STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is dated as of March
21, 1997, by and between Xxxxxx X. Xxxxxxx ("Xxxxxxx") and Xxxxx Xxxxxx
Multimedia Company, Inc. (the "Pledgor").
R E C I T A L S
Pursuant to a Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"), the Pledgor has purchased from Xxxxxxx 100% of the
outstanding capital stock (the "Stock") of Dolphin Inc. (the "Company"). The
consideration for the purchase of the Stock includes a 7% Convertible Note due
March 1, 2001, of even date herewith from the Pledgor to Xxxxxxx (the "Note").
This Agreement is intended to induce Xxxxxxx to sell the Stock to the Pledgor
and accept the Note as partial consideration for the Stock, by securing
repayment of the Note and performance of Pledgor's obligations thereunder.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions. All capitalized terms which are not
specifically defined in this Agreement shall have the meanings assigned to such
terms in the Purchase Agreement or, if not defined in the Purchase Agreement, in
the Note.
"Cash Surplus" means the dollar amount of the excess of the Company's
cash balance as of a relevant date over $125,000.00.
"Collateral" has the meaning set forth in Section 2.1 hereof.
"Default" has the meaning set forth in Article V hereof.
"Enforcement Costs" means any and all funds, costs, expenses and
charges of any nature whatsoever (including, without limitation, reasonable
attorney's fees and expenses) advanced, paid or incurred by or on behalf of
Xxxxxxx under or in connection with
the administration or enforcement of this Agreement, including, without
limitation, (a) the compliance of the Pledgor with any covenant, warranty,
representation or agreement of the Pledgor made in or pursuant to this Agreement
or the Note, (b) the collection or enforcement of the Note and/or this
Agreement, and (c) the exercise, preservation, maintenance, protection,
operation, management, collection, sale or other disposition of, or realization
upon, all or any part of the Collateral, under applicable law and otherwise.
"Event of Default" means an event which, with the giving of notice or
the lapse of time, or both, could or would constitute a Default under the
provisions of this Agreement.
"Financial Status Schedule" shall have the meaning set forth in
Section 4.4 hereof.
"1995 Financial Statements" means the Company's audited financial
statements for the year ended December 31, 1995, previously provided to the
Pledgor.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof, or any other entity.
"Presumed Value" shall have the meaning set forth in
Section 6.4(b) hereof.
"Security Interests" means the security interests in the
Collateral granted hereunder.
"Stockholder's Equity" means the Company's stockholder's equity, less
intangible assets, computed in accordance with generally accepted accounting
principles consistently applied with the 1995 Financial Statements.
"Stockholder's Equity Shortfall" means the dollar amount of the
excess, if any, of $330,000.00 over the Stockholder's Equity as of the end of
each fiscal quarter of the Company.
"Stockholder's Equity Surplus" means the dollar amount of the excess
of Stockholder's Equity as of the end of each fiscal quarter of the Company over
$400,000.00.
"UCC" means the Uniform Commercial Code of the State of
New York.
"Working Capital" means (i) the sum of the Company's cash and
accounts receivable less (ii) the sum of the Company's accounts payable, accrued
expenses, state income taxes payable and accrued
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pension expense, computed in accordance with generally accepted accounting
principles consistently applied with the 1995 Financial Statements.
"Working Capital Shortfall" means the dollar amount of the excess, if
any, of $215,000.00 over the Working Capital as of the end of each fiscal
quarter of the Company.
"Working Capital Surplus" means the dollar amount of the excess, if
any, of the Working Capital as of the end of each fiscal quarter of the Company
over $250,000.00.
SECTION 1.2. Rules of Construction. Unless otherwise defined herein
and unless the context otherwise requires, all terms used herein which are
defined by the UCC shall have the same meanings assigned to them by the UCC
unless and to the extent varied by this Agreement. The words "hereof", "herein",
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and subsection references are references to sections or
subsections of this Agreement unless otherwise specified. As used herein, the
singular number shall include the plural, the plural the singular, and the use
of the masculine, feminine or neuter gender shall include any other gender, as
the context may require.
ARTICLE II
THE COLLATERAL
SECTION 2.1. The Pledge. In order to secure the full and punctual
payment of the Note in accordance with the terms thereof, the Pledgor hereby
transfers, pledges, assigns, sets over, delivers and grants to Xxxxxxx, subject
to Section 2.5(a)(iv) hereof, a continuing lien and security interest in and to
all of the following collateral, both now owned and existing and hereafter
created, acquired and arising (all being collectively referred to as the
"Collateral") and all right, title and interest of the Pledgor in and to the
Collateral:
(a) Stock. (i) The Stock and any additional securities of the
Company issued by the Company in the future (collectively, the "Pledged Stock"),
(ii) any certificates representing or evidencing the Pledged Stock, (iii)
subject to Section 2.5 below with respect to Events of Default that have
occurred and are continuing, all dividends, cash, income, profits, instruments,
securities and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon conversion of the
Pledged Stock, and (iv) subject to the provisions of Section 2.5 hereof with
respect to
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Events of Default that have occurred and are continuing, any and all voting and
other rights, powers and privileges accruing or incidental to an owner of the
Pledged Stock and the other property referred to in subclauses (i) through
(iii); and
(b) Proceeds. All cash and non-cash proceeds and products of
the portion of the Collateral described in clause (a) above.
SECTION 2.2. Security Interests Only. The Security Interests are
granted as security only and shall not subject Xxxxxxx to, or transfer or in any
way affect or modify, any obligation or liability of the Pledgor with respect to
any of the Collateral or any transaction in connection therewith.
SECTION 2.3. Delivery, etc. The Pledgor shall deliver or promptly
cause to be delivered to Xxxxxxx (a) all certificates representing or evidencing
the Pledged Stock, which certificates shall be accompanied by undated and
irrevocable stock powers duly executed in blank by the Pledgor, and (b) all
other property, instruments and papers comprising, representing or evidencing
the Collateral or any part thereof, accompanied by proper instruments of
assignment or endorsement duly executed by the Pledgor.
SECTION 2.4. Record Owner of Collateral. Xxxxxxx shall have the right
in his sole and absolute discretion to hold any stock certificates, notes,
instruments or securities now or hereafter included in the Collateral in the
name of the Pledgor, provided that nothing herein shall preclude Xxxxxxx from
holding such Collateral in his own name upon the occurrence and continuation of
any Event of Default. The Pledgor will promptly give to Xxxxxxx copies of any
notices or other communications received by it with respect to Collateral
registered in the name of the Pledgor.
SECTION 2.5. Voting Rights; Dividends and Interest; etc.
(a) Unless and until an Event of Default shall have occurred
and be continuing:
(i) The Pledgor shall be entitled to exercise any and all
voting and other rights, powers and privileges accruing to an owner of the
Pledged Stock or any part thereof for any purpose consistent with the terms of
this Agreement and the Note.
(ii) Xxxxxxx shall execute and deliver to the Pledgor, or
cause to be executed and delivered to the Pledgor, all such proxies, powers of
attorney, and other instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and other rights, powers
and
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privileges which it is entitled to exercise pursuant to subparagraph (i) above.
(iii) The Pledgor shall be entitled to receive and retain
any and all cash dividends paid on the Pledged Stock to the extent and only to
the extent that such cash dividends are permitted by, and otherwise paid in
accordance with, the terms and conditions of this Agreement, the Note and
applicable laws. All noncash dividends and dividends paid or payable in cash or
otherwise in connection with a partial or total liquidation or dissolution,
instruments, securities, other distributions in property, return of capital,
capital surplus or paid-in surplus, other distributions (other than pursuant to
the first sentence of this clause), made on or in respect of Pledged Stock,
whether paid or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the outstanding capital stock of
the issuer of any Pledged Stock or received in exchange for Pledged Stock or any
part thereof, or in redemption thereof, as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer may
be a party or otherwise, shall be and become part of the Collateral, and, if
received by the Pledgor, shall not be commingled by the Pledgor with any of its
other funds or property but shall be held separate and apart therefrom in trust
for the benefit of Xxxxxxx and shall be forthwith delivered to Xxxxxxx in the
same form as so received (with any necessary endorsement, which the Pledgor
hereby agrees to make).
(iv) Notwithstanding any language contained herein to the
contrary, the term "Collateral" shall not include any money and/or property (or
cash or non-cash proceeds thereof) received by the Pledgor in conformity with
Section 2.5(a) hereof at a time when no Event of Default shall have occurred and
be continuing.
(v) Xxxxxxx shall not sell, transfer or encumber the
Collateral, except that Xxxxxxx may assign his interest in the Collateral in
connection with any permitted assignment of the Note.
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to dividends and/or other payments which
the Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this
Section 2.5 shall cease, and all such rights shall thereupon become vested in
Xxxxxxx, who shall have the sole and exclusive right and authority to receive
and retain such payments. All payments which are received by the Pledgor
contrary to the provisions of this Section 2.5 shall be received in trust for
the benefit of Xxxxxxx, shall be segregated from other property or funds of the
Pledgor and shall be forthwith delivered to Xxxxxxx in the same form as so
received (with any
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necessary endorsement, which the Pledgor hereby agrees to make). Any and all
money and other property paid over to or received by Xxxxxxx pursuant to the
provisions of this subparagraph (b) shall be applied to the amounts due under
the Note.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Pledgor to exercise the voting and other rights,
powers and privileges which it is entitled to exercise pursuant to paragraph
(a)(i) of this Section 2.5 shall cease, and all such rights, powers and
privileges shall thereupon become vested in Xxxxxxx, who shall have the sole and
exclusive right and authority to exercise such voting and other rights, powers
and privileges.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants to Xxxxxxx that the following
statements are accurate, assuming the accuracy of Xxxxxxx'x representations to
the Pledgor in the Purchase Agreement:
SECTION 3.1. Title and Authority. The Pledgor is the owner of the
Collateral currently in existence and has good and marketable title to the
Collateral free and clear of any liens other than the lien created by this
Agreement. The Pledgor has full power and authority to grant the Security
Interests to Xxxxxxx in the Collateral pursuant hereto and to execute, deliver
and perform its obligations in accordance with the terms of this Agreement
without the consent or approval of any Person other than any consent or approval
which has been obtained.
SECTION 3.2. Pledged Stock. The Pledgor has not created any liens
(other than the liens created hereby), options or other rights in the Collateral
and is not and will not become a party to and is not and will not become bound
by any agreement (other than this Agreement) which restricts in any manner the
rights of any present or future holder of any of the Pledged Stock.
SECTION 3.3. Validity, Perfection and Priority of Security Interests.
By virtue of the execution and delivery of this Agreement and upon delivery to
Xxxxxxx of the Collateral (or certificates, instruments or other papers
representing or evidencing the Collateral) in accordance with the provisions of
this Agreement, Xxxxxxx will have a valid and perfected lien on the Collateral
subject to no prior or other liens created by virtue of the Pledgor's actions or
omissions and except for the Financing Statements on Form UCC-1 executed by the
Pledgor and to be filed with the Secretary of State of the State of New Jersey,
the Secretary of State of the State of New York and the County Clerk's
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Office of New York County, no registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution and delivery of this Agreement or necessary for the validity or
enforceability of this Agreement or for the perfection of the Security
Interests.
SECTION 3.4. Survival. All representations and warranties contained
in or made under or in connection with this Agreement: (a) shall survive the
execution, delivery and performance of this Agreement, and (b) shall be accurate
at all times during which any amount remains outstanding under the Note with the
same effect as if such representations and warranties had been made at such
times.
ARTICLE IV
COVENANTS OF PLEDGOR
The Pledgor covenants and agrees with Xxxxxxx as follows:
SECTION 4.1. Title, Liens and Taxes. The Pledgor shall, at its cost
and expense, take any and all actions necessary to defend the Security Interests
of Xxxxxxx in the Collateral and the priority (or intended priority) thereof
against any adverse lien of any nature whatsoever, except for liens arising from
the actions or omissions of Xxxxxxx and/or the Company prior to the date hereof.
Except to the extent contested in good faith, the Pledgor will pay all taxes and
assessments levied or placed on the Collateral prior to the date when any
interest or penalty would accrue for the nonpayment thereof.
SECTION 4.2. Further Assurances. The Pledgor shall, from time to
time, at its expense, execute, deliver, acknowledge and cause to be duly filed,
recorded or registered any statement, assignment, endorsement, instrument,
paper, agreement or other document and take any other action that from time to
time may be necessary or desirable, or that Xxxxxxx may reasonably request, in
order to create, preserve, continue, perfect, confirm or validate the Security
Interests or to enable Xxxxxxx to obtain the full benefits of this Agreement or
to exercise and enforce any of his rights, powers and remedies hereunder. The
Pledgor shall pay all costs of, and incidental to, the filing, recording or
registration of any such document as well as any recordation, transfer or other
tax required to be paid in connection with any such filing, recordation or
registration. The Pledgor agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement signed by the
Pledgor in connection with this Agreement shall be sufficient as a financing
statement.
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SECTION 4.3. Care and Protection of Collateral. The Pledgor shall
promptly notify Xxxxxxx of any event causing deterioration, loss or depreciation
in value of any substantial portion of the Collateral and the amount of such
loss or depreciation.
SECTION 4.4. Maintenance of Cash, Working Capital and Stockholder's
Equity. The Pledgor will cause the Company to submit to Xxxxxxx and the Pledgor,
within forty-five (45) days after March 31, June 30 and September 30 of each
year and within sixty (60) days after December 31 of each year, a schedule
showing the Company's cash, Working Capital and Stockholder's Equity as of the
end of such fiscal quarter (the "Financial Status Schedule"). Xxxxxxx, the
Pledgor and the Company shall fully cooperate with each other in the preparation
and submission of the Financial Status Schedule and shall share any and all
information in their possession or control bearing upon the accuracy of the
Financial Status Schedule. The Pledgor shall not allow the Company to declare or
pay during any calendar quarter dividends and/or other distributions that exceed
on a cumulative basis the Cash Surplus, the Working Capital Surplus and/or the
Stockholder's Equity Surplus as of the end of the prior calendar quarter. Within
twenty (20) days after the receipt of a Financial Status Schedule showing a
Working Capital Shortfall and/or Stockholder's Equity Shortfall, Pledgor will
make a cash contribution or take such other actions as shall be required to
eliminate the Working Capital Shortfall, if any, and the Stockholder's Equity
Shortfall, if any.
SECTION 4.5. Liquidation, Dissolution, Etc. Without Xxxxxxx'x prior
written consent, during the term of this Agreement the Pledgor will not make any
non-cash contribution to the Company or allow the Company to (a) liquidate,
dissolve, merge, consolidate, sell substantially all of its assets or engage in
any material transaction outside the ordinary course of business consistent with
past practice; (b) borrow money from any Person other than BPMC or loan money to
any Person other than BPMC; (c) borrow money from BPMC while BPMC is indebted to
the Company for borrowed money or loan money to BPMC while the Company is
indebted to BPMC for borrowed money; or (d) issue, sell or authorize for
issuance or sale, shares of any class, options, warrants, rights or convertible
securities, or enter into any agreements or commitments of any character
obligating it to issue or sell any such securities.
SECTION 4.6. Sale of Collateral. Without the prior written consent of
Xxxxxxx, the Pledgor will not sell, lease, assign, transfer, dispose of, pledge
or xxxxx x xxxx on the Collateral other than the lien created by this Agreement.
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ARTICLE V
DEFAULT
The occurrence of any one or more of the following events shall
constitute a default under the provisions of this Agreement, and the term
"Default" shall mean, whenever it is used in this Agreement, any one or more of
the following events:
SECTION 5.1. Payment of Obligations; Default under Note. If there
occurs any "Event of Default" as defined in the Note, giving due consideration
to notice and cure provisions thereof;
SECTION 5.2. Breach of This Agreement. If the Pledgor fails to
perform, observe or comply with Section 4.4 of this Agreement and fails to cure
such breach within thirty (30) days after written notice thereof; the Pledgor
fails to perform, observe or comply with Section 4.6 of this Agreement; the
Pledgor grants a lien on the Collateral in violation of Section 4.6 of this
Agreement and fails to remove such lien within thirty (30) days after written
notice thereof; or the Pledgor fails to perform, observe or comply with any
other material provision of this Agreement and cure such breach within sixty
(60) days after written notice thereof;
SECTION 5.3. Representations and Warranties. If (a) any
representation and warranty contained in this Agreement, the Purchase Agreement
or any officer's certificate given by or on behalf of the Pledgor or furnished
in connection with this Agreement or the Purchase Agreement was false or
incorrect in any material respect on the date as of which made; and (b) in the
case of any representation and warranty contained in the Purchase Agreement or
an officer's certificate, the Pledgor acknowledges in writing or an arbitrator
determines in a final, binding and non-appealable ruling that (i) such false or
incorrect representation resulted from Pledgor's intentional act or willful
omission, and (ii) such material representation, if it had been made with truth,
accuracy and completeness, would have disclosed that the Pledgor's tangible
shareholders' equity was overstated by an amount in excess of $1,000,000,
computed in accordance with generally accepted accounting principles;
SECTION 5.4. Liquidation, Termination, Dissolution. If the Pledgor
shall liquidate, dissolve or terminate its existence without Xxxxxxx'x prior
written consent;
SECTION 5.5. Default under other Indebtedness. If the Pledgor shall
(a) default in any payment of the principal of, or interest on, any indebtedness
for borrowed money (other than the Note) in an original principal amount of
$250,000.00 or more beyond the period of grace, if any, provided in the
instrument or
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agreement (as amended from time to time) under which such indebtedness was
created or (b) default in the observance or performance of any other agreement
or condition relating to any such indebtedness for borrowed money or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur the effect of which default or other event (whether
described in subsection (a) or (b) hereof) is to cause or to permit the holder
or holders of such indebtedness or beneficiary or beneficiaries of such
indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice, if required,
such indebtedness to become due prior to its stated maturity;
SECTION 5.6. Inability to Pay Debts, etc. If the Pledgor shall
admit in writing its inability to pay its debts as they mature or shall make any
assignment for the benefit of any of its creditors;
SECTION 5.7. Bankruptcy. If proceedings in bankruptcy, or for
reorganization of the Pledgor, or for the readjustment of any of its debts,
under the Bankruptcy Code, as amended, or any part thereof, or under any other
applicable laws, whether state or federal, for the relief of debtors, now or
hereafter existing, shall be commenced against or by the Pledgor and, except
with respect to any such proceedings instituted by the Pledgor, shall not be
discharged within sixty (60) days of their commencement;
SECTION 5.8. Receiver, etc. If a receiver or trustee shall be
appointed for the Pledgor or for any substantial part of its assets and, except
with respect to any such appointments requested or instituted by the Pledgor,
such receiver or trustee shall not be discharged within sixty (60) days of his
or her appointment;
SECTION 5.9. Dissolution Proceedings. If any proceedings shall be
instituted for the dissolution or the full or partial liquidation of the Pledgor
and, except with respect to any such proceedings instituted by the Pledgor, such
proceedings shall not be discharged within sixty (60) days of their
commencement.
ARTICLE VI
RIGHTS AND REMEDIES
SECTION 6.1. Rights and Remedies of Xxxxxxx.
(a) Subject to the limitations set forth in Section 6.4 hereof,
upon and after the occurrence of a Default, Xxxxxxx may sell the Collateral, or
any part thereof, for cash and/or deferred payments (for example, under a note),
as Xxxxxxx shall xxxx
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appropriate, and at such price or prices as may be reasonably satisfactory to
Xxxxxxx. Xxxxxxx shall be authorized in connection with any such sale (if he
deems it advisable to do so) to require potential purchasers to execute
confidentiality agreements reasonably satisfactory to Xxxxxxx and/or to restrict
the prospective bidders or purchasers of any of the Collateral to Persons who
will represent and agree that they are accredited investors purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale Xxxxxxx
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the part
of the Pledgor, and the Pledgor hereby waives all rights of redemption, stay,
valuation and appraisal which the Pledgor now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
(b) Xxxxxxx shall give the Pledgor sixty (60) days prior
written notice (which the Pledgor agrees is reasonable notice within the meaning
of Section 9-504(3) of the UCC) of Xxxxxxx'x intention to make any sale or other
disposition of Collateral and shall afford to the Pledgor's investment bankers
an opportunity to seek purchasers for the Collateral during such period, subject
to any confidentiality agreements and representation letters reasonably required
by Xxxxxxx and authorized by Section 6.1(a) hereof. Such notice shall state the
date after which such sale or other disposition may be made. Xxxxxxx shall not
be required to sell all or any part of the Collateral on credit but may elect to
do so in his absolute discretion. In case any sale of all or any part of the
Collateral is made on credit, the Collateral so sold may be retained by Xxxxxxx
until the sale price is paid in full by the purchaser or purchasers thereof, but
Xxxxxxx shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. After the date
specified in the notice given under this Section 6.1(b), and subject to Section
6.4 hereof, Xxxxxxx may bid for or purchase, free from any right of redemption,
stay or appraisal on the part of the Pledgor (all of such rights being also
hereby waived and released by the Pledgor), the Collateral or any part thereof
offered for sale, provided that Xxxxxxx bids for or purchases such Collateral
for an amount not less than the amount offered by the highest bona fide
competing purchaser willing to purchase the Collateral for cash, and Xxxxxxx may
make payment on account thereof by using any claim then due and payable to
Xxxxxxx from the Pledgor (including, without limitation, amounts outstanding
under the Note) as a credit against the purchase price. Xxxxxxx may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to the Pledgor therefor, provided that the
Pledgor shall remain liable for
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all amounts remaining due under the Note and/or this Agreement after receiving
an appropriate credit for the proceeds of sale of the Collateral. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof and Xxxxxxx shall be free to carry out such
sale pursuant to such agreement, and the Pledgor shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after Xxxxxxx shall have entered into such an agreement all Events
of Default or Defaults may have been remedied and the Note paid in full.
The Pledgor acknowledges that compliance with applicable federal and
state securities laws (including, without limitation, the Securities Act of
1933, as amended, Blue Sky or other state securities laws or similar laws now or
hereafter existing analogous in purpose or effect) might very strictly limit or
restrict the course of conduct of Xxxxxxx if Xxxxxxx were to attempt to sell or
otherwise dispose of all or any part of the Collateral which is comprised of
securities, and might also limit or restrict the extent to which or the manner
in which any subsequent transferee of any such securities could sell or dispose
of the same.
(c) As an alternative to or in addition to exercising the power
of sale herein conferred upon it, Xxxxxxx may exercise any right, not
inconsistent with the terms of this Agreement, afforded by the UCC or applicable
law.
(d) In conjunction with any sale of all or any part of the
Collateral which is comprised of securities, the Pledgor (i) will, at any time
and from time to time, cooperate and use its best efforts to cause the Company
to cooperate in all respects with Xxxxxxx, including any cooperation required to
assist Xxxxxxx and the Company in complying with any applicable securities laws,
(ii) agrees to hold harmless, indemnify and defend Xxxxxxx and any underwriter
from and against all loss, liability, expenses, costs, fees, disbursements
(including, without limitation, the reasonable fees and disbursements of
Xxxxxxx'x legal counsel) and claims which may be incurred insofar as such loss,
liability, expense or claim arises out of or is based upon any alleged untrue
statement of a material fact contained in any prospectus (or any amendment or
supplement thereto) or in any notification or offering circular, or arises out
of or is based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements in any thereof not misleading
but except to the extent that any such loss, liability, expense or claim may
have been caused by any untrue statement or omission based upon information
furnished in writing to the Pledgor or the issuer of such securities by Xxxxxxx
or any underwriter expressly for use therein, (iii) will bear all costs and
expenses of carrying out its obligations under this subsection which shall be a
part of the Enforcement Costs secured hereby, and (iv) acknowledges that there
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is no adequate remedy at law for the failure by the Pledgor to comply with the
provisions of subsection 6.1(d)(i) and that such failure would not be adequately
compensable in damages, and therefore agrees that its agreements contained in
subsection 6.1(d)(i) may be specifically enforced.
SECTION 6.2. Application. The proceeds of collection, sale or other
disposition of all or any part of the Collateral coming into Xxxxxxx'x
possession may be applied by Xxxxxxx to the amounts outstanding under the Note
and to the Enforcement Costs, whether matured or unmatured, in such order and
manner as Xxxxxxx may determine in his sole discretion.
SECTION 6.3. No Waiver, etc. No failure or delay by Xxxxxxx to insist
upon the strict performance of any term, condition, covenant or agreement of
this Agreement or the Note, or to exercise any right, power or remedy consequent
upon a breach thereof, shall constitute a waiver of any such term, condition,
covenant or agreement or of any such breach, or preclude Xxxxxxx from exercising
any such right, power or remedy at any later time or times. By accepting payment
after the due date of any amount payable under this Agreement or the Note,
Xxxxxxx shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or the Note, or to
declare a Default for failure to effect such prompt payment of any such other
amount. The payment by the Pledgor or any other Person and the acceptance by
Xxxxxxx of any other amount due and payable under the provisions of this
Agreement or the Note during which a Default exists shall not in any way or
manner be construed as a waiver of such Default by Xxxxxxx or preclude Xxxxxxx
from exercising any right of power or remedy consequent upon such Default.
SECTION 6.4. Special Limitations. Notwithstanding any provision of
this Agreement or the UCC to the contrary:
(a) Without complying with Section 6.1 and, if applicable,
Section 6.4(c) hereof, Xxxxxxx shall have no right (or obligation) to retain the
Collateral for his own account in satisfaction of the amounts due Xxxxxxx under
the Note and this Agreement unless the Pledgor and Xxxxxxx expressly agree in
writing that Xxxxxxx shall retain the Collateral for his own account in
satisfaction of the amounts due Xxxxxxx under the Note and this Agreement.
(b) If Xxxxxxx is the sole bidder for the Collateral, Xxxxxxx
shall have no right to pursue a deficiency judgment against the Pledgor if (i)
the marketing period for the sale of the Collateral is less than one hundred
twenty (120) days or (ii) Xxxxxxx fails to obtain from a nationally recognized
investment banking firm and/or accounting firm (a "Nationally
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Recognized Appraiser") an estimate (or estimated range) of the value of the
Collateral and to bid not less than seventy-five percent (75%) of such amount
(or seventy-five percent (75%) of the mid-point in such range) (the "Presumed
Value"), it being expressly understood and agreed that the Presumed Value shall
be irrebuttably presumed to equal the fair market value of the Collateral in any
deficiency judgment proceeding.
(c) In the event that no Person (other than Xxxxxxx) makes a
bona fide offer to acquire the Company within the sixty (60) day notice period
provided by Section 6.1(b) hereof and Xxxxxxx desires to purchase the Collateral
for his own account:
(i) Xxxxxxx shall give written notice to the Pledgor of
such circumstances and the Pledgor shall thereafter have a period of ten (10)
days (or such longer period as Xxxxxxx shall permit in his absolute discretion)
to give written notice to Xxxxxxx in the form of Exhibit A hereto (the "Surplus
Notice"). If the Pledgor does not deliver the Surplus Notice, this Section
6.4(c) shall have no further force and effect whatsoever and Xxxxxxx shall have
the choice either to continue his attempts to dispose of the Collateral or to
bid for and acquire the Collateral, in which event the Pledgor shall have any
and all rights to recovery of any surplus as are afforded by the UCC and shall
have all other rights afforded by applicable law. In any event, Section 6.4(b)
shall remain applicable.
(ii) Xxxxxxx shall retain a Nationally Recognized
Appraiser of his choice to provide an estimate (or estimated range) of the value
of the Collateral.
(iii) In the event the Presumed Value exceeds the amount
due Xxxxxxx under the Note and this Agreement (the "Default Amount") by more
than $750,000, Xxxxxxx shall have the option to purchase the Collateral for his
own account by discharging the Note and delivering to the Pledgor Xxxxxxx'x
unsecured promissory note in the form of Exhibit B hereto (the "Default Note")
in an original principal amount equal to the Presumed Value, minus the Default
Amount, minus $750,000 (the "Default Note Amount").
(iv) In the event the Presumed Value exceeds the Default
Amount but the amount of such excess is $750,000 or less: (A) Xxxxxxx shall
purchase the Collateral for his own account; (B) Xxxxxxx shall discharge the
Note but Xxxxxxx shall not be required to deliver to the Pledgor any Default
Note or to make any other payment to the Pledgor; and (C) Xxxxxxx shall not be
entitled to any deficiency judgment on account of the Note.
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(v) In the event the Default Amount exceeds the Presumed
Value, Section 6.4(b) of this Agreement shall be applicable.
(vi) The Pledgor's delivery of the Surplus Notice shall
constitute the Pledgor's irrevocable agreement that, (A) if a Nationally
Recognized Appraiser determines a Presumed Value that is not more than $750,000
in excess of the Default Amount or (B) if (1) the Presumed Value exceeds the
Default Amount by more than $750,000, (2) Xxxxxxx exercises his option to
purchase the Collateral for his own account, and (3) Xxxxxxx delivers the
Default Note as set forth herein, the Pledgor shall be deemed to have expressly
waived and released any and all rights, demands, claims, damages, costs and
liabilities it could otherwise assert against Xxxxxxx under this Agreement, the
UCC and/or any other law or agreement on account of, relating to or in
connection with Xxxxxxx'x exercise of his rights hereunder and thereunder.
SECTION 6.5. Deficiency Judgment. Nothing set forth herein shall
preclude Xxxxxxx from proceeding under the Note instead of under this Agreement.
If Xxxxxxx exercises his rights under this Agreement and receives proceeds of
sale of the Collateral that are insufficient to cover in full all Enforcement
Costs and all other amounts due under the Note and this Agreement, Xxxxxxx shall
have the right to a deficiency judgment against the Pledgor.
SECTION 6.6. Acknowledgement. The Pledgor acknowledges and agrees
that any sale of the Collateral effected in conformity with the procedures
outlined herein shall be "commercially reasonable" within the meaning of the
UCC.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Course of Dealing; Amendment. No course of dealing
between Xxxxxxx and the Pledgor shall be effective to amend, modify or change
any provision of this Agreement or the Note. Xxxxxxx shall have the right at all
times to enforce the provisions of this Agreement and the Note in strict
accordance with the provisions hereof and thereof, notwithstanding any conduct
or custom on the part of Xxxxxxx in refraining from so doing at any time or
times. The failure of Xxxxxxx at any time or times to enforce his rights under
such provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or the Note or as having in any way or manner modified or waived
the same. This Agreement may not be amended, modified, or changed
- 15 -
in any respect except by an agreement, in writing, signed by Xxxxxxx and the
Pledgor.
SECTION 7.2. Waiver of Default. Xxxxxxx may, at any time and from
time to time, execute and deliver to the Pledgor a written instrument waiving,
on such terms and conditions as Xxxxxxx may specify in such written instrument,
any of the requirements of this Agreement or any Event of Default or Default and
its consequences, provided that any such waiver shall be for such period and
subject to such conditions as shall be specified in any such instrument. In the
case of any such waiver, the Pledgor and Xxxxxxx shall be restored to their
former positions prior to such Event of Default or Default and shall have the
same rights as they had hereunder. No such waiver shall extend to any subsequent
or other Event of Default or Default, or impair any right consequent thereto and
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 7.3. Notices. All notices, requests and demands to or upon
the parties to this Agreement shall be deemed to have been given or made when
made in accordance with the requirements set forth in the Purchase Agreement.
SECTION 7.4. Performance for the Pledgor. The Pledgor hereby
appoints Xxxxxxx the attorney-in-fact of the Pledgor for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which Xxxxxxx may xxxx necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, Xxxxxxx
shall have the right, upon the occurrence and during the continuance of an
Event of Default, with full power of substitution either in Xxxxxxx'x name or in
the name of the Pledgor, (a) to ask for, demand, xxx for, collect, receive,
receipt and give acquittance for any and all moneys due or to become due and
under and by virtue of any Collateral, (b) to endorse checks, drafts, orders
and other instruments for the payment of money payable to the Pledgor
representing any interest, dividend or other distribution payable in respect of
the Collateral or any part thereof or on account thereof, (c) to give full
discharge for all or any part of the Collateral, (d) to settle, compromise,
prosecute or defend any action, claim or proceeding with respect to all or any
part of the Collateral, (e) to sell, assign, endorse, pledge, transfer
and make any agreement respecting all or any part of the Collateral, or (f)
otherwise deal with all or any part of the Collateral as though Xxxxxxx were the
absolute owner thereof; provided, however, that nothing herein contained
shall be construed as requiring or obligating Xxxxxxx to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received by
Xxxxxxx, or to present or file any claim or notice, or to take any action with
- 16 -
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby.
SECTION 7.5. [Intentionally omitted.]
SECTION 7.6. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Xxxxxxx in order to
carry out the intentions of the parties hereto as nearly as may be possible, (b)
the invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction, and (c) the parties hereto shall endeavor in good faith
negotiations to replace the invalid or unenforceable provisions with valid and
enforceable provisions, the economic effect of which comes as close as possible
to that of the invalid or unenforceable provisions.
SECTION 7.7. Survival. All representations, warranties and
covenants contained herein shall survive the execution and delivery of this
Agreement and the Note.
SECTION 7.8. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Pledgor and Xxxxxxx and their respective personal
representatives, successors and assigns, except that the Pledgor shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of Xxxxxxx.
SECTION 7.9. Continuing Agreement. This Agreement and the Security
Interests shall terminate when the Note has been indefeasibly paid in full, at
which time Xxxxxxx will reassign and deliver to the Pledgor, against receipt,
such of the Collateral as is still held by Xxxxxxx (if any) and not sold or
otherwise applied by Xxxxxxx pursuant to the terms hereof. Any such reassignment
shall be without recourse to or warranty by Xxxxxxx at the expense of the
Pledgor.
SECTION 7.10. Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the substantive laws of the State of New York, both in
interpretation and performance, without regard to any conflicting conflict of
laws rules of the State of New York.
SECTION 7.11. Duplicate Originals and Counterparts. This Agreement
may be executed in any number of duplicate originals or counterparts, each of
such duplicate originals or counterparts shall be deemed to be an original and
all taken together shall constitute but one and the same instrument.
- 17 -
SECTION 7.12. Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only, shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
- 18 -
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first written above.
XXXXX XXXXXX MULTIMEDIA
COMPANY, INC.
BY:/S/ XXXXX XXXXXX
-------------------------------------
XXXXX XXXXXX
CHIEF EXECUTIVE OFFICER
/S/ XXXXXX X. XXXXXXX
-------------------------------------
XXXXXX X. XXXXXXX
Intending to be legally bound hereby,
Dolphin Inc. agrees not to take any action
that would cause the Pledgor to breach its
obligations under Section 4.4 or 4.5
of this Agreement.
DOLPHIN INC.
BY:/S/ XXXXXX X. XXXXXXX
-------------------------------------------
XXXXXX X. XXXXXXX, PRESIDENT
- 19 -
FORM OF SURPLUS NOTICE
This notice is a "Surplus Notice" given pursuant to Section
6.4(c) of the Pledge Agreement (the "Pledge Agreement") dated March , 1997
between Xxxxxx X. Xxxxxxx ("Xxxxxxx") and Xxxxx Xxxxxx Multimedia Company, Inc.
(the "Pledgor"). All capitalized terms used in this notice and not otherwise
defined are defined in the Pledge Agreement. Xxxxxxx has provided the Pledgor
with written notice that no Person (other than Xxxxxxx) has made a bona fide
offer to acquire the Company within the sixty (60) day notice period provided by
Section 6.1(b) of the Pledge Agreement and Xxxxxxx desires to purchase the
Collateral for his own account. In accordance with and as provided in the Pledge
Agreement:
1. If you have not already done so, you are hereby instructed
to retain a Nationally Recognized Appraiser of your choice to provide an
estimate (or estimated range) of the value of the Collateral.
2. In the event the Presumed Value exceeds the Default Amount
by more than $750,000, Xxxxxxx shall have the option to purchase the Collateral
for Xxxxxxx'x own account by discharging the Note and delivering to the Pledgor
the Default Note in the Default Note Amount.
3. In the event the Presumed Value exceeds the Default Amount
but the amount of such excess is $750,000 or less: (a) Xxxxxxx shall purchase
the Collateral for his own account; (b) Xxxxxxx shall not be required to deliver
to the Pledgor any Default
EXHIBIT A
Note or to make any other payment to the Pledgor; and (c) Xxxxxxx shall not be
entitled to any deficiency judgment on account of the Note.
4. In the event the Default Amount exceeds the Presumed Value,
Section 6.4(b) of the Pledge Agreement shall be applicable.
5. The Pledgor irrevocably agrees that, (a) if a Nationally
Recognized Appraiser determines a Presumed Value that is not more than $750,000
in excess of the Default Amount or (b) if (i) the Presumed Value exceeds the
Default Amount by more than $750,000, (ii) Xxxxxxx exercises his option to
purchase the Collateral for his own account, and (iii) Xxxxxxx delivers the
Default Note as set forth herein and in the Pledge Agreement, the Pledgor shall
be deemed to have expressly waived and released any and all rights, demands,
claims, damages, costs and liabilities it could otherwise assert against Xxxxxxx
under the Pledge Agreement, the UCC and/or any other law or agreement on account
of, relating to or in connection with Xxxxxxx'x exercise of his rights
thereunder.
IN WITNESS WHEREOF, this notice has been executed by the
undersigned officers of BPMC, intending that BPMC shall be legally bound hereby,
this _____ day of _______________, _____.
XXXXX XXXXXX MULTIMEDIA COMPANY, INC.
By:___________________________________
-----------------------
Chief Executive Officer
By:___________________________________
-----------------------
Chief Financial Officer
A-2
FORM OF DEFAULT NOTE
XXXXXX X. XXXXXXX ("Xxxxxxx"), for value received, hereby
promises to pay to XXXXX XXXXXX MULTIMEDIA COMPANY, INC., a New York corporation
("BPMC") the principal sum of _________ _______________________________
($______________), together with interest thereon. This Note is that certain
Default Note referenced in Section 6.4(c) of that certain Pledge Agreement dated
March 21, 1997 between Xxxxxxx and BPMC.
1. Interest. Interest shall accrue on the unpaid principal
balance of this Note at an annual rate of 6%. Interest shall not be compounded.
However, interest that accrues during the period ending on the last day of the
calendar month (the "Trigger Date") ending at least nine (9) months after the
date of this Note shall be added to the principal balance at the Trigger Date.
For purposes of computing interest and for the convenience of the parties, it
shall be irrebbutably presumed that payments are made on the first day of each
month (although no presumption shall be made as to the fact or amount of
payments).
2. Payments. (a) All payments under the Note shall be made to
BPMC at the address for BPMC set forth in the Pledge Agreement or to such other
address as BPMC shall designate by written notice to Xxxxxxx. The outstanding
principal balance of this Note on the Trigger Date, together with interest
accruing thereon, shall be repaid in fifty-one (51) equal monthly installments
of $__________, commencing on the first business day after the Trigger Date and
continuing on the first business day of each succeeding month.
(b) All unpaid principal, interest and/or other charges
shall be due and payable in full on the "Maturity Date." As used herein, the
term "Maturity Date" means the date the last scheduled payment is due hereunder.
(c) All payments under this Note shall be applied first
to interest and then to principal.
6. Prepayment. This Note may be prepaid in whole or in part at
any time without premium or penalty. In the event of a partial prepayment of
this Note, the remaining payments under this Note shall be adjusted so that the
remaining principal balance of this Note and accrued interest thereon shall be
repaid in full through that number of equal monthly payments remaining under
Section 2 of this Note.
EXHIBIT B
7. Miscellaneous. Presentment for payment, demand, protest and
notice of demand, protest and nonpayment, and all other notices are hereby
waived by Xxxxxxx. No failure to accelerate the debt evidenced hereby by reason
of default hereunder, acceptance of a past due installment, or indulgences
granted from time to time shall be construed (i) as a novation of this Note or
as a reinstatement of the indebtedness evidenced hereby or as a waiver of such
right of acceleration or of the right of BPMC thereafter to insist upon strict
compliance with the terms of this Note or (ii) to prevent the exercise of such
right of acceleration or any other right granted hereunder or by applicable law;
and Xxxxxxx hereby expressly waives the benefit of any statute or rule of law or
equity now provided, or which may hereafter be provided, which would produce a
result contrary to or in conflict with the foregoing. No extension of the time
for the payment of this Note, or any installment due hereunder, made by
agreement with any person now or hereafter liable for the payment of this Note
shall operate to release, discharge, modify, change, or affect the original
liability of Xxxxxxx under this Note, either in whole or in part unless BPMC
agrees otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, or discharge is sought.
This Note shall be construed and enforced in accordance with
the substantive laws of the State of New Jersey, without regard to any contrary
conflict of laws rules of the State of New Jersey.
If for any reason whatsoever fulfillment of any provision of
this Note, at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law, with regard to obligations of like
character and amount, then, ipso facto, the obligations to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall any exaction be
possible under this Note or under any other instrument evidencing or securing
the indebtedness evidenced hereby, that is in excess of the current limit of
such validity, but such obligation shall be fulfilled to the limit of such
validity.
Neither this Note or any interest therein may be transferred,
assigned or hypothecated by BPMC without Xxxxxxx'x prior written consent.
As used herein, the term "business day" means any day,
excluding Saturdays and Sundays, when national banks in New York City are
required to be open.
B-2
IN WITNESS WHEREOF, Xxxxxx X. Xxxxxxx has executed
and delivered this Note as of the date first above written.
------------------------------
Xxxxxx X. Xxxxxxx
B-3
