PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of February 7, 1997 made by and between
Interiors, Inc., a Delaware corporation (the "Pledgor"), and BH Funding, LLC, a
Delaware Limited Liability Company ("BH").
W I T N E S S E T H
WHEREAS, the Pledgor and BH entered into that certain Credit Agreement
(the "Credit Agreement") dated even date herewith pursuant to which BH agreed to
lend up to six hundred thousand dollars ($600,000) (the "Loan") to Pledgor under
the terms as set forth in the Credit Agreement; and
WHEREAS, BH required as a condition to the execution and delivery of
the Credit Agreement that Pledgor enter into this Pledge Agreement to secure the
due and punctual performance in full of all of the Pledgor's obligations under
the Credit Agreement (the "Obligations").
NOW THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, the parties hereto agree as follows:
SECTION 1. Definitions of Terms Used Herein. All capitalized terms
used herein but not defined herein shall have the meanings set forth in the
Credit Agreement.
SECTION 2. Pledge of Shares. In order to secure the payment and
performance in full of all of the obligations under the Credit Agreement,
whether existing as of this date or any time thereafter, the Pledgor hereby
pledges and assigns to BH, and grants to BH a continuing security interest in
all shares of Series B and Series C Preferred Stock (the "Shares") of Decor
Group, Inc., a Delaware corporation ("Decor"), held by Pledgor as of the date
hereof, or acquired by Pledgor following the date hereof (the "Collateral")
specifically delineated as follows:
Certificate No. Number of Shares Class of Securities
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B2 10,000,000 Series B Non-Convertible Preferred Stock;
B3 10,000,000 Series B Non-Convertible Preferred Stock;
C3 47,084 Series C Convertible Preferred Stock; and
C4 7,850 Series C Convertible Preferred Stock.
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SECTION 3. Security for Obligations. The pledge and security interest
granted pursuant to this Pledge Agreement secures the payment of all the
Obligations of the Pledgor under the Credit Agreement. Simultaneously with the
execution of this Agreement, Pledgor shall deliver the above-listed certificates
to BH, along with stock powers properly endorsed in blank. All ownership of and
voting control conveyed by the Collateral shall remain with Pledgor, including
any dividends thereon, unless and until Pledgor shall default upon its'
Obligations and BH exercises its' remedies upon such default, as defined in
Section 6 herein. The Shares of Series B Non-Convertible Preferred Stock are
subject to a voting trust between Pledgor and Decor.
SECTION 4. Further Assurances. The Pledgor agrees that at any time and
from time to time, the Pledgor will promptly execute and deliver all further
instruments and documents, including without limitation, the delivery of stock
powers executed in blank, and take all further action, that may be reasonably
necessary, or that BH may reasonably request, in order to perfect and preserve
any security interest granted or purported to be granted hereby or to enable BH
to exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 5. Return of Collateral. BH agrees, that upon Pledgors
satisfaction of all of its' obligations under the Note, BH shall promptly return
the Collateral to Pledgor, without lien, assignment, security interest, or other
encumbrance upon the Collateral.
SECTION 6. Remedies upon Default. (a) Upon the occurrence of an Event
of Default (as defined in the Credit Agreement):
(i) BH may, without demand of performance or other demand,
advertisement or notice of any kind (except notice of the time and place of
public or private sale) to or upon the Pledgor or any other person (all of which
are hereby expressly waived by the Pledgor), forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, may forthwith
sell, assign, give options to purchase, contract to sell or otherwise dispose of
and deliver the Collateral, or any part thereof, in one or more parcels at
public or private sales, at any exchange or broker's board or at any of BH's
offices or elsewhere, upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, with the right upon any such
sale, public or private, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Pledgor, which right or
equity is hereby expressly waived and released by the Pledgor; provided,
however, that the Pledgor shall not be credited with the net proceeds of any
sale on credit or for future delivery until the cash proceeds thereof are
actually received by BH;
(ii) BH may, instead of exercising the power of sale herein
conferred upon it, proceed by a suit at law or in equity to foreclose the pledge
and security interest under the Note and this Pledge Agreement and sell the
Collateral, or any part thereof, under a judgment or decree of a court of
competent jurisdiction or as otherwise authorized by applicable law;
(iii) All dividends and interest paid and other payments made
under or in connection with the Shares or otherwise in respect of the Collateral
and received by BH, and all proceeds of any sale
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or disposition of any of the Collateral, may, in the discretion of BH, be held
by BH as collateral for, or then or at any time thereafter applied in whole or
in part by BH against, all or any part of the Obligations in such order as BH
shall elect, the Pledgor remaining liable for any deficiency remaining after
such application. Any surplus of such payments held by BH and remaining after
payment in full of all the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus; and
(iv) BH may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein, all the rights and
remedies of a secured party on default under the Uniform Commercial Code
(whether or not the Uniform Commercial Code applies to the affected Collateral)
and all rights and remedies otherwise available to it under applicable law.
(b) The Pledgor agrees that, to the extent notice of sale or other
disposition of any of the Collateral shall be required by applicable law, the
Lender need not give more than twenty (20) days notice of the time and place of
any public sale or of the time after which a private sale or other intended
disposition is to take place and that such notice is reasonable notification of
such matters. No notification need be given to the Pledgor if, in the event that
the Obligations of the Pledgor shall remain unpaid after the Repayment Date or
if Pledgor fails to make the Mandatory Prepayment in accordance with the Note,
the Pledgor shall have signed a statement renouncing or modifying any right to
notification of any sale or other intended disposition. BH shall not be
obligated to make any sale pursuant to any such notice. BH may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by BH until the
selling price is paid by the purchaser thereof, but BH shall incur no liability
in the case of the failure of such purchaser to take up and pay for the
Collateral so sold, and in case of any such failure such Collateral may again be
sold on like notice. To the extent permitted by law, the Borrower waives all
claims, damages and demands against BH arising out of the retention, sale or
other disposition of the Collateral or any part thereof, except any such claims,
damages and demands arising out of the gross negligence or willful misconduct of
BH.
(c) The Pledgor recognizes that BH may be unable to effect a public
sale of any or all of the Collateral by reason of certain prohibitions contained
in applicable statutes and regulations, but may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale made in good faith to a bona fide third party shall not be deemed
to have been made in a commercially unreasonable manner by virtue of its private
nature.
SECTION 7. Amendments. No amendment or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor here from
shall in any event be effective unless
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the same shall be in writing and signed by BH, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 8. Addresses for Notices. Notices hereunder shall be given only
by personal delivery, facsimile transmisison, registered or certified mail,
return receipt requested, overnight courier service, or telex, telegram,
facsimile or other form of electronic mail and shall be deemed transmitted when
personally delivered or deposited in the mail or delivered to a courier service
or a carrier for electronic transmittal or electronically transmitted by
facsimile (as the case may be), postage or charges prepaid, and properly
addressed to the particular party to whom the notice is to be sent. Unless and
until changed by notice given as provided herein, notices shall be sent (i) to
BH, at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, and (ii) to the Pledgor, at its
principal business address, 000 Xxxxxxxxxx Xxxxxx, Xx. Xxxxxx. XX 00000.
SECTION 9. Consent to Jurisdiction. The Pledgor hereby consents and
submits to the jurisdiction of the Courts of the State of New York and of any
Federal Court located in said State in connection with any actions or
proceedings brought against the Borrower by the Lender arising hereunder.
SECTION 10. Expenses. Should all or any part of the indebtedness
represented by the Note, or the pledge of collateral represented by this Pledge
Agreement, be collected or executed upon by action at law, or in bankruptcy,
insolvency, receivership or other court proceedings, or should the Note or
Pledge Agreement be placed in the hands of attorneys for collection or execution
after default, the Pledgor hereby promises to pay to BH, upon demand by BH at
any time, in addition to principal of, interest on and any other amount owing in
respect of the Note or the indebtedness evidenced hereby, all court costs and
reasonable attorneys, fees and all other reasonable collection charges and
expenses incurred or sustained by BH.
SECTION 11. Section Headings. The Section headings in this Pledge
Agreement are for convenience only and shall not affect the construction hereof.
SECTION 12. Governing Law. Regardless of the place of execution or
performance, this Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to such
state's conflicts of laws provisions. Each of the parties hereto irrevocably
consents to the jurisdiction and venue of the federal and state courts located
in the State of New York, County of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be fully executed and delivered as of the day and year first above
written.
BH FUNDING, LLC
/s/ Xxxxxxxx Xxxx
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Name:
Title:
INTERIORS, INC.
/s/ Xxx Xxxx
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Name: Xxx Xxxx
Title: President
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