EXHIBIT 10.25
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "AGREEMENT") is entered into on February
2, 1999, between DSI TOYS, INC., a Texas corporation ("PLEDGOR"), and SUNROCK
CAPITAL CORP., a Delaware corporation ("PLEDGEE").
1. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and as collateral security for and to secure the
prompt payment and performance in full of the Secured Obligations (hereinafter
defined), Pledgor hereby assigns to Pledgee and grants to Pledgee a continuing
security interest in 65% of the issued and outstanding shares of capital stock
(which currently are represented solely by the stock certificates identified on
SCHEDULE I attached hereto) of DSI (HK) Limited., together with all proceeds,
products and increases thereof and substitutions and replacements therefor
(collectively, the "COLLATERAL").
As used in this Agreement, the term "SECURED OBLIGATIONS" shall mean
(i) any and all obligations, liabilities and indebtedness of Pledgor to Pledgee
under that certain Loan and Security Agreement dated the date hereof by and
among Pledgee and Pledgor (as hereafter amended from time to time, the "LOAN
AGREEMENT") and (ii) any and all extensions, renewals, modifications, increases
and replacements of the foregoing. The term "SECURED OBLIGATIONS" shall include,
without limitation, all unpaid accrued interest thereon and all costs and
expenses payable as hereinafter provided: (i) whether now existing or hereafter
incurred; (ii) whether direct, indirect, primary, absolute, secondary,
contingent, secured, unsecured, matured or unmatured; (iii) whether such
indebtedness is from time to time reduced and thereafter increased, or entirely
extinguished and thereafter reincurred; (iv) whether such indebtedness was
originally contracted with Pledgee or with another or others; (v) whether or not
such indebtedness is evidenced by a negotiable or nonnegotiable instrument or
any other writing; and (vi) whether such indebtedness is contracted by Pledgor
individually or jointly or severally with another or others.
2. Pledgor represents and warrants that (i) Pledgor holds absolute
ownership of the Collateral, free and clear of all liens and encumbrances; (ii)
there are no restrictions upon the transfer of any of the Collateral, other than
as may appear and may be referenced on the face of the certificates or other
than arising under applicable state or federal securities laws; (iii) Pledgor
owns 100% of the issued and outstanding capital stock of DSI (HK) Limited; (iv)
there are no existing obligations to issue capital stock or securities
convertible into capital stock of DSI (HK) Limited, and in no event will Pledgor
permit any such stock or securities to be issued prior to payment in full of the
Secured Obligations; and (v) there are no existing securities or obligations of
DSI (HK) Limited, the amount of which obligation is based, in whole or in part,
on the value of DSI (HK) Limited's capital stock or any increase thereof, nor
will Pledgor permit any such securities or obligations to exist prior to payment
in full of the Secured Obligations.
3. In furtherance of Pledgee's security interest in the Collateral,
Pledgor agrees to deliver to Pledgee, on the date of this Agreement, the stock
certificates identified on SCHEDULE I attached hereto, together with stock
powers duly executed in blank by Pledgor.
STOCK PLEDGE AGREEMENT - Page 1
4. With respect to the Collateral and all proceeds, products and increases
thereof and substitutions therefor, Pledgor hereby appoints Pledgee its
attorney-in-fact, to arrange for the transfer of the Collateral on the books of
DSI (HK) Limited to the name of Pledgee subsequent to the occurrence and during
the continuance of any Event of Default (as hereinafter defined) hereunder.
However, Pledgee shall be under no obligation to do so.
5. During the term of this Agreement, provided no Event of Default has
occurred and then exists hereunder, Pledgor shall have the right, where
applicable, to vote the Collateral on all corporate questions, and Pledgee
shall, if necessary, execute due and timely proxies in favor of Pledgor for this
purpose.
6. Upon the occurrence of any Event of Default and during the continuance
thereof, Pledgee may exercise all of the rights and privileges in connection
with the Collateral to which a transferee may be entitled as the record holder
thereof, together with the rights and privileges otherwise granted hereunder.
Pledgee shall be under no obligation to exercise any of such rights or
privileges.
7. If, with the consent of Pledgee, Pledgor shall substitute or exchange
other securities in place of those herein mentioned, all of the rights and
privileges of Pledgee and all of the obligations of Pledgor with respect to the
securities originally pledged or held as Collateral hereunder shall be forthwith
applicable to such substituted or exchanged securities.
8. Upon the occurrence of any Event of Default and during the continuance
thereof, Pledgee shall be authorized to collect all dividends, interest
payments, and other amounts (including amounts received or receivable upon
redemption or repurchase) that may be, or become, due on any of the Collateral.
If Pledgor receives any such dividends, payments or amounts after the occurrence
and during the continuance of an Event of Default, it shall immediately endorse
and deliver the same to Pledgee in the form received. All such amounts which
Pledgee receives and retains in accordance with the terms of this paragraph 8
shall be applied to reduce the principal amount outstanding on the Secured
Obligations in inverse order of maturity. Pledgee is, furthermore, authorized to
give receipts in the name of Pledgor for any amounts so received. Pledgee shall
be under no obligation to collect any such amounts.
9. In the event that, during the term of this Agreement, subscription
warrants or any other rights or options shall be issued in connection with the
Collateral, such warrants, rights, or options shall be immediately assigned, if
necessary, by Pledgor to Pledgee. If any such warrants, rights, or options are
exercised by Pledgor, all new securities so acquired by Pledgor shall be
immediately assigned to Pledgee, shall become part of the Collateral and shall
be endorsed to, delivered to and held by Pledgee under the terms of this
Agreement in the same manner as the securities originally pledged.
10. In the event that, during the term of this Agreement, any share,
dividend, reclassification, readjustment or other change is declared or made in
the capital structure of DSI (HK) Limited, new, substituted and additional
shares, or other securities, issued by reason of any such change shall become
part of the Collateral and shall be endorsed to, delivered to and held by
Pledgee under the terms of this Agreement in the same manner as the securities
originally pledged to such an
STOCK PLEDGE AGREEMENT - Page 2
extent that Pledgee retains its pledge in 65% of all the issued and outstanding
capital stock of DSI (HK) Limited.
11. Pledgor authorizes Pledgee, without notice or demand, and without
affecting the liability of Pledgor hereunder, from time to time to:
(A) hold security in addition to and other than the Collateral for
the payment of the Secured Obligations or any part thereof, and exchange,
enforce, waive and release any Collateral or any part thereof, or any other such
security, or part thereof;
(B) release any of the endorsers or guarantors of the Secured
Obligations secured hereunder or any part thereof, or any other person
whomsoever liable for or on account of such Secured Obligations;
(C) on the transfer of all or any part of the Secured Obligations
secured hereunder, Pledgee may assign all or any part of Pledgee's security
interest in the Collateral and shall be fully discharged thereafter from all
liability and responsibility with respect to the Collateral so transferred,
provided that in no event shall Pledgee be liable for any act or omission or
negligent act or negligent omission with respect to the Collateral, other than
acts or omissions constituting gross negligence, willful misconduct or tortious
breach of contract. The transferee of the Collateral shall be vested with the
rights, powers and remedies of Pledgee hereunder, and with respect to any
Collateral not so transferred, Pledgee shall retain all rights, powers and
remedies hereby given; and
(D) Pledgor hereby waives any right to require Pledgee to proceed
against Pledgor, DSI (HK) Limited or any other person whomsoever, to proceed
against or exhaust any collateral or any other security held by Pledgee, or to
pursue any other remedy available to Pledgee. Pledgor further waives any defense
arising by reason of any liability or other defense of Pledgor or of any other
person. Pledgor shall have no right to require Pledgee to marshal collateral.
12. It shall not be necessary for Pledgee to inquire into the powers of
Pledgor or the officers, directors or agents acting or purporting to act on
behalf of Pledgor, and any obligations made or created in reliance on the
professed exercise of such powers shall be secured hereunder.
13. To the extent permitted by applicable law and in the Loan Agreement,
Pledgee shall be under no duty or obligation whatsoever to make or give any
presentments, demands for performance, notices of non-performance, protests,
notices of protest, or notices of dishonor in connection with the Secured
Obligations.
14. The occurrence of any of the following events shall, at the option of
Pledgee, constitute an "EVENT OF DEFAULT" under this Agreement:
(A) the occurrence of an Event of Default, as such term is defined
in the Loan Agreement; or
STOCK PLEDGE AGREEMENT - Page 3
(B) the default or nonperformance by Pledgor of any term or
condition of this Agreement.
15. Upon the occurrence and during the continuance of any Event of
Default, the Secured Obligations shall, at the option of Pledgee, become
immediately due and payable, and Pledgee shall have all the rights and remedies
provided in the Uniform Commercial Code of Texas at the date of this Agreement
and, in this connection, the Pledgee may, upon ten (10) days' notice to the
Pledgor sent to the persons identified in and in the same manner as provided in
the Loan Agreement, without liability for any diminution in value or price which
may have occurred, sell all or any part of the Collateral in such manner and for
such price as Pledgee may determine. At any public sale Pledgee shall be free to
purchase all or any part of the Collateral. Pledgee shall receive the proceeds
of any such sale or sales, and, after deducting therefrom any and all reasonable
costs and expenses incurred in connection with the sale thereof, apply the net
proceeds toward the payment of the Secured Obligations secured hereunder,
including interest, reasonable attorneys' fees, and all other reasonable costs
and expenses incurred by Pledgee hereunder and under any other agreement between
Pledgor and Pledgee. If such proceeds be more than sufficient to pay the same,
then in case of a surplus, such surplus shall be accounted for and paid over to
Pledgor, provided Pledgor be not then indebted to Pledgee otherwise under this
Agreement or any Other Agreement or for any cause whatsoever.
16. Upon indefeasible repayment in full in cash of the Secured
Obligations, Pledgee will promptly, at Pledgor's expense, deliver all of the
Collateral to Pledgor along with all instruments of assignment executed in
connection therewith, and execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence Assignor's release of Pledgee's
security interest hereunder.
17. THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LOCAL LAW OF THE STATE OF
TEXAS EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT OTHERWISE
REFER CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT TO THE SUBSTANTIVE LAW OF
ANOTHER JURISDICTION.
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IN WITNESS WHEREOF, Pledgor and Pledgee have executed this Agreement as of
the date first above written.
PLEDGOR:
DSI TOYS, INC.
By: /s/ M. D. XXXXX
M.D. Xxxxx
Chief Executive Officer
PLEDGEE:
SUNROCK CAPITAL CORP.
By: /s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
Senior Vice President
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SCHEDULE I
Stock Certificate No. 6, Register Folio 14, evidencing 6,500 shares of DSI
(HK) LIMITED, issued in the name of DSI Toys, Inc. as of November 25, 1997.
SCHEDULE I - Page 1
