EXHIBIT 10.2
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT (this "Agreement"), dated the 6th day of October,
1997, by and between XXXX X. SILVER ("J. Silver"), XXXXXX X. SILVER ("E.
Silver"), XXXXX X. SILVER ("C. Silver"), XXXXXXXX X. SILVER ("L. Silver"),
having offices c/o International Cutlery, Ltd. 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, and SHARP OF FLORIDA, INC., a New York corporation, having
offices at 0 Xxxxxxxxx 000xx Xxxxxx, Xxxxxxxx Xxxxx, Xxxxxxx 00000 (the
"Pledgee"). J. Silver, E. Silver, C. Silver and L. Silver are hereinafter
sometimes individually referred to as a "Pledgor" and collectively as the
"Pledgors").
W I T N E S S E T H:
WHEREAS, concurrently herewith, the Pledgee has provided to International
Cutlery, Ltd., a Delaware corporation (the "Debtor"), a $1,300,000 loan (the
"Loan") which is evidenced by Debtors 7% $1,300,000 senior secured convertible
promissory note due July 31, 2001 (the "Note"); and
WHEREAS, the Debtor has agreed to secure its obligations under the Note by
granting the Pledgee a first priority lien and security interest on
substantially all of the assets and properties of Debtor pursuant to the terms
and conditions of a security agreement, also dated of even date herewith (the
"Security Agreement"); and
WHEREAS, in order (a) to further secure the obligations of the Debtor under
the Note, and (b) to insure that the Pledgee shall have the right to convert the
Note into sixty (60%) percent of the "Fully-Diluted Debtor Equity" (as
hereinafter defined), the Pledgors have agreed, pursuant to this Agreement, to
pledge to the Pledgee all, and not less than all, of the shares of Common Stock
of the Debtor owned of record and beneficially by the Pledgors; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS.
In addition to those terms defined elsewhere in this Agreement, the
following terms shall have the following meanings wherever used in this
Agreement:
(a) "Common Stock" shall mean the shares of Common Stock of the
Debtor, $0.01 par value per share.
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(b) "Dilutive Securities" shall mean any options, warrants, notes,
debentures, preferred stock, subscriptions, rights, or other securities of the
Debtor, whether now existing or hereafter authorized, which are exercisable or
convertible into shares of Common Stock of the Debtor, except that with respect
to the presently outstanding Class A and/or Class B Redeemable Common Stock
Purchase Warrants of Debtor ("Warrants"), such term shall include only shares of
Common Stock issued upon exercise of such Warrants prior to conversion of the
Note.
(c) "Event of Default" shall mean and be limited to the occurrence
and continuance of an "Event of Default" under Section 5 of the Note.
(d) "Fully-Diluted Debtor Equity" shall mean the outstanding Common
Stock of the Debtor on a fully-diluted basis, after giving effect to the
exercise of Dilutive Securities or the conversion of all Dilutive Securities.
(e) "Noteholder" shall mean the Pledgee or any subsequent holder of
Note from time to time.
(f) "Obligations" shall collectively (i) mean the right of the
Noteholder to convert the Note into not less than sixty (60%) percent of the
Fully-Diluted Debtor Equity, and (ii) have the same meaning as the term "Loan
Obligations" as defined in the Security Agreement.
(g) "Satisfaction Date" shall mean that date on which all of the
Obligations have been paid or performed in full.
(h) "Shares" shall mean, collectively, the 6,926,692 shares of Common
Stock of the Debtor being delivered and pledged to the Pledgees concurrently
with the execution and delivery of this Agreement, and shall further include any
and all securities which may hereafter be issued upon or in respect of such
capital stock (whether in the form or by way of dividends, distributions,
recapitalizations or otherwise).
(i) "Debtor" shall mean International Cutlery, Ltd., a Delaware
corporation.
2. PLEDGE OF THE SHARES.
(a) As security for the due and timely payment of the Obligations,
the Pledgors hereby pledge to the Pledgee, and grants to the Pledgee a first
priority lien and security interest in, all of the Shares (as same are
constituted from time to time) until the Satisfaction Date.
(b) In furtherance of the pledge hereunder, the Pledgors are,
concurrently herewith, delivering to the Pledgee the certificates representing
all, and not less than all, of the Shares, each accompanied by appropriate
undated stock powers duly endorsed in blank by the Pledgor who is the record
owner of such Shares.
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3. TRANSFER OF SHARES TO PLEDGEE TO PRESERVE FULLY-DILUTED DEBTOR EQUITY.
In the event that at any time or from time to time subsequent to the
full conversion by Pledgee of its Note into shares of Common Stock of the
Debtor, there shall continue to remain issued and outstanding any Warrants, on
any one or more occasions that the holders of such Warrants shall be entitled
receive additional shares of Debtor's Common Stock by reason of the exercise of
any such Warrants, the Pledgee shall have the corresponding right, without prior
notice or approval of the Pledgors, to transfer into the name of the Pledgee or
any nominee of the Pledgee, such additional number of shares of the Common Stock
of the Debtor as shall, when added to the number of shares of Debtor's Common
Stock issued to the Pledgee upon the full conversion of the Note into Debtor's
Common Stock, continue to represent sixty (60%) percent of the issued and
outstanding Fully Diluted Debtor Equity, after giving effect to the issuance of
any shares of Debtor Common Stock upon such exercise of Warrants.
4. RETENTION OF THE SHARES.
(a) Except as otherwise provided herein, the Pledgee shall have no
obligation with respect to the Shares or any other property held or received by
the Pledgee hereunder, except to use reasonable care in the custody and
preservation thereof, to the extent required by law.
(b) The Pledgee shall hold the Shares and any other property held or
received by the Pledgee hereunder in the form in which same are delivered
herewith, unless and until there shall occur and be continuing an Event of
Default, or until the Satisfaction Date.
5. RIGHTS OF THE PLEDGORS.
Throughout the term of this Agreement, so long as no Event of Default
has occurred and is continuing, the Pledgors shall have the right to vote the
Shares in all Debtor corporate matters, except as to matters or in a manner
inconsistent with the terms of the Securities Purchase Agreement or this
Agreement.
6. EVENT OF DEFAULT; POWER OF ATTORNEY.
(a) Upon the occurrence and during the continuance of any Event of
Default the Pledgee shall have the right (provided that the Pledgee has given
five (5) days' prior written notice of the subject Event of Default to the
Pledgor) to (i) vote the Shares in all Debtor corporate matters, (ii) receive
all dividends and distributions paid or declared in respect of the Shares
(subject to application thereof in the manner and priorities set forth in
Section 7(b) below), (iii) transfer all or any portion of the Shares (as
determined by the Pledgee in its discretion) on the books of the Debtor to and
in the name of the Pledgee or such other Person or Persons as the Pledgee may
designate in furtherance of any sale or other realization of value thereon, (iv)
effect any sale, transfer or disposition of all or any portion of the Shares and
in furtherance thereof, take possession of and endorse any and all checks,
drafts, bills of exchange, money orders or other documents and instruments
received on account of the Shares, (v) collect,
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xxx for and give acquittance for any money due on account of any of the
foregoing, and (vi) take any and all other action contemplated by this
Agreement, or as otherwise permitted by law, or as the Pledgee may reasonably
deem necessary or appropriate, in order to accomplish the purposes of this
Agreement.
(b) In furtherance of the foregoing powers of the Pledgee, the
Pledgors hereby authorize and appoint the Pledgee, with full powers of
substitution, as the true and lawful attorney-in-fact of the Pledgors, in their
name, place and stead, to take any and all such action as the Pledgee, in its
sole discretion, may deem necessary or appropriate in furtherance of the
exercise of the aforesaid powers. Such power of attorney shall be coupled with
an interest, and shall be irrevocable until the Satisfaction Date.
(c) The foregoing rights and powers granted to the Pledgee, and the
foregoing power of attorney, shall be fully binding upon any Person who shall
acquire any beneficial interest in any of the Shares (other than a purchaser in
foreclosure from the Pledgee).
7. FORECLOSURE; SALE OF SHARES.
(a) Without limitation of Section 5 above, in the event that the
Pledgee shall make any sale or other disposition of any or all of the Shares
during the continuance of an Event of Default, the Pledgee may also:
(i) offer and sell all or any portion of the Shares by
means of a private placement restricting the offer or sale to a limited number
of prospective purchasers who meet such suitability standards as the Pledgee and
its counsel may deem appropriate, and who may be required to represent that they
are purchasing Shares for investment and not with a view to distribution;
(ii) purchase all or any portion of the Shares for the
Pledgee's own account at a price not less than the highest BONA FIDE offer
received therefor, which if effected in a manner in compliance with applicable
law, shall be deemed to be a commercially reasonable disposition of the subject
Shares; and
(iii) sell any or all of the Shares upon credit or for future
delivery, without being in any way liable for failure of the purchaser to pay
for the subject Shares.
(b) Any and all net proceeds of any sale or other disposition of any
Shares shall be applied (i) first, to the reasonable costs and expenses of the
sale or other disposition, (ii) next, to the Pledgee, for application to the
Note, and (iii) next, to the Pledgors or as may otherwise be directed by a court
of competent jurisdiction.
(c) Upon any sale or any of the Shares in accordance with this
Agreement, the Pledgee shall have the right to assign, transfer and deliver the
subject Shares to the purchaser(s) thereof, and each such purchaser shall be
entitled to hold such Shares absolutely free from any
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right or claim of the Pledgors and/or any other Person claiming any beneficial
interest in the Shares, including any equity of redemption (which right and all
other such rights are hereby waived by the Pledgors to the fullest extent
permitted by law).
8. COVENANTS, REPRESENTATIONS AND WARRANTIES.
In connection with the transactions contemplated by this Agreement, and
knowing that the Pledgee is and shall be relying hereon, each of the Pledgors
hereby severally (and not jointly and severally) covenants, represents and
warrants that:
(a) the Shares have been duly and validly issued, are fully paid and
non-assessable, and are owned by the Pledgors free and clear of any and all
restrictions, pledges, liens, encumbrances or other security interests of any
kind, save and except for the pledge to the Pledgee pursuant to this Agreement;
(b) there are and will be no options, warrants or other rights
created by the Pledgors in respect of the sale, transfer or other disposition of
any of the Shares, and the Pledgors has the absolute right to pledge the Shares
hereunder without the necessity of any consent of any Person;
(c) neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of this Agreement by the Pledgors, conflicts with or will result in
the breach or violation of or a default under the terms, conditions or
provisions of (i) any mortgage, security agreement, indenture, evidence of
indebtedness, loan or financing agreement, or other agreement or instrument to
which the Pledgors is a party or by which the Pledgors is bound, or (ii) any
provision of law, any order of any court or administrative agency, or any rule
or regulation applicable to the Pledgors;
(d) this Agreement has been duly executed and delivered by the
Pledgors, and constitutes the legal, valid and binding obligation of each of the
Pledgors, enforceable against the Pledgors in accordance with its terms;
(e) there are no actions, suits or proceedings pending or threatened
against or affecting the Pledgors that involve or relate to the Shares;
(f) the Pledgors shall not, at any time prior to the release of the
lien on the Shares in accordance with this Agreement, (i) sell, transfer or
convey any interest in any of the Shares, or (ii) suffer or permit any other
pledge, lien or encumbrance to be created upon or granted with respect to any of
the Shares;
(g) in the event that and at such time as there shall be distributed
or delivered any additional Shares within the definition thereof under paragraph
1(e) above, the Pledgors shall take such action as may be necessary in order
that such additional Shares, together with appropriate undated stock powers duly
endorsed in blank by the Pledgors, are promptly delivered to the Pledgee to be
held in pledge hereunder; and
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(h) from time to time hereafter, the Pledgors shall take any and all
such further action, and shall execute and deliver any and all such further
documents and/or instruments, as the Pledgee may request in order to accomplish
the purposes of this Agreement, in order to enable the Pledgee to exercise any
of its rights hereunder, and/or in order to secure more fully the Pledgee's
interest in the Shares.
9. RETURN OF THE SHARES.
Except to the extent that any of the Shares shall have been foreclosed upon
in accordance with this Agreement, the Pledgee shall release its lien hereunder
and return the Shares to and in the name of the Pledgors at the Satisfaction
Date.
10. PLEDGEE'S STANDARD OF CARE.
The Pledgee shall not incur any liability for any action taken by it,
except to the extent that same constitutes gross negligence or willful
misconduct by the Pledgee or its agents. The Pledgee shall be entitled to rely
upon and assume to be accurate all notices and advice given to the Pledgee
hereunder (absent specific knowledge to the contrary) and to rely upon any
document and/or signature believed by it in good faith to be genuine and
rendered by an authorized representative of the subject person. The Pledgee
shall look solely to the Pledgors (or, if available, to proceeds from the sale
or disposition of Shares in accordance herewith) for reimbursement of any
reasonable costs and expenses which the Pledgee may incur in acting hereunder.
The Pledgee may, notwithstanding its status as such hereunder, act as counsel
for any interested party (including any Noteholder); and the Pledgee may resign
at any time, provided that such resignation shall not become effective until a
substitute pledgee is appointed by mutual agreement of the Pledgors and the
Requisite Holders, and the Pledgee has delivered to its successor all
certificates, documents and/or funds then held by it thereunder.
11. MISCELLANEOUS.
(a) Any notices or consents required or permitted under this
Agreement shall be in writing and shall be deemed given when personally
delivered, when sent by recognized overnight courier service with all charges
prepaid or billed to the account of the sender, or when mailed by certified
mail, return receipt requested, with all charges prepaid, in each instance
addressed to the party being notified at his or its address first set forth
above. Either party may change its address for notices by means of written
notice given in accordance herewith, provided that same shall not be deemed to
have been given until actual receipt by the party being notified.
(b) The laws of the State of New York shall govern the construction
and enforcement of this Agreement and the rights and remedies of the parties
hereto. The parties hereby consent to the jurisdiction of all courts sitting in
the State of New York in connection with any action or proceeding under or
relating to this Agreement, and waive trial by jury in any such action or
proceeding.
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(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The Pledgors shall not, however, assign any of its rights or
obligations hereunder without the prior written consent of the Pledgee. Except
as otherwise referred to herein, this Agreement, and the documents executed and
delivered pursuant hereto, constitute the entire agreement between the parties
relating to the specific subject matter hereof.
(d) Neither any course of dealing between the Pledgors and the
Pledgee nor any failure to exercise, or any delay in exercising, on the part of
the Pledgee, any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege operate as a waiver of any other exercise of such right, power or
privilege or any other right, power or privilege.
(e) No change, amendment, modification, waiver, assignment of rights
or obligations, cancellation or discharge hereof, or of any part hereof, shall
be valid unless the Requisite Holders shall have consented thereto in writing.
(f) The captions and paragraph headings in this Agreement are for
convenience of reference only, and shall not in any way define, limit or
describe the construction, terms or provisions of this Agreement.
(g) If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only
to the extent necessary to render same valid, or not applicable to given
circumstances, or excised from this Agreement, as the situation may require, and
this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included
herein, as the case may be.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the date first set forth above.
PLEDGORS:
/s/
-------------------------------
XXXX X. SILVER
/s/
-------------------------------
XXXXXX X. SILVER
/s/
-------------------------------
XXXXX X. SILVER
/s/
-------------------------------
XXXXXXXX X. SILVER
[PLEDGEE]
SHARP OF FLORIDA, INC.
BY: /s/
---------------------------
ACCEPTED AND AGREED TO
BY THE DEBTOR:
INTERNATIONAL CUTLERY, LTD.
BY: /s/
------------------------------
PRESIDENT
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