EXHIBIT 10.8
SECURITY AGREEMENT
This Security Agreement is made as of March 10, 2000, between Bill Gross'
idealab!, a California corporation ("Pledgee"), and Bill Gross ("Pledgor").
RECITALS
In connection with Pledgor's purchase of shares of Pledgee's Series D
Preferred Stock ("Series D Shares") for a total purchase price of $30,000,000,
by payment of a note from Pledgor (the "Note"), Pledgor desires to secure the
purchase of the Series D Shares with the collateral as described below.
NOW, THEREFORE, it is agreed as follows:
1. CREATION AND DESCRIPTION OF SECURITY INTEREST. In consideration of the
transfer of the Series D Shares to Pledgor, Pledgor, pursuant to the California
Corporations Code, hereby pledges 50,000,000 shares (the "Shares") of Pledgee's
Common Stock (herein sometimes referred to as the "Collateral") represented by
certificate number CS-651, duly endorsed in blank or with executed stock powers,
and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, and the Pledgeholder shall not encumber or dispose of such Shares
except in accordance with the provisions of this Security Agreement.
2. PLEDGOR'S REPRESENTATIONS AND COVENANTS. To induce Pledgee to enter into
this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) PAYMENT OF INDEBTEDNESS. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) ENCUMBRANCES. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
(c) MARGIN REGULATIONS. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. VOTING RIGHTS. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. STOCK ADJUSTMENTS. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. OPTIONS AND RIGHTS. In the event that, during the term of this pledge,
subscription options or other rights or options shall be issued in connection
with the pledged Shares, such rights and options shall be the property of
Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. DEFAULT. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Corporations Code.
7. RELEASE OF COLLATERAL. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. WITHDRAWAL OR SUBSTITUTION OF COLLATERAL. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. TERM. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at ---- which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
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10. INSOLVENCY. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. PLEDGEHOLDER LIABILITY. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
12. INVALIDITY OF PARTICULAR PROVISIONS. Pledgor and Pledgee agree that the
enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. SUCCESSORS OR ASSIGNS. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.
14. GOVERNING LAW. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR"
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Signature
BILL GROSS
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Print Name
Address: 130 WEST UNION STREET
PASADENA, CA 91103
"PLEDGEE" BILL GROSS' IDEALAB!
a California corporation
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Signature
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Print Name
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Title
"PLEDGEHOLDER" ---------------------------------------
Secretary of
Bill Gross' idealab!
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