STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of May __,
2004, is made and entered into by and between SAVON TEAM SPORTS, INC., a Utah
corporation ("Pledgor"), and XXXX XXXXXXXXXX ("Pledgeholder"), with reference to
the following facts:
A. Concurrently herewith, pursuant to the terms of a Stock Purchase
Agreement, dated as of May 20, 2004 (the "Stock Purchase Agreement"), by and
among Pledgor, Pledgeholder, Xxxxx Xxxx, Xxxx X. Xxxxxxxxxx, Trustee of the Xxxx
X. Xxxxxxxxxx and Xxxx Xxxxxxxxx Family Trust and Small World Toys, a California
corporation (the "Company"), Pledgor is acquiring all of the issued and
outstanding common stock of the Company. In connection therewith and in partial
payment for such shares, Pledgor is issuing to Pledgeholder a promissory note in
the principal amount of $500,000 (the "Six Month Note"), a promissory note in
the principal amount of $1,000,000 (the "Seven Month Note") and a promissory
note in the principal amount of $700,000.
C. As a condition to closing under the Stock Purchase Agreement, Pledgor
has agreed to pledge to Pledgeholder, as security for repayment of the Six Month
Note and the Seven Month Note (collectively, "the Notes"), an aggregate of 1,667
shares of the common stock of the Company on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. SECURITY INTEREST; STOCK PLEDGE.
(a) As security for the full and timely payment by Pledgor of the Notes
and Pledgor's performance of its obligations under the Notes (the
"Obligations"), Pledgor hereby pledges and grants to Pledgeholder a lien on and
a continuing security interest in (i) 1,667 shares of the Common Stock of the
Company owned beneficially or of record by Pledgor (the "Pledged Stock") and
(ii) all proceeds of the foregoing, including 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 foregoing and
any and all replacements thereof or substitutions therefor (the "Proceeds")(all
of the items described in clauses (i) and (ii) of this clause (a), are
collectively referred to as the "Collateral"). Concurrently herewith, Pledgor
has delivered to Pledgeholder a stock certificate representing the Pledged Stock
together with an assignment separate from the certificate, executed in blank by
Pledgor with signature guaranteed by a bank or broker.
(b) In the event that, during the term of this Agreement, there is any
reclassification, readjustment, or other change in the capital structure of the
Company or the issuance to Pledgor of any additional shares of the capital stock
of the Company or there is any stock split or stock dividend effected, declared
or paid on any of the Collateral, then all new, substitute and/or additional
shares, issued or issuable to Pledgor with respect to the Collateral shall be
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deemed to be Collateral hereunder and shall be delivered to and held by
Pledgeholders under the terms of this Agreement in the same manner as the
Collateral originally pledged hereunder.
(c) Until the occurrence of an Event of Default as defined in Section 5
below, Pledgor shall be entitled to exercise all voting and consensual rights
pertaining to the Pledged Stock and to give consents, waivers, approvals, and
ratifications in respect of the Pledged Stock, and to exercise and enjoy all
other incidents of ownership of the Pledged Stock to the extent permitted under
applicable law, provided, however, that Pledgor shall not exercise or refrain
from exercising such rights if such action would (i) conflict with any provision
of this Agreement or the Notes or (ii) impair the value of any of the Collateral
or the rights or interests of Pledgeholder.
2. DUTIES OF PLEDGEHOLDER. Pledgeholder, as a secured party, shall take
such reasonable care with the Collateral. The powers of Pledgeholder hereunder
are solely to protect his interest in the Collateral and shall not impose any
duty upon Pledgeholder to exercise any of such powers.
3. DUTIES OF PLEDGOR. Pledgor's duty to perform and observe the agreements
and covenants on its part contained herein shall be absolute and unconditional,
except as expressly provided herein.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR.
(a) Pledgor hereby represents and warrants to Pledgeholder as follows:
(i) Except for restrictions created hereby and restrictions under
applicable state, federal or other securities laws, there are no restrictions
upon the transfer of any of the items of Collateral which Pledgor beneficially
owns or in which Pledgor has any right or interest and Pledgor has the right and
authority to pledge and xxxxx x xxxx in each and all of items of the Collateral.
All of the Pledged Stock is free from all liens, claims, encumbrances, options,
purchase money or other security interests or other charge or rights of any
person or entity of any kind whatsoever ("Liens").
(ii) No consent of any other person or party, no consent, license,
permit, approval or authorization of, exemption by notice or report to, or
registration, filing, declaration with any governmental authority or regulatory
body, foreign or domestic, is required either (A) for the grant of the security
interests by Pledgor or for the execution, delivery or performance of this
Agreement by Pledgor, (B) for the perfection or exercise by Pledgeholder of his
rights and remedies hereunder or (C) in an Event of Default(as defined
hereunder) for the exercise by Pledgeholder of the voting or other rights
provided for in this Agreement or the remedies provided hereunder in respect of
the Collateral.
(iii) The Pledgor is the legal and beneficial owner of the Pledged
Stock and has full power, authority and legal right to execute, deliver and
perform its obligations under this Agreement and to pledge all of its rights,
title and interest in and to the shares of the Pledged Stock.
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(iv) This Agreement creates a valid security interest in the
Collateral in favor of Pledgeholder securing the Obligations, which security
interest has been perfected and is prior to any and all Liens. None of the
Collateral constitutes "margin stock" as that term is used in Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System. This Agreement
constitutes a legal, valid and binding obligation, enforceable against Pledgor
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, moratorium, reorganization or other laws affecting creditors' rights
and remedies general or public policy.
(b) The Pledged Stock has been duly and validly issued and is fully paid
and non-assessable and no options, warrants or other rights to acquire any
securities of the Company have been issued or granted.
(c) Without the prior written consent of Pledgeholder, which consent may
be withheld in the sole discretion of Pledgeholder, (i) Pledgor will not allow
the Company to issue additional shares of its equity securities, any securities
convertible into or exchangeable for any equity securities of the Company or any
options, warrants or other similar rights to acquire any of the equity
securities of the Company; and (ii) Pledgor will not sell, transfer, assign or
otherwise dispose of any or all of the Collateral or any interest therein
(voluntarily or involuntarily, by operation of law or otherwise).
(d) If Pledgor receives any payment or property which it is not entitled
to retain pursuant to the terms of this Agreement, such payment or property
shall be received in trust for Pledgeholder, shall be segregated from other
funds and property of Pledgor and shall immediately be delivered over to
Pledgeholder.
(e) Pledgor hereby irrevocably appoints Pledgeholder, with full power of
substitution, as Pledgor's attorney-in-fact, with full authority in the place
and stead of Pledgor and in the name of Pledgor or otherwise, from time to time
in the Pledgeholder's discretion, to take any action and to execute any
instruments with Pledgeholder deems necessary or advisable to accomplish the
purposes of this Agreement.
5. REMEDIES UPON DEFAULT.
(a) The occurrence of any one or more of the following events shall
constitute an "Event of Default" under this Agreement:
(i) The breach by Pledgor of any representation, warranty or any
material covenant contained in this Agreement.
(ii) There occurs any "Event of Default" as defined in the Notes.
(b) During the continuance of an Event of Default hereunder, Pledgeholder
shall have the right to do any one or more of the following:
(i) Declare all Obligations secured hereby immediately due and
payable; and
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(ii) Utilize any and all such other rights and remedies to which a
secured creditor may be entitled at law or in equity.
(c) In addition to the foregoing, upon an Event of Default, Pledgeholder
shall have the right to vote the Pledged Stock, whether at any meetings of
holders of securities of the Company or by written consent, which right shall be
exercised, if at all, by giving written notice thereof to the Company, and the
Company shall be entitled to rely on such notice without further notice or
investigation. Once such notice is provided to the Company, Pledgeholder shall
be treated in all respects as the holder of such Pledged Stock and shall be
entitled to all rights of a holder thereof, including without limitation receipt
of all notices or other information provided to holders of common stock or other
securities of the Company, all inspection rights to which holders of common
stock or other securities of the Company are entitled and the right to receive
dividends and other distributions.
(d) The rights and remedies available to Pledgeholder shall be cumulative
and not exclusive of any other right or remedy available hereunder, at law or in
equity. The exercise (partial or otherwise) of one or more of such rights or
remedies shall not impair Pledgeholder's right to exercise any other or further
right or remedy hereunder or at law or in equity. No failure or delay by Pledgor
in exercising any right or remedy hereunder shall operate as a waiver thereof.
6. TERMINATION OF PLEDGE. This Agreement creates a continuing security
interest in the Collateral and this Agreement and the security interest granted
hereby shall continue in full force and effect until all of the Obligations have
been satisfied and paid in full (subject to reinstatement if at any time payment
of any of the Obligations is voided, rescinded or otherwise must be returned by
Pledgeholder for any reason), at which time the security interest granted
hereunder shall terminate (subject to such reinstatement). Promptly following
the receipt of written notice that the Obligations have been satisfied and paid
in full, then, at Pledgor's expense, Pledgeholder shall return any certificates
in his possession or under his control, representing the Pledged Stock (and any
other items of Collateral in Pledgeholder's possession or control) and take such
further action (at Pledgor's expense) as Pledgor may reasonably request to
reflect the termination of this Agreement and the security interests created
hereby. 7. ASSIGNMENT. The rights and obligations of Pledgor hereunder are not
assignable by Pledgor. Subject to the preceding sentence, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, successors and assigns.
8. NO CONTINUING WAIVER. The waiver of any Event of Default hereunder
shall not constitute a continuing waiver or a waiver of any subsequent Event of
Default.
9. NOTICE. All notices and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given only if done in one or
more of the following ways: (i) on the day of delivery if delivered personally,
(ii) two days after the date of mailing if mailed by registered or certified
first class mail, postage prepaid, (iii) the next business day following deposit
with an overnight air courier service which guarantees next day delivery, or
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(iv) when sent by facsimile (with a copy simultaneously sent by registered or
certified mail return receipt requested), to the other party at the following
address (or to such person or persons or such other address or addresses as a
party may specify by notice pursuant to this provision):
If to Pledgeholder:
Xxxx Xxxxxxxxxx
000 00xx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxx Xxxxx LLP
1901 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Pledgor:
Savon Team Sports, Inc.
c/o Small World Toys
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
With a copy to:
Loeb & Loeb LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
10. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of any such
provision to other persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
11. INTERPRETATION OF DOCUMENT. The parties hereto acknowledge and agree
that this Agreement has been negotiated at arms' length and between parties
equally sophisticated and knowledgeable in the matters dealt with in this
Agreement. Each party has had access to counsel of their selection. Accordingly,
any rule of law, court decision or other legal precedent that would require
interpretation of any ambiguities in this Agreement against the party that has
drafted it is not applicable and is waived.
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12. GOVERNING LAW; VENUE. This Agreement shall be governed by the
procedural and substantive laws of the State of California without regard to
conflict of law principles. The parties agree that any legal action or
proceeding with respect to this Agreement may be brought exclusively in courts
located in Los Angeles County in the State of California.
13. ARBITRATION AND ATTORNEYS' FEES AND COSTS. Any and all disputes,
claims or controversies arising out of or relating to this Agreement that are
not resolved by mutual agreement of the parties hereto will be submitted to
final and binding arbitration before JAMS/ENDISPUTE, or its successor. Either
party may commence the arbitration process called for in this Agreement by
filing a written demand for arbitration with JAMS/ENDISPUTE, with a copy to the
other party. The arbitration will be conducted in accordance with the provisions
of this Agreement and JAMS/ENDISPUTE's Comprehensive Arbitration Rules and
Procedures ("Arbitration Rules") in effect at the time of filing of the demand
for arbitration, and California Code of Civil Procedure Section 1282, et. seq.
(the "Code of Civil Procedure"), as amended, and all other California procedural
and substantive law. Specifically, Section 1283.05 of the Code of Civil
Procedure shall govern the rights of discovery. To the extent there exists an
inconsistency between this Agreement, the Arbitration Rules and/or the Code of
Civil Procedure, then this Agreement, the Code of Civil Procedure and thereafter
the Arbitration Rules will apply in such order. The parties will cooperate with
JAMS/ENDISPUTE and with one another in selecting an arbitrator from
JAMS/ENDISPUTE's panel of neutrals, and in scheduling the arbitration
proceedings. In the event that the parties cannot agree on a neutral arbitrator
or do not cooperate with one another in the selection thereof, the parties
hereby authorize and direct JAMS/ENDISPUTE to appoint a neutral from its Los
Angeles panel of neutrals. The parties shall participate in the arbitration in
good faith, and they shall initially share equally in its costs, unless
otherwise required by law; provided, however, the prevailing party is entitled
to reimbursement of all attorneys' fees, expenses, and costs of arbitration as
described below. Notwithstanding anything to the contrary provided in the
Arbitration Rules, the arbitrator shall issue a reasoned award with supporting
facts and law. The reasoned award shall will be final and non-appealable, except
as provided by California law. The provisions of this Section may be enforced by
any court of competent jurisdiction, as limited by this Agreement, and the
prevailing party in such arbitration and court action shall be awarded all
costs, fees, expenses, expert witness fees and attorneys' fees, all of the
foregoing to be paid by the non-prevailing party. Notwithstanding the foregoing,
a party may seek injunctive relief in a court of competent jurisdiction in
connection with any arbitration. Any arbitration hereunder shall take place in
the County of Los Angeles, California.
14. AMENDMENTS. This Agreement, and any provision hereof, may be amended
or waived only by an instrument in writing executed by each of Pledgor and
Pledgeholder. No electronic record or electronic signature (other than
telephonic facsimile) shall be deemed to be a writing so as to satisfy any
requirement under this Agreement Note that any amendment, waiver, notice or
other instrument under or pursuant hereto be in writing.
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Pledge
Agreement as of the date first written above.
SAVON TEAM SPORTS, INC.
By:
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Xxxx Xxxxxxxxxx
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