STOCK PLEDGE AGREEMENT
Exhibit 10.5
In
consideration of NEWSTAR FINANCIAL, INC. (the “Lender”) selling certain assets
to USDC Portsmouth, Inc., a California corporation (“Borrower”), pursuant to
Secured Party Sale Agreement of even date between the Lender, the Borrower and
the undersigned, the Lender’s acceptance of the Borrower’s note in partial
payment of the purchase price, and to secure the undersigned’s Guaranty of even
date in favor of the Lender with respect to the obligations of the Borrower to
the Lender (the “Guaranty”), evidenced by that certain Time Note of even date
(the “Time Note”) in the principal amount of $975,000, U.S. Dry Cleaning
Corporation (the “Pledgor”), as collateral security for the performance of all
obligations hereunder and the payment of the indebtedness and the performance of
all other obligations relating to the Guaranty, the security documents, and
other documents relating thereto, and all amendments and replacements thereof
(collectively hereinafter called the “Obligations”), hereby deposits with the
Lender and pledges, collaterally assigns, delivers, and grants a security
interest in the following property:
100
shares of common stock (par value $0.01 of USDC PORTSMOUTH, INC., a California
corporation, evidenced by certificate number No. 1,
together
with any shares or fractional shares of stock issued or to be issued as a result
of a stock dividend or stock split-up on or with respect to the above-described
property, any additional shares which may be delivered and pledged to the Lender
as hereinafter provided, and all dividends, distributions, and other proceeds of
all of the foregoing, in each case whether now existing or hereafter arising
(all of the foregoing is hereinafter called the “Collateral”).
The
Pledgor hereby represents and warrants that (a) the Pledgor is the sole owner of
the Collateral free from any adverse lien or security interest (other than the
pledge of the Collateral in favor of Setal 2, LLC (with it successors and
assigns, the “First Lien Lender”) to secure certain obligations of Pledgor under
that certain Convertible Note, dated March 12, 2008, in the original principal
amount of $1,725,000 (as amended from time to time, the “First Lien Note”), (b)
the Collateral is freely transferable by the Pledgor without notice to or
consent by any other person, corporation, or other entity (other than the First
Lien Lender until the payment in full of the First Lien Note), (c) the delivery
by the Pledgor of the Collateral will create a valid and perfected security
interest therein in the Lender, (d) there are no restrictions on the
transferability of the Collateral to the Lender by the Pledgor or with respect
to the foreclosure and transfer thereof by the Lender (other than in favor of
the First Lien Lender until the payment in full of the First Lien Note), (e) the
Collateral is registered in the Pledgor’s name on the books of the Borrower, (f)
the Pledgor will warrant and defend title to the Collateral against the claims
and demands of any person, firm, corporation, trust, partnership, or other
entity (other than the First Lien Lender until the payment in full of the First
Lien Note), (g) the Collateral constitutes all of the presently issued and
outstanding shares of Borrower owned by the Pledgor, and (h) the Pledgor owns
100% of the voting stock of Borrower and is the controlling stockholder of
Borrower. The Pledgor agrees that the Collateral will not be sold,
assigned, transferred (other than in connection with the existing pledge in
favor of the First Lien Lender until the payment in full of the First Lien
Note), on further pledged without the prior written consent of the
Lender.
Until
such time as the Obligations have been paid in full, the Pledgor, except with
the written consent of the Lender which will not be unreasonably withheld, as
the controlling stockholder of Borrower, shall not suffer, cause, or permit any
other or further shares of Borrower to be issued to the Pledgor unless such
shares are pledged with the Lender as additional Collateral for the obligations,
nor shall the Pledgor suffer, cause, or permit the Collateral to be purchased or
retired by Borrower, nor shall the Pledgor permit Borrower to be merged,
consolidated, terminated, liquidated or dissolved. The Pledgor agrees
that upon any sale or transfer of the Obligations, the Lender may deliver to the
purchaser or transferee the Collateral, which purchaser or transferee shall
thereupon become vested with all powers and rights given to the Lender hereunder
in respect thereto and the Lender shall be thereafter forever relieved and fully
discharged from any liability or responsibility in connection
therewith. To the maximum extent permitted by law, the Lender shall
not be liable with respect to the Collateral except for the safekeeping
thereof.
Prior to
any non-payment under the Obligations (beyond any notice and cure period) the
Pledgor shall have all rights and powers pertaining to the Collateral, subject
to the terms of this Agreement. Upon the non-payment of any of the
Obligations thereunder as and when the same shall become due and payable (beyond
any notice and cure period), or at any time or from time to time thereafter
during the continuance of such default, the following may occur:
1. The
Lender may apply to the Obligations all or any part of the Collateral and the
proceeds thereof and may sell or otherwise transfer any or all of the Collateral
in such manner and for such price as the Lender may determine (subject to
applicable law) and out of the proceeds of such sale retain an amount sufficient
to pay the balance due and all other sums required under the terms of the
Obligations together with the expenses of the sale and shall pay any balance of
such proceeds to Pledgor.
2. The
Lender shall have all the rights and remedies of a secured party afforded by the
Uniform Commercial Code as from time to time in effect in the Commonwealth of
Massachusetts or afforded by other applicable law. The requirement of
reasonable notice with respect to any public sale or disposition of the
Collateral shall be met if such notice is mailed, postage prepaid, to the
Pledgor at the address set forth above at least ten (10) days before the time of
the sale or other disposition. The expenses of retaking, holding,
preparing for sale, selling, or the like shall include the Lender’s reasonable
attorneys fees and other costs and legal expenses and shall be part of the
Obligations.
3. The
Collateral, or any part thereof, may be sold, together or in parcels, at
brokers’ board, or at public or private sale, in Boston, Massachusetts or
elsewhere, in accordance with applicable law; and the Lender or its assigns may
at any such brokers’ board, or at public sale, become the purchaser of all or
any portion of the Collateral, discharged from all rights or redemption; and the
net proceeds of sale, after deducting all costs and expenses thereof and
attorneys’ fees in connection therewith, may be applied to the payment of the
Obligations, in such order as the Lender shall deem proper, accounting to the
Pledgor for the balance not so applied. Nothing herein contained
shall obligate the Lender to resort to the Collateral before proceeding against
the Pledgor or the Pledgor’s estate for non-payment of sums due, or prevent it
from prosecuting both remedies at the same time, to the end that all Obligations
hereby secured may be paid in full.
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4. The
Lender shall have authority to have stocks and registered bonds and other
securities included in the Collateral transferred into its own name as pledgee
or otherwise or into the name of its nominee and to collect the income
therefrom, and at its option to hold such income as security for the Obligations
or apply it on the principal and/or the accrued interest, if any, due on the
Obligations.
5. The
Pledgor agrees that whether or not registered in the Lender’s name as pledgee,
the Lender shall be under no duty to collect, exercise any rights pertaining to,
fix or preserve the liability of any party under, protect, preserve, vote upon
or otherwise deal with the Collateral pledged hereunder or any income thereon,
except that the Lender shall use due care with respect to the safekeeping
thereof while in the Lender’s possession, but nothing herein contained shall
deprive the Lender of exercising such rights at the Lender’s
election. No delay or omission on the Lender’s part in exercising any
right hereunder or under any instrument evidencing an Obligation secured hereby
shall operate as a waiver of such right or of any other right hereunder or under
any such evidence of indebtedness. A waiver on any one occasion shall
not be construed as a bar to or waiver or any such right and/or remedy on any
future occasion.
The
Pledgor agrees to make, execute and deliver, upon request, any further
assignments, powers of attorney, assurances, acquittances or other documents
which the Lender may reasonably request to enable the Lender to transfer or
realize upon said property or to secure to the Lender more fully the full
benefit hereof and hereby appoints the Lender, its successors and assigns, its
attorney-in-fact, with full power of substitution, for the purpose of carrying
out any provisions herein and taking any action with respect to said property as
said attorney-in-fact may determine after the occurrence of a default (after any
applicable grace or notice period) to accomplish the purposes hereof (which
appointment as attorney-in-fact is irrevocable and coupled with an
interest).
The
rights of the Pledgor hereunder are subject to an Intercreditor Agreement of
even date (the “Intercreditor Agreement”) among the Lender, the Borrower, the
Pledgor and the First Lien Lender. Notwithstanding any other
provision hereof to the contrary, the Pledgor shall not be required to deliver
or grant control of any Collateral to Lender hereunder, prior to the payment in
full of the First Lien Note, if the Pledgor is also required to deliver or grant
control of such Collateral to the First Lien Lender or any successor thereto or
assignee thereof and the First Lien Lender and any such successor thereto or
assignee thereof has agreed, pursuant to the terms of the Intercreditor
Agreement, to hold the Collateral for the benefit of the Lender, subject to the
terms of the Intercreditor Agreement.
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IN
WITNESS WHEREOF, the Pledgor has caused this Stock Pledge Agreement to be duly
executed as of the 24th day of
March, 2008.
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US
DRY CLEANING CORPORATION
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By
____________________________________
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Name:
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Title:
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