PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of September 30, 20034 (this
"Agreement"), by and among ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇, an individual (the "Pledgor"), and
each of Longview Fund, LP, Longview Equity Fund, LP and Longview International
Equity Fund, LP (collectively, the "Secured Parties").
Reference is made to (i) that certain Amendment Agreement (the
"Amendment Agreement"), dated as of the date hereof, by and among Knightsbridge
Fine Wines, Inc. ("Knightsbridge"), the Secured Parties, and ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇,
individually, (ii) the Note Purchase Agreement, dated as of May 28, 2004 (the
"Note Purchase Agreement"), by and among Knightsbridge and the Secured Parties,
(iii) that certain Convertible Promissory Note No. PN-04-1 dated May 28, 2004
(the "First Note"), in the original principal amount of $250,000 issued by in
favor of Longview Fund, LP, (iv) that certain Convertible Promissory Note No.
PN-04-2 dated May 28, 2004 (the "Second Note"), in the original principal amount
of $200,000 issued by Knightsbridge in favor of Longview Equity Fund, LP, and
(v) that certain Convertible Promissory Note No. PN-04-3 dated May 28, 2004 (the
"Third Note" and, collectively with the First Note and the Second Note, the
"Notes"), in the original principal amount of $50,000 issued by Knightsbridge in
favor of Longview International Equity Fund, LP. The Notes evidence loans made
by the Secured Parties to Knightsbridge in the principal amount of the Notes.
This Agreement is the Pledge Agreement referred to in the Amendment Agreement.
In order to induce the Secured Parties to enter into the
Amendment Agreement with Knightsbridge, the Pledgor, as Chief Executive Officer
and President of Knightsbridge, has agreed to pledge the Shares and the proceeds
of such Shares to the Secured Parties to secure the obligations of the Pledgor
under the Amendment Agreement, the Note Purchase Agreement, and the Notes.
NOW, THEREFORE, in consideration of the premises, the Pledgor
hereby agrees with the Secured Parties as follows:
1. Pledge and Security Interest.
(a) The Pledgor hereby pledges to the Secured
Parties and hereby grants to the Secured Parties a first priority lien on, and
security interest in, all his right, title and interest in and to the Shares
owned by the Pledgor and which are set forth on Schedule A attached hereto (the
"Pledged Shares"), and all proceeds of the Pledged Shares, including, without
limitation, all cash, securities or other property distributed in respect of or
in exchange for any or all such Pledged Shares (together with the Pledged
Shares, the "Pledged Collateral"), as security for the prompt and complete
payment when due of all amounts payable to the Secured Parties under the
Amendment Agreement, the Note Purchase Agreement, the Notes and this Agreement
(collectively, the "Obligations").
(b) The Pledgor agrees to deliver promptly or
cause to be delivered to the Secured Parties all Pledged Shares, and any and all
certificates or other instruments or documents representing any of the Pledged
Collateral (together with any necessary endorsement). All Pledged Shares
delivered to the Secured Parties shall be accompanied by undated stock power
duly executed in blank or other instruments of transfer satisfactory to the
Secured Parties and by such other instruments and documents as the Secured
Parties may reasonably request.
(c) This Agreement constitutes a security
agreement under Article 9 of the Uniform Commercial Code as in effect in the
State of New York, as the same may be amended from time to time (the "UCC"),
with respect to the Pledged Collateral.
2. Voting Rights; Attorney-in-Fact. So long as no Event
of Default (as such term is defined in the Notes) shall have occurred and be
continuing, the Pledgor shall be entitled to exercise all voting rights
pertaining to the Pledged Shares and to give consents, waivers and ratifications
in respect thereof. After the occurrence and during the continuance of an Event
of Default, the Secured Parties shall have the exclusive right to vote any and
all of the Pledged Shares and to give consents, waivers and ratifications in
respect thereof, and the Pledgor shall deliver to the Secured Parties such
proxies or other documents and instruments as the Secured Parties may request to
further effectuate the foregoing. For these purposes, the Pledgor designates and
appoints the Secured Parties as the Pledgor's agent and attorney-in-fact for
purposes of executing such documents and instruments as the Secured Parties may
consider necessary or appropriate for purposes of implementing this Agreement.
The foregoing designation and appointment is irrevocable and coupled with an
interest.
3. Representations, Warranties and Covenants of the
Pledgor. The Pledgor represents and warrants to the Secured Parties that:
(a) the execution, delivery and performance of
the Amendment Agreement, the Note Purchase Agreement, the Notes and this
Agreement by the Pledgor do not violate or conflict with any law applicable to
the Pledgor, any order or judgment of any court or other agency or governmental
authority applicable to the Pledgor or any of the Pledgor's assets or any
contractual restriction binding on or affecting the Pledgor or any of his
assets;
(b) the Pledgor has obtained all consents that
are required to have been obtained by him with respect to the Amendment
Agreement, the Note Purchase Agreement, the Notes and this Agreement (including,
without limitation, any consent required to be obtained from the issuer of the
Pledged Shares) and all such consents are in full force and effect and all
conditions of any such consents have been complied with;
(c) the Amendment Agreement, the Note Purchase
Agreement, the Notes and this Agreement constitute the legal, valid and binding
obligations of the Pledgor, enforceable against him in accordance with their
respective terms, subject to applicable bankruptcy, insolvency or other similar
laws affecting creditors' rights generally and to equitable principles of
general application (regardless of whether enforcement is sought in a proceeding
in equity or at law); and
(d) on the date hereof and as of the date of any
future delivery of Pledged Collateral to the Secured Parties and at all times
until the security interests granted by this Agreement are terminated pursuant
to Section 6 hereof: (A) the Pledgor is or will be the owner of such Pledged
Collateral, subject to no adverse claim (including any lien, encumbrance or
claim of legal or beneficial ownership), except the lien and security interest
in favor of the Secured Parties; (B) the Pledgor has or will have full power,
authority and legal right to pledge the Pledged Collateral to the Secured
Parties hereunder, and no consent, approval or other authorization of any person
or governmental authority is required (except those which have been obtained) in
connection therewith; and (C) the lien of this Agreement constitutes or will
constitute a first priority perfected security interest in the Pledged
Collateral in favor of the Secured Parties.
4. Rights of the Secured Parties. The Secured Parties
shall not be liable for failure to collect or realize upon the Pledged
Collateral, or for any delay in so doing nor shall it be under any obligation to
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take any action whatsoever with regard thereto. If an Event of Default has
occurred and is continuing, the Secured Parties may thereafter, without notice,
exercise all rights, privileges or options pertaining to any Pledged Shares as
if it were the absolute owner thereof, upon such terms and conditions as it may
determine, all without liability except to account for property actually
received by it, but the Secured Parties shall have no duty to exercise any of
the aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
5. Remedies.
(a) Upon the occurrence and during the
continuance of an Event of Default, the Secured Parties, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale), each of
which demands, advertisements or notices are hereby expressly and irrevocably
waived by the Pledgor, may forthwith collect, receive and realize upon the
Pledged Collateral or any part thereof shall have come into the possession of
the Secured Parties at such time, and may forthwith sell, assign, give option or
options to purchase, contract to sell or otherwise dispose of and deliver the
Pledged Collateral or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange, broker's board or elsewhere upon such
terms and conditions as the Secured Party may deem advisable and at such prices
as the Secured Parties, in their sole discretion may deem advisable, with the
right to the Secured Parties upon any such public sale to purchase the whole or
any part of the Pledged Collateral so sold. Each purchaser at any such sale,
public or private, shall hold the property sold free from any claim or right on
the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted
by law) stay and appraisal which such Pledgor now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Secured Parties agree that it shall give to the Pledgor, not less than ten
(10) days notice (which the Pledgor agrees is reasonable notice within the
meaning of Section 9-504 of the UCC) of the time and place of any public sale or
of the time at which a private sale or other intended disposition of the Pledged
Collateral is to take place. The Pledgor recognizes that the Secured Parties may
be unable to effect a public sale of any or all of the Pledged Collateral 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 securities 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 shall be deemed to have been
made in a commercially reasonable manner. The Secured Parties shall be under no
obligation to delay a sale of any of the Pledged Collateral for the period of
time necessary to permit the Pledgor to register such securities for public sale
under applicable federal or state securities laws.
(b) In addition to these rights and remedies set
forth in Section 5(a) hereof, upon the occurrence and during the continuance of
an Event of Default, the Secured Parties shall be entitled to transfer the
Pledged Shares into its own name and assume legal ownership thereof in full
satisfaction of the Obligations, whereupon the Pledgor shall not have any
further liability under the Note or hereunder.
(c) The Secured Parties shall apply the net
proceeds of any collection, recovery, receipt, realization or sale of the
Pledged Collateral, after deducting all reasonable costs and expenses of every
kind incurred in connection therewith or incidental to the care, safekeeping or
otherwise of any and all of the Pledged Collateral or in any way relating to the
rights of the Secured Parties hereunder, including reasonable legal fees and
expenses, to the payment, in whole or in part, of all accrued but unpaid
interest on the Notes and then to the outstanding principal amount of the Notes.
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(d) In addition to the rights and remedies
granted to the Secured Parties in this Agreement, the Secured Parties shall have
all the rights and remedies of a secured party under the UCC with respect to the
Pledged Collateral.
6. Termination of Security Interest.
(a) Upon the payment in full of all Obligations
of the Pledgor under the Amendment Agreement, the Note Purchase Agreement, and
the Notes, the Secured Party shall deliver to the Pledgor all items of Pledged
Collateral in the possession of the Secured Parties.
(b) Upon any delivery of Pledged Collateral to
the Pledgor in accordance with the terms of this Agreement, the lien and
security interest provided for herein as to such Pledged Collateral shall
immediately terminate and cease to attach thereto (if such lien and security
interest has not previously terminated and ceased to attach).
7. Further Assurances. The Pledgor agrees that at any
time and from time to time upon the written request of the Secured Parties, the
Pledgor will execute and deliver such further documents and do such further acts
and things as the Secured Parties may reasonably request in order to effect the
purposes of this Agreement.
8. Severability. Any provision of this Agreement which
is prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions and without affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
9. Waivers; Remedies Cumulative. The Secured Parties
shall not by any act, delay, omission or otherwise be deemed to have waived any
of its rights or remedies hereunder and no waiver or amendment shall be valid
unless in writing, signed by the Secured Parties, and then only to the extent
therein set forth. A waiver by the Secured Parties of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Secured Parties would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Secured
Parties, 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 hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights or remedies provided by law.
10. Amendment. This Agreement may be amended, modified or
altered only by an instrument in writing executed by the Pledgor and the Secured
Parties.
11. Place of Delivery and Release of Pledged Collateral
and Remittances. Each delivery and release of Pledged Collateral and remittance
of dividends or interest thereon or of other amounts to the Secured Parties or
the Pledgor hereunder shall be made at the address for such party set forth in
the preamble hereto or at such other address in the United States of America as
such party may have last specified for such delivery or remittance by notice to
the other party.
12. Notices. Except as otherwise expressly provided
herein, all notices and other communications in connection with this Agreement
will be sufficient if in writing and sent by hand, by certified or registered
mail (with return receipt requested), by overnight courier or by confirmed
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facsimile transmission. If delivered by hand or overnight courier, a notice or
communication will be deemed effective on the date of delivery. If delivered by
certified or registered mail (return receipt requested), a notice or
communication will be deemed effective four days after mailing. If sent by
facsimile transmission, a notice or communication will be deemed effective upon
receipt.
13. Binding Effect; Applicable Law. This Agreement and
all obligations of the Pledgor hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the Pledgor, and shall,
together with the rights and remedies of the Secured Parties hereunder, inure to
the benefit of the Secured Parties and their successors and assigns; provided
that the Pledgor may not assign all or any part of this Agreement without the
prior written consent of the Secured Parties. This Agreement is being delivered
and is intended to be performed in the State of New York, and shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by the laws of the State of New York, without giving effect to the principles of
conflicts of laws thereunder. This Agreement shall not be interpreted or
construed with any presumption against the party that caused this Agreement to
be drafted.
14. Counterparts. This Agreement may be executed
(including by facsimile signature) in two (2) or more counterparts, and all such
counterparts taken together shall be deemed to constitute one and the same
agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above stated.
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▇▇▇▇ ▇▇▇▇▇▇▇, individually
LONGVIEW FUND, LP
By:
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Name:
Title:
LONGVIEW EQUITY FUND, LP
By:
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Name:
Title:
LONGVIEW INTERNATIONAL EQUITY FUND, LP
By:
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Name:
Title:
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SCHEDULE A
PLEDGED SHARES
Two hundred and fifty thousand shares of common stock, par value $0.001, of
Knightsbridge Fine Wines, Inc.