to execute any instrument which the
Lender may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(i) to receive, endorse and collect all instruments made payable to
Pledgors representing any dividend or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same;
(ii) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for money due and to become due under or in
respect of any of the Collateral;
(iii) to file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Lender with
respect to any of the Collateral; and
(iv) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Lender were the absolute owner thereof for all purposes, and to
do, at the Lender's option and Pledgors' expense, at any time, and from time to
time, all acts that the Lender deems necessary to protect, preserve or realize
upon the Collateral and the Lender's security interest therein, in order to
effect the intent of this Agreement, all as full and effectively as Pledgors
might do.
This appointment as attorney-in-fact is coupled with an interest and is
irrevocable. In performing its functions and duties under this Agreement, the
Lender has not assumed and shall not be deemed to have assumed any obligation
toward or relationship of agency or trust with or for Pledgors.
SECTION 9. LENDER MAY PERFORM. If Pledgors fail to perform any agreement
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the expenses of the Lender incurred in connection therewith shall
be payable by Pledgors under Section 14(b).
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SECTION 10. The Lender's Duties and Liabilities.
(a) The powers conferred on the Lender hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Lender accords its
own property, it being understood that the Lender shall have no responsibility
for (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral,
whether or not the Lender has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to assert rights against any parties with
respect to any Collateral.
(b) The Lender shall not be liable to Pledgors (i) for any loss or damage
sustained by Pledgors or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral that may occur as a result of,
in connection with or that is in any way related to (x) any exercise by the
Lender of any right or remedy under this Agreement or (y) any other act or
failure to act of the Lender, except to the extent that the same shall be
determined by a judgment of a court of competent jurisdiction, that is final and
not subject to review on appeal, to be the result of acts or omissions on the
part of the Lender constituting gross negligence or willful misconduct.
SECTION 11. EVENTS OF DEFAULT; REMEDIES UPON DEFAULT; DECISIONS RELATING TO
EXERCISE OF REMEDIES.
11.1 Any one or more of the following events shall constitute an Event of
Default by Pledgors under this Agreement:
(a) FAILURE TO PAY OBLIGATIONS. If Pledgors fail to pay when due and
payable or when declared due and payable, all or any portion of the Secured
Obligations owing to Lender (whether for principal, interest, taxes,
reimbursement of expenses, or otherwise);
(b) FAILURE TO PERFORM. If Pledgors fail to perform, keep or observe
any other term, provision, condition, covenant, agreement, warranty or
representation contained in this Agreement, or any other present or future
agreement between Pledgors and Lender, and such failure continues for five (5)
days following written notice from the Lender to Pledgors;
(c) VOLUNTARY INSOLVENCY PROCEEDING. If Pledgors commence any
Insolvency Proceeding (as defined below); and
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(d) INVOLUNTARY INSOLVENCY PROCEEDING. If any Insolvency Proceeding is
commenced against Pledgors and which is not dismissed within sixty (60) days of
the date of filing.
11.2 As used herein the term "Insolvency Proceeding" means and includes any
proceeding commenced by or against any person or entity under any provision of
the federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency law, including, but not limited to, assignments for the benefit of
creditors, formal or informal moratoriums, compositions or extensions generally
with its creditors.
11.3 If an Event of Default shall have occurred and be continuing:
(a) the Lender may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code (the "UCC") in effect in the State of Washington at that time;
(b) the Lender may transfer all or any part of the Collateral into the
Lender's name or the name of its nominee or nominees;
(c) the Lender may give all consents, waivers and ratifications in
respect of the Collateral and otherwise act with respect thereto as though it
were a party thereto or outright owner thereof;
(d) the Lender may settle, adjust, compromise and arrange all
accounts, controversies, questions, claims and demands whatsoever in relation to
all or any part of the Collateral;
(e) the Lender may, in respect of the Collateral, execute all such
contracts, agreements, deeds, documents and instruments; bring, defend and
abandon all such actions, suits and proceedings; and take all actions in
relation to all or any part of the Collateral as the Lender in its absolute
discretion may determine;
(f) (i) The Lender may without notice (except as specified
below), sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker's board or at any of the Lender's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as the Lender may
deem commercially reasonable, irrespective of the impact of any such sales on
the market price of the Collateral. To the extent permitted by law, the Lender
may be the purchaser of any or all of the Collateral at any such public or
private sale. Pledgors agree that, to the extent notice of sale shall be
required by law, at least five (5) days' notice to Pledgors of the time and
place of any public sale or the time after which a private sale is to be made
shall constitute reasonable notification. The Lender shall not be
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obligated to make any sale of the Collateral regardless of notice of sale having
been given. The Lender 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;
(ii) Pledgors recognize that, by reason of certain
prohibitions contained in the Securities Act of 1933, as from time to time
amended (the "Securities Act"), and applicable state securities laws, the Lender
may be compelled, with respect to any sale of all or any part of the Collateral
conducted without prior registration or qualification of such Collateral under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof, and such purchasers may have to be limited in number to possibly one
purchaser and any purchaser must be a sophisticated investor able to fend for
himself. Pledgors acknowledge that any such private sales may be at prices and
on terms less favorable to the Lender than those obtainable through a public
sale without such restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, Pledgors agree that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
the Lender shall have no obligation to request the Parent to engage in public
sales and no obligation to delay the sale of any Collateral for the period of
time necessary to permit the Parent to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws. The Pledged Shares constitute or upon foreclosure may
constitute "restricted securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act and may be subject
to transfer restrictions under the Securities Act;
(g) The Lender may appoint managers, sub-agents, officers and
servants for any of the purposes mentioned in the foregoing provisions of this
Section 11 and to dismiss the same, all as the Lender in its absolute discretion
may determine; and
(h) The Lender may generally take all such other action as the Lender in
its absolute discretion may determine to be incidental or conducive to any of
the matters or powers mentioned in the foregoing provisions of this Section 11
and which the Lender may or can do lawfully.
SECTION 12. REMEDIES CUMULATIVE. Each and every right, power and remedy
hereby specifically given to the Lender shall be in addition to every other
right, power and remedy specifically given under this Agreement, the Stock
Purchase Agreement or the Note or now or hereafter existing at law or in equity,
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed expedient by the
Lender. All such rights, powers and remedies shall be cumulative, and the
exercise or the beginning of exercise of one shall not be deemed a waiver of the
right to exercise of any other or others. No delay or omission of the Lender in
the exercise of any such right, power or
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remedy and no renewal or extension of any of the Secured Obligations shall
impair any such right, power or remedy or shall be construed to be a waiver of
any default or Event of Default or an acquiescence therein.
SECTION 13. APPLICATION OF PROCEEDs. After and during the continuance of an
Event of Default, any cash held by the Lender as Collateral and all cash
proceeds received by the Lender (all such cash being "Proceeds") in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral pursuant to the exercise by the Lender of its remedies as a secured
creditor as provided in Section 11 of this Agreement shall promptly be applied
by the Lender from time to time as follows:
FIRST: To the payment of the costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and advances
made or incurred by the Lender in connection therewith, in accordance with
Section 14(b);
SECOND: After payment in full of the amounts specified in the
preceding subparagraph, to the payment of the Secured Obligations to the
Lender; and
THIRD: After payment in full of the amounts specified in the preceding
subparagraphs, and any other amount required by any provision of law, to
Pledgors, or their heirs, representatives, successors or assigns, or to
whomever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
Proceeds.
All applications of Proceeds to the Secured Obligations shall be applied to the
payment of interest before application to the payment of principal.
SECTION 14. INDEMNITY AND EXPENSES.
(a) Pledgors agree to indemnify the Lender from and against any and all
claims, losses and liabilities growing out of or resulting from Pledgors' breach
of any term hereof or any misrepresentation made hereunder or in connection with
this Agreement (including, without limitation, enforcement of this Agreement),
except claims, losses or liabilities resulting from the Lender's gross
negligence or willful misconduct. This provision shall remain in effect
following payment of the Secured Obligations.
(b) Pledgors will upon demand pay to the Lender the amount of any and all
of the Lender's reasonable out-of-pocket expenses, including fees and
disbursements of its counsel, that the Lender may incur in connection with (i)
the administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of the
Lender hereunder or (iv) the failure by Pledgors to perform or observe any of
the provisions hereof.
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SECTION 15. AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any departure by
Pledgors herefrom shall in any event be effective without the written
concurrence of the Lender. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 16. ADDRESSES FOR NOTICES. Any communications between the parties
hereto or notices or requests provided herein to be given may be given by
mailing the same, postage prepaid, or by facsimile transmission to each party at
its address set forth on the signature pages hereof or to such other addresses
as each party may in writing hereafter indicate. Any notice, request or demand
to or upon the Lender or Pledgors shall not be effective until received
(provided, in the case of facsimile transmission, that receipt is confirmed).
SECTION 17. EFFECT OF DISPOSITION OF COLLATERAL. Any sale of, or the grant
of options to purchase, or any other realization upon, any Collateral by Lender
hereunder shall operate to divest all right, title, interest, claim and demand,
either at law or in equity, of Pledgors therein and thereto, and shall be a
perpetual bar both at law and in equity against Pledgors and against any and all
persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under Pledgors.
SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED OBLIGATIONS;
TERMINATION. This Agreement shall create a continuing security interest in the
Collateral and shall:
(i) be binding upon Pledgors, their heirs, representatives, successors and
assigns;
(ii) inure, together with the rights and remedies of the Lender, to the
benefit of the Lender and its successors, transferees and assigns; and
(iii) without limiting the generality of the foregoing clause (ii), the
Lender may assign or otherwise transfer all or a portion of its interests and
rights under the Note to any other person or entity, and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to the Lender herein or otherwise.
SECTION 19. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
SECTION 20. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality
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and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF PLEDGORS AND THE LENDER AND ALL OTHER ASPECTS HEREOF SHALL BE
DEEMED TO BE MADE UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF WASHINGTON. Unless otherwise defined
herein, or in the Note, terms defined in Divisions 8 and 9 of the UCC are used
herein as therein defined.
SECTION 23. INTERPRETATION. Wherever in this Agreement the context may
require, the masculine gender shall be deemed to include the feminine and/or
neuter, and the singular to include the plural.
SECTION 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
WAIVER OF TRIAL BY JURY. Pledgors hereby irrevocably submit to the jurisdiction
of any Washington State or Federal court sitting in the Central District of
Washington in any action or proceeding arising out of or relating to this
Agreement, and Pledgors hereby irrevocably agree that all claims in respect of
such action or proceeding may be heard and determined in such Washington State
or Federal court. Pledgors hereby irrevocably waive, to the fullest extent they
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. Pledgors agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Section 24 shall affect the right of the Lender to bring any
action or proceeding against Pledgors or their property in the courts of any
other jurisdiction. IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS, EACH
PARTY HERETO WAIVES TRIAL BY JURY.
SECTION 25. SECURITY INTEREST ABSOLUTE. All rights of the Lender and
security interests hereunder, and all obligations of Pledgors hereunder, shall
be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Note or any other
agreement or instrument relating thereto;
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(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Note or any other related document;
(iii) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to any departure from any
guaranty for all or any of the Secured Obligations; or
(iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, Pledgors.
SECTION 26. PLEDGORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (i) Pledgors shall remain liable under the contracts and
agreements included in or relating to the Collateral to the extent set forth
therein to perform all of their duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise by the
Lender of any of the rights hereunder shall not release Pledgors from any of
their duties or obligations under the contracts and agreements included in or
relating to the Collateral and (iii) the Lender shall not have any obligation or
liability under the contracts and agreements included in or relating to the
Collateral by reason of this Agreement, nor shall the Lender be obligated to
perform any of the obligations or duties of Pledgors thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 27. SURETY WAIVERS.
(a) Except to the extent otherwise expressly restricted or prohibited
pursuant either the Stock Purchase Agreement or the Note, at any time and in any
manner, upon such terms and at such times as it considers best and with or
without notice to Pledgors, Lender may alter, compromise, accelerate, extend, or
change the time or manner for payment of the indebtedness, increase or reduce
the rate of interest thereon, release or add any one or more obligors,
guarantors, endorsers or borrower, accept additional or substituted security
therefor, or release or subordinate any security therefor, without in any way
affecting the security interest of this Agreement or any covenant of Pledgors.
(b) Pledgors waive any right to require Lender to proceed
against the Borrower or any other person, firm or corporation at any time or to
pursue any other remedy in its power, and Pledgors agree that Lender shall not
be obligated to resort to any other security, with any priority, in any
particular order, or at all, even if such action, or lack thereof, destroys,
alters or otherwise impairs subrogation rights of Pledgors or the rights of
Pledgors to proceed against Borrower for reimbursement, or both.
(c) Pledgors waive and agree not to assert or take advantage of: (i) any
defense that may arise by reason of the incapacity, lack of authority,
insolvency, suspension or dissolution of Borrower or any other person, or the
failure of Lender to file or enforce a claim against the estate (either in
administration, bankruptcy or other proceedings) of Borrower or
-12-
any other person; or (ii) any defense or right based upon election of remedies
by Lender, including, without limitation, an election to proceed by nonjudicial
rather than judicial foreclosure, even if such election destroys, alters or
otherwise impairs subrogation rights of Pledgors or the right of Pledgors to
proceed against Borrower or any other person for reimbursement, or both.
(d) Pledgors, by execution hereof, represent to Lender that the
relationship between Pledgors and Borrower is such that Pledgors have access to
all relevant facts and information concerning the debt and Borrower and that
Lender can rely upon Pledgors having such access. Pledgors waive and agree not
to assert any duty on the part of Lender to disclose to Pledgors any facts that
Lender may now or hereafter know about the Borrower, regardless of whether
Lender has reason to believe that any such facts materially increase the risk
beyond that which Pledgors intend to assume or has reason to believe that such
facts are unknown to Pledgors or has a reasonable opportunity to communicate
such facts to Pledgors. Pledgors are fully responsible for being and keeping
informed of the financial condition and operations of Borrower and all
circumstances bearing on the risk of nonpayment of any indebtedness hereby
secured.
(e) Pledgors waive demand, protest and notices of any kind, including,
without limiting the generality of the foregoing, notice of the existence,
creation or incurring of new or additional indebtedness or of any action or
non-action on the part of the Borrower, Lender, any endorser, any creditor of
Borrower or Pledgors under this or any other instrument, or any other person
whosoever, in connection with any obligation or evidence of indebtedness held by
Lender as collateral or in connection with any indebtedness secured hereby.
(f) Until all Secured Obligations of Borrower to Lender under the Stock
Purchase Agreement and the Note have been paid in full, Pledgors waive the right
of subrogation and waive any right to enforce any remedy which Lender now has or
may hereafter have against Borrower and any benefit of, and any right to
participate in, any security now or hereafter held by Lender.
(g) With or without notice to Pledgors, Lender, in its sole discretion, at
any time and from time to time, in such manner and upon such terms as it
considers reasonable, may apply any and all payments or recoveries from any
security, in such manner, order and priority as Lender elects, to any
indebtedness of Borrower to Lender, whether or not such indebtedness is secured
hereby or is otherwise secured or is due at the time of such application.
(h) No exercise or nonexercise of Lender of any right hereby given it and
no dealing by Lender with Borrower or any other person shall in any way affect
any of the Secured Obligations of Pledgors hereunder or give Pledgors any
recourse against Lender.
(i) Notwithstanding that Pledgors and Borrower may have entered into a
separate agreement relating to their rights and duties with each other, no
right, remedy or
-13-
provision thereof shall be binding upon or affect or delay Lender's rights or
remedies under this Agreement or by operation of law.
(j) Pledgors understand that the exercise by Lender of certain rights and
remedies contained in the Stock Purchase Agreement and the Note may affect or
eliminate Lender's right to seek a money judgment against Borrower and,
therefore, Pledgors' right of subrogation to seek a money judgment against
Borrower, and that Pledgors, upon completion of a foreclosure of this Agreement
by Lender, may therefore succeed to a partially or totally non-reimbursable
liability on the part of Borrower. Nevertheless, Pledgors hereby authorize and
empower Lender, at its sole option, without notice or and without affecting the
validity or enforceability of this Agreement, as herein modified, to exercise,
in its sole discretion, any and all rights and remedies, or any combination
thereof, which may be available to it, including the right to foreclose this
Agreement by nonjudicial sale, subject to any restrictions contained in the
Stock Purchase Agreements or the Note.
Pledgors acknowledge that Pledgors may have certain rights under applicable
law which, if not waived by Pledgors, might provide Pledgors with defenses
against Pledgors' liability under this Agreement. So long as any Obligation
remains outstanding under the Stock Purchase Agreement or the Note, Pledgors
further waive all rights and defenses that are or may become available to
Pledgors.
SECTION 28. FACSIMILE EXECUTION. Execution of this Agreement shall be
deemed binding upon the party executing this Agreement notwithstanding that
delivery of the executed document may be by facsimile transmission. Any party
shall be entitled to rely on a faxed execution copy of this Agreement with the
same force and effect as if an originally inked execution copy were delivered.
Inked original documents shall be delivered to the other parties by Federal
Express mail within one business day of the facsimile transmission.
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IN WITNESS WHEREOF, Pledgors and the Lender have caused this Agreement to
be duly executed and delivered as of the date first above written.
PLEDGORS: LENDER:
JENSEN FAMILY LIVING TRUST JENKON INTERNATIONAL, INC.,
a Washington corporation
- ---------------------------- By: _________________________
Daniel O. Jensen, Trustee Name: ______________________
Title: ________________________
- ---------------------------- Notice Address:
Beverly A. Jensen, Trustee
Notice Address for Pledgors: 7600 NE 41st Street
Suite 300
- ---------------------------- Vancouver, WA 98662
- ---------------------------- Fax No.: (360) 256-9623
- ---------------------------- Attention: David Edwards
- ----------------------------
- ----------------------------
with a copy to: with a copy to:
Perkins Coie LLP Jeffer, Mangels, Butler & Marmaro LLP
1211 SW Fifth Ave. 2121 Avenue of the Stars
Suite 1500 Tenth Floor
Portland, OR 97204 Los Angeles, California 90067
Fax No.: (503) 727-2000 Fax No.: (310) 203-0567
Attention: Patrick J. Simpson, Esq. Attention: Robert Steinberg, Esq.
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EXHIBIT "A"
TO PLEDGE AGREEMENT
CERTIFICATE NOS. # OF SHARE
-16-