EXHIBIT 15(F)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement"), dated as of October 12, 2001,
is made by JAKKS PACIFIC, INC., a Delaware corporation, FLYING COLORS TOYS,
INC., a Michigan corporation, ROAD CHAMPS, INC., a Delaware corporation, JAKKS
ACQUISITION CORP., a Delaware corporation ("JAC") and PENTECH INTERNATIONAL
INC., a Delaware corporation (each a "Grantor" and collectively, "Grantors"),
jointly and severally, in favor of BANK OF AMERICA, N.A., as Administrative
Agent under the Loan Agreement hereafter referred to, the Lenders therein named
and in favor of each of the Lenders which may hereafter become a party thereto
collectively as Secured Party, with reference to the following facts:
RECITALS
A. Grantors (other than JAC) have entered into a Loan Agreement of even
date herewith among Grantors, the Lenders referred to therein, and Bank of
America, N.A., as Administrative Agent (as it may from time to time be amended,
restated, extended, renewed, modified or supplemented, the "Loan Agreement").
JAC is a guarantor under the Guaranty (as defined in the Loan Agreement
referenced below.) This Agreement is the Pledge Agreement referred to in the
Loan Agreement and is one of the "Loan Documents" referred to in the Loan
Agreement.
B. Pursuant to the Loan Documents of even date the Lenders are making
certain credit facilities available to Grantors (other than JAC).
C. As a condition of the availability of such credit facilities,
Grantors are required to enter into this Agreement to pledge certain Pledged
Collateral to Secured Party as herein provided.
AGREEMENT
NOW, THEREFORE, in order to induce the Lenders to extend credit
facilities to Grantors under the Loan Agreement, and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged,
Grantors hereby jointly and severally represent, warrant, covenant, agree, and
pledge as follows:
1. Definitions. Terms defined in the Loan Agreement and not otherwise
defined in this Agreement shall have the meanings given those terms in the Loan
Agreement as though set forth herein in full. The following terms shall have the
meanings respectively set forth after each:
"Certificates" means all certificates, instruments or other
documents now or hereafter representing or evidencing any Pledged
Securities.
"Distributions" means dividends, distributions, redemption
payments, liquidation payments, and all rights to any of the foregoing.
"Issuer" means any issuer of any Pledged Securities.
"Pledged Collateral" means any and all property of Grantors, or
any of them, now or hereafter pledged and delivered to Secured Party
pursuant to this Agreement, and includes without limitation (a) the
Pledged Securities, and any Certificates or other written evidences
representing such equity interests and any interest of Grantors, or any
of them, in the entries on the books of any securities intermediary or
financial intermediary pertaining thereto, (b) all proceeds and products
of any of the foregoing, and (c) any and all collections, Distributions,
interest or premiums with respect to any of the foregoing.
"Pledged Securities" means:
(a) any and all shares of capital stock or member or
other equity interests in each of the Domestic Subsidiaries
listed on Schedule I hereto (each a "Designated Domestic
Subsidiary" and collectively, the "Designated Domestic
Subsidiaries"), (b) sixty-five percent (65%) of the capital
stock or member or other equity interests in each of the Foreign
Subsidiaries listed on Schedule I hereto (each a "Designated
Foreign Subsidiary" and collectively, the "Designated Foreign
Subsidiaries"), (c) any and all securities now or hereafter
issued in substitution, exchange or replacement for any of the
foregoing shares, or with respect thereto and (d) any and all
warrants, options or other rights to subscribe to or acquire any
additional capital stock or member or other equity interests in
any Designated Domestic Subsidiary or Designated Foreign
Subsidiary (except that in no event shall more than sixty-five
percent (65%) of the capital stock or member or other equity
interest of any Designated Foreign Subsidiary be pledged to
Secured Party hereunder).
"Secured Party" means the Administrative Agent (acting as the
Administrative Agent and/or on behalf of the Lenders), and the Lenders,
and each of them, and any one or more of them. Subject to the terms
hereof and of the Loan Agreement, any right, remedy, privilege or power
of Secured Party may be exercised by the Administrative Agent, or by the
Requisite Lenders, or by any Lender acting with the consent of the
Requisite Lenders.
2. Incorporation of Representations, Warranties, Covenants and Other Provisions
of Loan Documents. This Agreement is one of the Loan Documents referred to in
the Loan Agreement. All representations, warranties, affirmative and negative
covenants and other provisions contained in any Loan Document that are
applicable to Loan Documents generally are fully applicable to this Agreement
and are incorporated herein by this reference as though set forth herein in
full. In addition, Grantors, and each of them, hereby represent and warrant to
Secured Party as follows:
(a) Grantors have good and marketable title to the Pledged Collateral in which
Grantors are purporting to grant a security interest to Administrative Agent on
behalf of Secured Party, and the Pledged Collateral is not subject to any Lien
other than Permitted Encumbrances and other encumbrances permitted pursuant to
the Loan Agreement;
(b) Grantors have the right and power to pledge the Pledged Collateral owned by
Grantors to Administrative Agent on behalf of Secured Party without the consent,
approval or authorization of, or notice to, any Person (other than such
consents, approvals, authorization or notices which have been obtained or given
prior to the date hereof) and such pledge constitutes the valid, binding and
enforceable obligation of Grantors, and each of them,
enforceable against Grantors, and each of them, in accordance with the terms
hereof and the other Loan Documents, except as enforcement may be limited by
Debtor Relief Laws or equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial discretion;
(3) Upon delivery to Administrative Agent of the Pledged Collateral referred to
in this Agreement, Administrative Agent will have a first priority perfected
security interest in the Pledged Collateral securing the Obligations;
(4) All shares of capital stock or member or other equity interest that
constitute a portion of the Pledged Collateral are duly authorized, validly
issued in accordance with all applicable Laws, fully paid and non-assessable,
and represent one hundred percent (100%) of the issued and outstanding shares of
common stock or member or other equity interest of each of the Designated
Domestic Subsidiaries and sixty-five percent (65%) of the issued and outstanding
shares of common stock or member or other equity interest of each of the
Designated Foreign Subsidiaries.
3. Creation of Security Interest.
3.1 Pledge of Pledged Collateral. Grantors hereby jointly and severally pledge
to Administrative Agent on behalf of Secured Party and grant to Administrative
Agent on behalf of Secured Party a security interest in and to all Pledged
Collateral for the benefit of Secured Party, together with all products,
proceeds, Distributions, Cash, instruments and other Property, and any and all
rights, titles, interests, privileges, benefits and preferences appertaining or
incidental to the Pledged Collateral (provided that in no event shall more than
sixty-five percent (65%) of the capital stock or member or other equity interest
of any Designated Foreign Subsidiary be pledged to Secured Party hereunder). The
security interest and pledge created by this Section 3.1 shall continue in
effect so long as any Obligation is owed to Secured Party or any commitment to
extend credit to Grantors under the Loan Documents remains outstanding from the
Lenders.
3.2 Delivery of Certain Pledged Collateral. On or before the Closing Date,
Grantors shall cause to be pledged and delivered to Administrative Agent for the
benefit of Secured Party the Certificates evidencing the capital stock listed on
Schedule I hereto. Following the Closing Date, additional Pledged Collateral may
from time to time be delivered to Administrative Agent for the benefit of
Secured Party by agreement between Secured Party and Grantors. All Certificates
at any time delivered to Administrative Agent for the benefit of Secured Party
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. Administrative Agent shall hold all
Certificates pledged hereunder pursuant to this Agreement unless and until
released in accordance with Section 3.3 of this Agreement.
3.3 Release of Pledged Collateral. Pledged Collateral that is required to be
released from the pledge and security interest created by this Agreement in
order to permit Grantors to consummate any disposition of stock or assets,
merger, consolidation, amalgamation, acquisition, or dividend payment or
distribution that Grantors are entitled to consummate pursuant to the Loan
Documents, if any, shall be so released by Administrative Agent at such times
and to the extent necessary to permit Grantors to consummate such permitted
transactions promptly following
Administrative Agent's receipt of written request therefor by Grantors
specifying the purpose for which release is requested and such further
certificates or other documents as Administrative Agent on behalf of Secured
Party reasonably shall request in its discretion to confirm that Grantors are
permitted to consummate such permitted transaction and to confirm Secured
Party's replacement Lien on appropriate collateral (unless replacement
collateral is not required pursuant to the Loan Documents). Any request for any
permitted release shall be transmitted to Administrative Agent on behalf of
Secured Party. Administrative Agent, at the expense of Grantors, promptly shall
redeliver all Certificates and shall execute and deliver to Grantors all
documents requested by Grantors that are reasonably necessary to release Pledged
Collateral of record whenever Grantors shall be entitled to the release thereof
in accordance with this Section 3.3.
4. Security for Obligations. This Agreement and the pledge and security
interests granted herein secure the prompt payment, in full in cash, and full
performance of, all Obligations, whether for principal, interest, fees, expenses
or otherwise, including, without limitation, all Obligations of Grantors now or
hereafter existing under the Loan Documents, and all interest that accrues on
all or any part of any of the Obligations of Grantors after the filing of any
petition or pleading against Grantors, or any of them, or any other Person for a
proceeding under any Debtor Relief Law.
5. Further Assurances. Each Grantor agrees that at any time, and from time to
time, at its own expense such Grantor will promptly execute, deliver and file or
record all further financing statements, instruments and documents, and will
take all further actions, including, without limitation, causing the issuers of,
or obligors on any of the Pledged Collateral to so execute, deliver, file or
take other actions, that may be necessary or desirable, or that Secured Party
reasonably may request, in order to perfect and protect any pledge or security
interest granted hereby or to enable Secured Party to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral and to
preserve, protect and maintain the Pledged Collateral and the value thereof,
including, without limitation, payment of all taxes, assessments and other
charges imposed on or relating to the Pledged Collateral. Each Grantor hereby
(a) irrevocably directs the issuers of or obligors on any such Pledged
Collateral, or each securities intermediary, registrar, transfer agent or
trustee for any such Pledged Collateral, to accept the provisions of this
Agreement as conclusive evidence of the right of Secured Party to effect any
transfer or exercise any right hereunder or with respect to any such Pledged
Collateral, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by such Grantor or any other Person to any of such
parties; and (b) covenants and agrees to transfer or reinvest any such Pledged
Collateral, immediately upon Secured Party's request, in such manner as may be
deemed necessary or desirable by Secured Party to create and perfect, and to
continue and preserve, an indefeasible security interest in such Pledged
Collateral in favor of Administrative Agent on behalf of Secured Party, or the
priority, control and exclusivity thereof, free of all other Liens and claims
except as may be permitted by the terms hereof or of the Loan Agreement.
6. Voting Rights; Dividends; etc. So long as no Default or Event of Default
under the Loan Agreement occurs and remains continuing:
6.1 Voting Rights. Grantors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Securities, or any part
thereof, for any purpose not inconsistent with the terms of this Agreement, the
Loan Agreement, or the other Loan Documents.
6.2 Interest and Distribution Rights. Grantors shall be entitled to receive and
to retain and use any and all interest, premiums or Distributions paid in
respect of the Pledged Collateral; provided, however, that any and all such
Distributions received in the form of capital stock (or other equity interest)
shall be, and the Certificates representing such capital stock (or other equity
interest) forthwith shall be delivered to Administrative Agent to hold as,
Pledged Collateral and shall, if received by Grantors, be received in trust for
the benefit of Secured Party, be segregated from the other property of Grantors,
and forthwith be delivered to Administrative Agent for the benefit of Secured
Party as Pledged Collateral in the same form as so received (with any necessary
endorsements). Notwithstanding the foregoing sentence, Grantors shall not be
required to deliver to Administrative Agent to hold as Pledged Collateral any
Distributions received in the form of capital stock (or other equity interest),
and such Distributions shall not constitute Pledged Collateral, to the extent
that (a) such capital stock (or other equity interest) represents an equity
interest in a Designated Foreign Subsidiary and (b) Secured Party's receipt of
such capital stock (or other equity interest) would cause Secured Party to
obtain a pledge pursuant to this Agreement of greater than sixty-five percent
(65%) of the applicable equity interest of the applicable Designated Foreign
Subsidiary.
7. Rights During Default or Event of Default. When a Default or Event of Default
has occurred and is continuing:
7.1 Voting and Distribution Rights. At the option of Secured Party, all rights
of Grantors to exercise the voting and other consensual rights which they would
otherwise be entitled to exercise pursuant to Section 6.1 above, and to receive
the interest, premiums and Distributions which it would otherwise be authorized
to receive and retain pursuant to Section 6.2 above, shall cease, and all such
rights shall thereupon become vested in Administrative Agent for the benefit of
Secured Party who shall thereupon, at the direction of Administrative Agent,
have the sole right to exercise such voting and other consensual rights and to
receive and to hold as Pledged Collateral such Distributions, provided, however,
that Grantors' rights to receive Distributions pursuant to Section 6.2 above
shall not cease with respect to, and Secured Party shall not have the right to
receive and hold as Pledged Collateral, any Distributions made in respect of the
Pledged Collateral in the form of capital stock (or other equity interest), or
the Certificates representing such capital stock (or other equity interest), to
the extent that (a) such capital stock (or other equity interest) represents an
equity interest in a Designated Foreign Subsidiary and (b) Secured Party's
receipt of such capital stock (or other equity interest) would cause Secured
Party to obtain a pledge pursuant to this Agreement of greater than sixty-five
percent (65%) of the applicable equity interest of the applicable Designated
Foreign Subsidiary. Administrative Agent shall give notice to Grantors of
Secured Party's election to exercise voting rights with respect to the Pledged
Collateral; provided, however, that (i) neither the giving of such notice nor
the receipt thereof by Grantors shall be a condition to exercise of any rights
of Secured Party hereunder, and (ii) neither Administrative Agent nor any Lender
shall incur any liability for failing to give such notice.
7.2 Distributions Held in Trust. All Distributions which are received by
Grantors contrary to the provisions of this Agreement shall be received in trust
for the benefit of Secured Party, shall be segregated from other funds of
Grantors, and forthwith shall be paid over to Administrative Agent for the
account of Secured Party as Pledged Collateral in the same form as
so received (with any necessary endorsements).
7.3 Irrevocable Proxy. Grantors hereby jointly and severally revoke all previous
proxies with regard to the Pledged Securities and appoints Administrative Agent
for the benefit of Secured Party as its proxyholder to attend and vote at any
and all meetings of the shareholders (or other equity holders, as applicable) of
the corporations (or other entities, as applicable) which issued the Pledged
Securities, and any adjournments thereof, held on or after the date of the
giving of this proxy and prior to the termination of this proxy and to execute
any and all written consents of shareholders (or other equity holders, as
applicable) of such corporations (or other entities, as applicable) executed on
or after the date of the giving of this proxy and prior to the termination of
this proxy, with the same effect as if each Grantor had personally attended the
meetings or had personally voted its shares (or other equity interests, as
applicable) or had personally signed the written consents; provided, however,
that the proxyholder shall have rights hereunder only upon the occurrence and
during the continuance of a Default or Event of Default under the Loan
Agreement. Grantors hereby jointly and severally authorize Administrative Agent
to substitute another Person as the proxyholder and, upon the occurrence or
during the continuance of any Event of Default, hereby authorizes and directs
the proxyholder to file this proxy and the substitution instrument with the
secretary or other appropriate officer of the appropriate corporation or other
entity as applicable. This proxy is coupled with an interest and is irrevocable
until such time as no commitment to extend credit to Grantors remains
outstanding from the Lenders and until such time as all Obligations have been
paid and performed in full.
8. Transfers and Other Liens. Grantors agree that, except as specifically
permitted under the Loan Documents, they will not (i) sell, assign, exchange,
transfer or otherwise dispose of, or contract to sell, assign, exchange,
transfer or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral, (ii) create or permit to exist any Lien upon or with
respect to any of the Pledged Collateral, except for Permitted Encumbrances and
other encumbrances permitted pursuant to the Loan Agreement, or (iii) take any
action with respect to the Pledged Collateral which is inconsistent with the
provisions or purposes of this Agreement or any other Loan Document.
9. Secured Party Appointed Attorney-in-Fact. Each Grantor hereby irrevocably
appoints Administrative Agent for the benefit of Secured Party as such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor,
and in the name of such Grantor, or otherwise, from time to time, in Secured
Party's sole and absolute discretion to do any of the following acts or things:
(a) to do all acts and things and to execute all documents necessary or
advisable to perfect and continue perfected the security interests created by
this Agreement and to preserve, maintain and protect the Pledged Collateral; (b)
to do any and every act which such Grantor is obligated to do under this
Agreement; (c) to prepare, sign, file and record, in such Grantor's name, any
financing statement covering the Pledged Collateral; and (d) to endorse and
transfer the Pledged Collateral upon foreclosure by Secured Party; provided,
however, that Administrative Agent shall be under no obligation whatsoever to
take any of the foregoing actions, and neither Administrative Agent nor any
Lender shall have any liability or responsibility for any act (other than
Administrative Agent's or such Lender's own gross negligence or willful
misconduct) or omission taken with respect thereto. Each Grantor hereby agrees
to repay immediately upon demand all reasonable costs and expenses incurred or
expended by Secured Party in exercising any right or
taking any action under this Agreement, together with interest as provided for
in the Loan Agreement.
10. Administrative Agent May Perform Obligations. If any Grantor fails to
perform any Obligation contained herein, Administrative Agent for the benefit of
Secured Party may, but without any obligation to do so and without notice to or
demand upon such Grantor, perform the same and take such other action as Secured
Party may deem necessary or desirable to protect the Pledged Collateral or
Secured Party's security interests therein, Administrative Agent being hereby
authorized (without limiting the general nature of the authority hereinabove
conferred) to pay, purchase, contest and compromise any Lien which in the
reasonable judgment of Secured Party appears to be prior or superior to Secured
Party's security interests, and in exercising any such powers and authority to
pay necessary expenses, employ counsel and pay reasonable attorneys' fees. Each
Grantor hereby agrees to repay immediately upon demand all sums so expended by
Secured Party, together with interest from the date of expenditure at the rates
provided for in the Loan Agreement. Neither Administrative Agent nor any Lender
shall be under any duty or obligation to preserve, maintain or protect the
Pledged Collateral or any of such Grantor's rights or interest therein, exercise
any voting rights with respect to the Pledged Collateral, whether a Default or
Event of Default has occurred or is continuing, or make or give any notices of
default, presentments, demands for performance, notices of nonperformance or
dishonor, protests, notices of protest or notice of any other nature whatsoever
in connection with the Pledged Collateral on behalf of such Grantor or any other
Person having any interest therein; and neither Administrative Agent nor any
Lender assumes and none shall be obligated to perform the obligations of such
Grantor, if any, with respect to the Pledged Collateral.
11. Reasonable Care. So long as Administrative Agent exercises reasonable care
with respect to any Pledged Collateral in its possession, custody or control,
Administrative Agent shall have no liability for any loss of or damage to such
Pledged Collateral, and in no event shall Administrative Agent have liability
for any diminution in value of Pledged Collateral occasioned by economic or
market conditions or events. Administrative Agent 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 similar to that which Administrative Agent accords its own
property, it being understood that Administrative Agent shall not have any
responsibility for ascertaining or taking action with respect to maturities,
calls, conversions, exchanges, tenders or other matters relative to any Pledged
Collateral, whether or not Administrative Agent has or is deemed to have
knowledge of such matters, or taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
12. Events of Default and Remedies.
12.1 Rights Upon Event of Default. Upon the occurrence and during the
continuance of an Event of Default under the Loan Agreement, Grantors shall be
in default hereunder and Secured Party shall have in any jurisdiction where
enforcement is sought, in addition to all other rights and remedies that Secured
Party may have under this Agreement and under applicable Law or in equity, all
of its rights and remedies as a secured party under the Uniform Commercial Code
as enacted in any such jurisdiction, and in addition the following rights and
remedies, all of which may be exercised with or without further notice to
Grantors:
(a) to notify any Issuer of any Pledged Securities and any and all other
obligors on any Pledged Collateral that the same has been pledged to
Administrative Agent for the benefit of Secured Party and that all Distributions
and other payments thereon are to be made directly and exclusively to
Administrative Agent for the account of Secured Party; to renew, extend, modify,
amend, accelerate, accept partial payments on, make allowances and adjustments
and issue credits with respect to, release, settle, compromise, compound,
collect or otherwise liquidate, on terms acceptable to Secured Party, in whole
or in part, the Pledged Collateral and any amounts owing thereon or any guaranty
or security therefor; to enter into any other agreement relating to or affecting
the Pledged Collateral; and to give all consents, waivers and ratifications with
respect to the Pledged Collateral and exercise all other rights (including
voting rights), powers and remedies and otherwise act with respect thereto as if
Secured Party were the owner thereof;
(b) to enforce payment and prosecute any action or proceeding with respect to
any and all of the Pledged Collateral and take or bring, in Secured Party's
name(s) or in the name of Grantors, all steps, actions, suits or proceedings
deemed by Secured Party necessary or desirable to effect collection of or to
realize upon the Pledged Collateral;
(c) in accordance with applicable Law, to take possession of the Pledged
Collateral with or without judicial process;
(d) to endorse, in the name of Grantors, all checks, notes, drafts, money
orders, instruments and other evidences of payment relating to the Pledged
Collateral;
(e) to transfer any or all of the Pledged Collateral into the name of Secured
Party or its nominee or nominees; and
(6) in accordance with applicable Law, to foreclose the Liens and security
interests created under this Agreement or under any other agreement relating to
the Pledged Collateral by any available judicial procedure or without judicial
process, and to sell, assign or otherwise dispose of the Pledged Collateral or
any part thereof, either at public or private sale or at any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or on future
delivery, or otherwise, with or without representations or warranties, and upon
such terms as shall be acceptable to Secured Party;
all at the sole option of and in the sole discretion of Secured Party.
12.2 Notice of Sale. Secured Party shall give Grantors at least ten (10) days'
written notice of sale of all or any part of the Pledged Collateral. Any sale of
the Pledged Collateral shall be held at such time or times and at such place or
places as Secured Party may determine in the exercise of its sole and absolute
discretion. Secured Party may bid (which bid may be, in whole or in part, in the
form of cancellation of Obligations) for and purchase for the account of Secured
Party or any nominee of Secured Party the whole or any part of the Pledged
Collateral. Secured Party shall not be obligated to make any sale of the Pledged
Collateral if it shall determine not to do so regardless of the fact that notice
of sale of the Pledged Collateral may have been given. Secured Party may,
without notice or publication, adjourn the sale from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.
12.3 Private Sales. Upon the occurrence and during the continuance of an Event
of Default under the Loan Agreement, whether or not any of the Pledged
Collateral has been effectively registered under the Securities Act of 1933, as
amended, or other applicable Laws, Secured Party may, in its sole and absolute
discretion, sell all or any part of the Pledged Collateral at private sale in
such manner and under such circumstances as Secured Party may deem necessary or
advisable in order that the sale may be lawfully conducted. Without limiting the
foregoing, Secured Party may (i) approach and negotiate with a limited number of
potential purchasers, and (ii) restrict the prospective bidders or purchasers to
Persons who will represent and agree that they are purchasing the Pledged
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. In the event that any of the Pledged Collateral
is sold at private sale, each Grantor agrees that if the Pledged Collateral is
sold for a price which Secured Party in good faith believes to be reasonable,
then, (A) the sale shall be deemed to be commercially reasonable in all
respects, (B) such Grantor shall not be entitled to a credit against the
Obligations in an amount in excess of the purchase price, and (C) Secured Party
shall not incur any liability or responsibility to such Grantor in connection
therewith, notwithstanding the possibility that a substantially higher price
might have been realized at a public sale. Grantors recognize that a ready
market may not exist for Pledged Collateral which is not regularly traded on a
recognized securities exchange or in another recognized market, and that a sale
by Secured Party of any such Pledged Collateral for an amount substantially less
than a pro rata share of the fair market value of such Issuer's assets minus
liabilities may be commercially reasonable in view of the difficulties that may
be encountered in attempting to sell a large amount of Pledged Collateral or
Pledged Collateral that is privately traded.
12.4 Title of Purchasers. Upon consummation of any sale of Pledged Collateral
pursuant to this Section 12, Administrative Agent on behalf of Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Pledged Collateral so sold. Each such purchaser at any
such sale shall hold the Pledged Collateral sold absolutely free from any claim
or right on the part of Grantors, and each Grantor hereby waives (to the extent
permitted by applicable Law) all rights of redemption, stay and appraisal which
it now has or may at any time in the future have under any rule of Law or
statute now existing or hereafter enacted. If the sale of all or any part of the
Pledged Collateral is made on credit or for future delivery, Secured Party shall
not be required to apply any portion of the sale price to the Obligations until
such amount actually is received by Secured Party, and any Pledged Collateral so
sold may be retained by Secured Party until the sale price is paid in full by
the purchaser or purchasers thereof. Secured Party shall not incur any liability
in case any such purchaser or purchasers shall fail to pay for the Pledged
Collateral so sold, and, in case of any such failure, the Pledged Collateral may
be sold again upon like notice.
12.5 Disposition of Proceeds of Sale. The net cash proceeds resulting from the
collection, liquidation, sale or other disposition of the Pledged Collateral
shall be applied, first, to the reasonable costs and expenses (including
reasonable attorneys' fees) of retaking, holding, storing, processing and
preparing for sale, selling, collecting and liquidating the Pledged Collateral,
and the like; second, to the satisfaction of all Obligations, with application
as to any particular Obligations to be in the order set forth in the Loan
Agreement or other Loan Documents; and, third, to all other indebtedness secured
hereby in such order and manner as Secured Party in its sole and absolute
discretion
may determine.
13. Continuing Effect. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantors for
liquidation or reorganization, should Grantors become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantors' assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant to
applicable Law, rescinded or reduced in amount, or must otherwise be restored or
returned by Administrative Agent or any Lender, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment or any part
thereof is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
14. Covenant Not to Issue Uncertificated Securities. Grantors jointly and
severally represent and warrant to Secured Party that all of the capital stock
(or other equity interests) of each of the Issuers is in certificated form (as
contemplated by Article 8 of the California Uniform Commercial Code), and
covenant to Secured Party that they will not cause or permit any Issuer to issue
any capital stock (or other equity interest) in uncertificated form or seek to
convert all or any part of its existing capital stock (or other equity interest)
into uncertificated form (as contemplated by Article 8 of the California Uniform
Commercial Code). The foregoing representations, warranties and covenants shall
survive the execution and delivery of this Agreement.
15. Covenant Not to Dilute Interests of Secured Party in Pledged Securities.
Grantors jointly and severally represent, warrant and covenant to Secured Party
that they will not at any time cause or permit any Issuer to issue any
additional capital stock (or other equity interest), or any warrants, options or
other rights to acquire any additional capital stock (or other equity interest),
if the effect thereof would be to dilute in any way the interests of Secured
Party in any Pledged Securities or in any Issuer.
16. Indemnity. Grantors jointly and severally agree to indemnify and hold
harmless Secured Party, and each of them, from and against any and all claims,
demands, losses, judgments and liabilities (including without limitation
liabilities for penalties) of whatsoever kind or nature, and to reimburse
Secured Party for all costs and expenses, including without limitation
reasonable attorneys' fees and expenses and/or costs and expenses associated
with, arising out of or in connection with this Agreement or the exercise by
Secured Party of any right or remedy granted to it hereunder or under the other
Loan Documents other than arising from the gross negligence or willful
misconduct of Secured Party. In no event shall Secured Party be liable for any
matter or thing in connection with this Agreement other than to account for
monies actually received by it in accordance with the terms hereof. If and to
the extent that the agreements of Grantors under this Section 16 are
unenforceable for any reason, Grantors hereby agree to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable Law.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
18. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same agreement.
19. Additional Powers and Authorization. The Administrative Agent has been
appointed as the Administrative Agent hereunder pursuant to the Loan
Agreement and shall be entitled to the benefits of the Loan Agreement and the
other Loan Documents. Notwithstanding anything contained herein to the contrary,
the Administrative Agent may employ agents, trustees, or attorneys-in-fact and
may vest any of them with any Property (including, without limitation, the
Pledged Collateral), title, right or power deemed necessary for the purposes of
such appointment.
20. WAIVER OF JURY TRIAL. EACH GRANTOR AND SECURED PARTY EXPRESSLY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED OR INCIDENTAL TO THIS AGREEMENT,
THE LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. EACH GRANTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY ARE WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, THE LOAN
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed as of the date first above written.
ACCEPTED AND AGREED "Grantors"
AS OF THE DATE FIRST
ABOVE WRITTEN: JAKKS PACIFIC, INC.
FLYING COLORS TOYS, INC.
"Secured Party" ROAD CHAMPS, INC.
JAKKS ACQUISITION CORP.
BANK OF AMERICA, N.A., PENTECH INTERNATIONAL INC.
as Administrative Agent
for the Lenders
By: /s/ XXXX X. XXXXXXX
By: /s/ XXXXX X. XXXXXXX ----------------------------
----------------------------- Xxxx X. Xxxxxxx
Title: Exec. V.P./C.F.O.
Xxxxx X. Xxxxxxx, V.P. -------------------------
-------------------------------- of each of the foregoing
[Printed name and title]
SCHEDULE I
CLOSING DATE EQUITY INTERESTS
DOMESTIC EQUITY INTERESTS
-------------------------------------------------------------------------------------------------------------------
Issuer of Capital Stock Class of Certificate Number Percentage of
or Other Equity Interest Shareholder Interest No(s). of Shares Ownership
-------------------------------------------------------------------------------------------------------------------
Xxxx Corporation JAKKS Pacific, Inc. Corporation 6 5,000 100%
Flying Colors Toys, Inc. JAKKS Pacific, Inc. Corporation 160 23,825 100%
JAKKS Acquisition Corp. JAKKS Pacific, Inc. Corporation 2 200 100%
XX Xxxxxxx Parkway, Inc. JAKKS Pacific, Inc. Corporation 1 100 100%
J-X Enterprises, Inc. JAKKS Pacific, Inc. Corporation 2 200 100%
Pentech Cosmetics, Inc. Pentech International Inc. Corporation 3 200 100%
Pentech International, Inc. JAKKS Pacific, Inc. Corporation P-X-2 10 100%
Pentech-Mon Ami, Inc. Pentech International Inc. Corporation 2 200 100%
Road Champs, Inc. JAKKS Acquisition Corp. Corporation 2 100 100%
Sawdust Pencil Co. Pentech International Inc. Corporation 3 200 100%
-------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY INTERESTS
-------------------------------------------------------------------------------------------------------------
Issuer of Capital Stock Class of Certificate Number of Percentage of
or Other Equity Interest Shareholder Interest No(s). Shares Ownership
-------------------------------------------------------------------------------------------------------------
JAKKS Pacific (H.K.) JAKKS Pacific, Inc. Hong Kong 650 65%
Limited Corporation
Road Champs Limited Road Champs, Inc. Hong Kong 195 65%
Corporation
Flying Colors Toys (HK) JAKKS Pacific, Inc. Hong Kong 650 65%
Limited Corporation
JP (HK) Limited JAKKS Pacific, Inc. Hong Kong 650 65%
Corporation
