GUARANTY BUSINESS CREDIT CORPORATION PLEDGE AGREEMENT
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PLEDGE AGREEMENT
(SUPPLEMENT TO SECURITY AGREEMENT)
PLEDGOR: SMALL WORLD KIDS, INC.
ADDRESS: 0000 XXXXXXXXXX XXXXXXX
XXXXXX XXXX, XXXXXXXXXX 00000
DATE: DECEMBER 15, 2004
THIS PLEDGE AGREEMENT ("Pledge Agreement"), dated the above date, is entered
into between the pledgor named above ("Pledgor"), whose address is set forth
above, and PNC BANK, NATIONAL ASSOCIATION, with an address at 0 Xxxxx Xxxx
Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, as agent ("Agent") for itself and
the lenders (the "Lenders") under the Revolving Credit and Security Agreement
among such Lenders, Agent and Small World Toys (the "Borrower"). This Pledge
Agreement is executed as a supplement to the Security Agreement (the "Security
Agreement") of substantially even date, between Pledgor and Agent.
1. PLEDGE OF STOCK. Pledgor shall concurrently deliver to Agent the stock
certificates and other securities evidencing the stock and securities listed on
Exhibit A hereto, together with duly executed instruments of assignment thereof
to Agent (which, together with all replacements and substitutions therefor are
hereinafter referred to as the "Securities"). Pledgor hereby pledges to Agent
and grants Agent for the benefit of the Agent and the Lenders a security
interest in the Securities, and all rights and remedies relating to, or arising
out of, any and all of the foregoing, and all proceeds thereof (collectively,
the "Collateral") to secure the "Obligations" (as defined in the Security
Agreement), including, but not limited to, those arising under the Continuing
Guaranty by the Pledgor in favor of Agent (the "Guaranty") relating to Borrower.
Any and all stock dividends, rights, warrants, options, puts, calls, conversion
rights and other securities and any and all property and money distributed or
delivered with respect to the Securities or issued upon the exercise of any
puts, calls, conversion rights, options, warrants or other rights included in or
pertaining to the Securities shall be included in the term "Securities" as used
herein and shall be subject to this Pledge Agreement, and Pledgor shall deliver
the same to Agent immediately upon receipt thereof together with any necessary
instruments of transfer; provided, however, that until an Event of Default (as
hereinafter defined) shall occur, but subject to any other agreements by Pledgor
with or in favor of Agent, Pledgor may retain any dividends paid in cash or its
equivalent, with respect to any stock included in the Securities and any
interest paid with respect to any bonds, debentures or other evidences of
indebtedness included in the Securities. Pledgor hereby acknowledges that the
acceptance of the pledge of the Securities by Agent and Lenders shall not
constitute a commitment of any kind by Agent and Lenders to permit Pledgor to
incur Obligations or to make loans to Borrower.
2. VOTING AND OTHER RIGHTS. Pledgor shall have the right to exercise all
voting rights with respect to the Securities, provided no Event of Default (as
hereinafter defined) has occurred. Upon the occurrence of any Event of Default,
Agent shall have the right (but not any obligation) to exercise all voting
rights with respect to the Securities. Provided no Event of Default has
occurred, Pledgor shall have the right to exercise all puts, calls, straddles,
conversion rights, options, warrants, and other rights and remedies with respect
to the Securities, provided Pledgor obtains the prior written consent of Agent
thereto. Agent shall have no responsibility or liability whatsoever for the
exercise of, or failure to exercise, any puts, calls, straddles, conversion
rights, options, warrants, rights to vote or consent, or other rights with
respect to any of the Securities. If an Event of Default has occurred, Agent
shall have the right from time to time to transfer all or any part of the
Securities to Agent's own name or the name of its nominee.
3. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and warrants
to Agent that Pledgor now has, and throughout the term of this Agreement will at
all times have, good title to the Securities and the other Collateral, free and
clear of any and all security interests, liens and claims of any kind
whatsoever. Pledgor further represents and warrants that the Collateral
represents 100% of the outstanding capital stock of the Borrower, except as set
forth on Exhibit A hereto, and Pledgor shall cause the Collateral at all times
to include 100% of the outstanding capital stock of the Borrower now outstanding
or hereafter issued and 100% of all options and warrants to acquire stock of
said issuer hereafter issued, except as set forth on Exhibit A hereto. Pledgor
represents and warrants that there are no outstanding options or warrants to
acquire stock of the Borrower.
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GUARANTY BUSINESS CREDIT CORPORATION PLEDGE AGREEMENT
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4. EVENTS OF DEFAULT. If any one or more of the following events shall
occur, any such event shall constitute an Event of Default and Pledgor shall
provide Agent with immediate notice thereof: (a) Any warranty or representation
delivered to Agent or any Lender by Pledgor or any of Pledgor's officers,
employees or agents in connection herewith, is incorrect, false, untrue or
misleading in any material respect; or (b) Pledgor shall fail to promptly pay or
perform when due part or all of any of its obligations under this Agreement, or
(c) any Event of Default shall occur under the Security Agreement.
5. REMEDIES. Upon the occurrence of an Event of Default, and at any time
thereafter, Agent shall have the right, without notice to or demand upon
Pledgor, to exercise any one or more of the remedies provided for under the
Security Agreement or that Agent has under law or equity. Without limitation
upon the terms of the Security Agreement, Pledgor agrees that it shall
conclusively be deemed commercially reasonable for Agent, in connection with any
sale or disposition of the Securities, to impose restrictions and conditions as
to the investment intent of a purchaser or bidder, the ability of a purchaser or
bidder to bear the economic risk of an investment in the Securities, the
knowledge and experience in business and financial matters of a purchaser or
bidder, the access of a purchaser or bidder to information concerning the issuer
of the Securities, as well as legend conditions and stop transfer instructions
restricting subsequent transfer of the Securities, and any other restrictions or
conditions which Agent believes to be necessary or advisable in order to comply
with any state or federal securities or other laws. Pledgor acknowledges that
the foregoing restrictions may result in fewer proceeds being received upon such
sale then would otherwise be the case. Pledgor hereby agrees to provide to Agent
any and all information required by Agent in connection with any sales of
Securities by Agent hereunder. If, after the occurrence of any Event of Default,
Rule 144 promulgated by the Securities and Exchange Commission (or any other
similar rule) is available for use by Agent in connection with the sales of any
Securities hereunder, Pledgor agrees not to utilize Rule 144 in the sale of any
securities held by Pledgor of the same class as the Securities, without the
prior written consent of Agent.
6. REMEDIES, CUMULATIVE; NO WAIVER. The failure of Agent to enforce any of
the provisions of this Agreement at any time or for any period of time shall not
be construed to be a waiver of any such provision or the right thereafter to
enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to Agent by the Security
Agreement, law or equity.
7. TERM. This Agreement and Agent's rights hereunder shall continue in
full force and effect until all of the Obligations have been fully paid,
performed and discharged and the Security Agreement and all other present and
future agreements between Borrower and Agent have terminated. Upon termination,
Agent shall return the Collateral to Pledgor, with any necessary instruments of
transfer.
8. GENERAL PROVISIONS. This Agreement, the Guaranty, the Security
Agreement and the documents referred to therein are the entire agreements
between Pledgor and Agent with respect to the subject matter hereof, and all
representations, warranties, agreements, heretofore made, with respect to the
subject matter hereof, which are not set forth herein or therein, are superseded
hereby. The terms hereof may not be waived or amended except in a writing
executed by Pledgor and Agent. All rights hereunder shall inure to the benefit
of and be enforceable by Agent and its successors and assigns and shall be
binding upon Pledgor and its successors and assigns; provided that Pledgor may
not transfer any of its rights hereunder without the prior written consent of
Agent. Pledgor shall upon demand reimburse Agent for all costs, fees and
expenses (including without limitation attorneys' fees, whether or not suit be
brought), which are incurred by Agent in connection with, or arising out of,
this Agreement, including, without limitation, from the enforcement of any of
Agent's rights hereunder.
9. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. AGENT AND PLEDGOR EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN AGENT AND PLEDGOR; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF AGENT OR PLEDGOR OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
AGENT OR PLEDGOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
PLEDGOR:
SMALL WORLD KIDS, INC.
BY
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NAME
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TITLE
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AGENT:
PNC BANK, NATIONAL ASSOCIATION
BY
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NAME
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TITLE
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GUARANTY BUSINESS CREDIT CORPORATION PLEDGE AGREEMENT
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EXHIBIT A
8,333 shares of Common Stock of Small World Toys
The Securities with respect to which Pledgor is providing Agent a first-priority
security interest, and possession of the stock certificates, do not as of the
date hereof constitute 100% of the outstanding capital stock of Borrower,
because 1,667 shares of the Common Stock of Small World Toys (the "Prior Pledged
Shares") have been pledged to Xxxx Xxxxxxxxxx to secure two Secured Promissory
Notes payable to Xxxx Xxxxxxxxxx, both dated May 20, 2004, in the principal
amounts of $500,000 and $1,000,000, respectively. Pledgor represents, warrants
and covenants that Agent shall have a security interest in the Prior Pledged
Shares, subject only to such security interest granted to Xxxx Xxxxxxxxxx, and
Pledgor agrees that, immediately upon the payment of such notes, Pledgor shall
provide the stock certificates evidencing the Prior Pledged Shares to Agent,
together with duly executed instruments of assignment thereof.
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