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EXHIBIT 10.1
COLLATERAL PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of August 1, 1999 made between PETQUARTERS,
INC. an Arkansas corporation and its wholly owned subsidiary, PQ ACQUISITION
COMPANY, INC. an Arkansas corporation, acting in the manner and to the extent
described in the SECURED PROMISSORY NOTE executed of even date, described below
(the two parties collectively referred to as "Pledgor"), and THE SUN VALLEY
TRUST OF JULY 30, 1999, a trust organized pursuant to the laws of the state of
Idaho, referred to as "Pledgee", being the holder the SECURED PROMISSORY NOTE.
WHEREAS, the Pledgor has executed a SECURED PROMISSORY NOTE to the
Pledgee in the principal sum of Four Million Six Hundred Thousand
($4,600,000.00) Dollars which Pledgee now holds, which is Exhibit 1; and
WHEREAS, it is a condition precedent to the SECURED PROMISSORY NOTE to
the Pledgee in the principal sum of Four Million Six Hundred Thousand
($4,600,000.00) Dollars that Pledgor shall have executed and delivered to the
Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy the
condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to the Pledgor, the
receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby
makes the following representations and warranties to the Pledgee and hereby
covenants and agrees with Pledgee as follows:
1. Security for Pledgor's Obligations
This Agreement is for the benefit of the Pledgee, the Holder of the
Note and to secure the payment of all other obligations and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Pledgor, now existing or hereafter incurred under, arising out of or in
connection with the issuance of SECURED PROMISSORY NOTE to the Pledgee in the
principal sum of Four Million Six Hundred Thousand ($4,600,000.00) Dollars and
the due performance and compliance with the terms of all agreements by the
Pledgor (all such monies, dividends, shares, obligations and liabilities,
collectively, the "Secured Obligations").
2. Definition of Stock
As used herein, the term "Stock" shall mean all of the issued and
outstanding shares of capital stock, at any time owned by the Pledgor of
HUMBOLDT INDUSTRIES, INC., a Pennsylvania corporation and all of the issued and
outstanding shares of capital stock, at any time owned by the Pledgor of
MAPLEWOOD INDUSTRIES, INC., a Pennsylvania corporation, (hereinafter
collectively referred to as "HUMBOLDT'). At no time shall the shares of
Humboldt, owned by Pledgor, be less than one hundred (100%) percent of the
issued and outstanding shares of HUMBOLDT. The Pledgor represents and warrants
that on the date hereof (i) the Stock consists of 1000 shares of the capital
stock of HUMBOLDT and 20 shares of the capital stock of MAPLEWOOD (ii) such
Stock constitutes one hundred (100%) percent of the issued and outstanding
capital stock of HUMBOLDT and MAPLEWOOD.
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3. Pledge of Collateral
3.1 Pledge
To secure the Secured Obligations and for the purposes set forth in
Section 1, the Pledgor (i) hereby grants to the Pledgee a security interest in
all of the Collateral (as defined in Section 3.4); (ii) hereby pledges and
deposits as security with the Pledgee (except as otherwise permitted below) the
Stock owned by the Pledgor on the date hereof and delivers to the Pledgee
certificates therefor accompanied by stock powers duly executed in blank by the
Pledgor or such other instruments of transfer as are acceptable to the Pledgee
and (iii) hereby assigns, transfers, hypothecates, mortgages, charges and sets
over to the Pledgee all of the Pledgor's right, title and interest in and to
such Stock (and in and to the certificates or instruments evidencing such
Stock), to be held by the Pledgee upon the terms and conditions set forth in
this Agreement.
3.2 Subsequently Acquired Stock
If the Pledgor shall acquire (by purchase, stock dividend or otherwise)
any additional Stock at any time or from time to time after the date hereof of
HUMBOLDT or MAPLEWOOD, the Pledgor will forthwith pledge and deposit such Stock
as security with the Pledgee and deliver to the Pledgee certificates therefor
accompanied by stock powers duly executed in blank by the Pledgor or such other
instruments of transfer as are acceptable to the Pledgee, and will promptly
thereafter deliver to the Pledgee a certificate executed by any of the
President, any Vice President, or the Treasurer of the Pledgor describing such
Stock and certifying that the same has been duly pledged with the Pledgee
hereunder.
3.3 Uncertificated Stock
Notwithstanding anything to the contrary contained in Sections 3.1 and
3.2, if any Stock (whether now owned or hereafter acquired) is evidenced by an
uncertificated security, the Pledgor shall promptly notify the Pledgee thereof
and shall promptly take all actions required to perfect the security interest of
the Pledgee under applicable law (including, in any event, the Uniform
Commercial Code). The Pledgor further agrees to take such actions as the Pledgee
deems necessary or desirable to effect the foregoing and to permit the Pledgee
to exercise any of its rights and remedies hereunder, and agrees to provide an
opinion of counsel satisfactory to the Pledgee with respect to any such pledge
of uncertificated Stock promptly upon request of the Pledgee.
3.4 Definitions of Pledged Stock and Collateral
All Stock pledged hereunder is hereinafter called the "Pledged Stock,"
and the Pledged Stock, together with all proceeds thereof, including any
securities and moneys received and at the time held by the Pledgee hereunder, is
hereinafter called the "Collateral."
4. Appointment of Sub-Agents; Endorsements
The Pledgee hereby appoints The Delaware Escrow Company, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ for retaining physical
possession of the Pledged Stock, which may be held (in the discretion of the
Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in favor
of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent
appointed by the Pledgee.
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5. Voting
Unless and until an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to vote any and all Pledged Stock and
to give consents, waivers or ratifications in respect thereof, provided that no
vote shall be cast or any consent, waiver or ratification given or any action
taken which would violate or be inconsistent with any of the terms of this
Agreement, any other instrument or agreement referred to herein or therein, or
which would have the effect of impairing the position or interests of the
Pledgee. All such rights of the Pledgor to vote and to give consents, waivers
and ratifications shall cease in case an Event of Default shall occur and be
continuing, and Section 7 shall become applicable.
6. Dividends and Other Distributions
Unless and until an Event of Default shall have occurred and be
continuing, all cash dividends payable in respect of the Pledged Stock shall be
paid to the Pledgor, provided that all cash dividends payable in respect of the
Pledged Stock which are determined by the Pledgee, in its absolute discretion,
to represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid to the Pledgee and retained by
it as part of the Collateral. The Pledgee shall also be entitled to receive
directly and to retain as part of the Collateral:
(a) All other or additional stock or securities or property (other than cash)
paid or distributed by way of dividend in respect of the Pledged Stock;
(b) All other or additional stock or other securities or property (including
cash) paid or distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(c) All other or additional stock or other securities or property which may be
paid in respect of the Collateral by reason of any consolidation, merger,
exchange of stock, conveyance of assets, liquidation or similar corporate
reorganization.
7. Remedies in Case of Event of Default
In case an Event of Default as defined in Section 10, below, the
Pledgee shall be entitled to exercise all of the rights, powers and remedies
(whether vested in it by this Agreement or agreement between the parties or by
law) for the protection and enforcement of its rights in respect of the
Collateral, and the Pledgee shall be entitled, without limitation, to exercise
the following rights, which the Pledgor hereby agrees to be commercially
reasonable:
(a) To receive all amounts payable in respect of the Collateral otherwise
payable under Section 6 to the Pledgor;
(b) To transfer all or any part of the Pledged Stock into the Pledgee's name or
the name of its nominee or nominees;
(c) To vote all or any part of the Pledged Stock (whether or not transferred
into the name of the Pledgee) and give all consents, waivers and ratifications
in respect of the Collateral and otherwise act with respect thereto as though it
were the outright owner thereof (the Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of the Pledgor, with full
power of substitution, to do so); and
(d) At any time or from time to time to sell, assign and deliver, or grant
options to purchase, all or any part of the Collateral, or any interest therein,
at any public or private sale, without demand of performance, advertisement or
notice of intention to sell or of the time or place of sale or adjournment
thereof or to redeem or otherwise (all of which are hereby waived by the
Pledgor), for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or prices and
on such terms as the Pledgee in its absolute discretion may determine, provided
that at least 10 days' notice of the time and place of any such sale shall be
given to the Pledgor. The Pledgor
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shall have the right to redeem the obligation, if, not more than thirty (30)
days after receipt of a notice of default from the Pledgee, Pledgor delivers to
Pledgee good funds in an amount sufficient to pay all principal, accrued
interest, costs and attorney's fees. However, if within the thirty (30) day
redemption period, the Pledgee delivers the ten (10) day notice of sale, the
Pledgor's redemption rights will terminate at 5:00 PM, Mountain Time, on the day
prior to the sale date, whether that data shall be less than thirty (30) days.
In no event shall the Pledgor's redemption extend more than thirty (30) days
after notice of default is received. If the Pledgor fails to exercise its right
of redemption, as set forth herein, the redemption right granted herein is
waived and released to the fullest extent permitted by law with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any, of
marshaling the Collateral and any other security for the Secured Obligations or
otherwise. At any such sale, unless prohibited by applicable law, the Pledgee
may bid for and purchase all or any part of the Collateral so sold free from any
such right or equity of redemption. None or the Pledgees shall be liable for
failure to collect or realize upon any or all of the Collateral or for any delay
in so doing nor shall any of them be under any obligation to take any action
whatsoever with regard thereto.
8. Application of Proceeds
All moneys collected by the Pledgee upon any sale or other disposition
of the Collateral, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of all costs and expenses incurred by
the Pledgee in connection with such sale, the delivery of the Collateral or the
collection of any such moneys (including, without limitation, attorneys' fees
and expenses), and the balance of such moneys shall be held by the Pledgee and
applied by it to satisfy the obligations as provided in the SECURED PROMISSORY
NOTE issued by the Pledgor. After the satisfaction of all amounts due, any
excess funds shall be paid to the Pledgor.
9. Purchasers of Collateral
Upon any sale of the Collateral by the Pledgee hereunder (whether by
virtue of the power of sale herein granted, pursuant to judicial process or
otherwise), the receipt of the Pledgee or the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Pledgee or such
officer or be answerable in any way for the misapplication or nonapplication
thereof.
10. Default
The following events shall constitute evidence of a Default by the
Pledgee, said default or defaults constituting the Pledgee's absolute right to
the election of remedies provided for in Section 7 of this Agreement, or any
other remedies available to the Pledgee whether in Law or Equity:
(a) Failure by the Pledgor to observe or perform any covenant contained
in:
(i) SECURED PROMISSORY NOTE; and
(ii) This Collateral Pledge Agreement; or
(b) The failure of the Pledgor to repay the entire amount of the
SECURED PROMISSORY NOTE on the due date;
(c) Any representation or warranty made by the Pledgee or any
statement, certificate or other data furnished by any of them in connection
herewith or with any other Document proves at any time to be incorrect in any
material respect; or
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(d) A judgment or judgments for the payment of money shall be rendered
against the Pledgor which shall remain unsatisfied and in effect for a period of
30 days without a stay of execution; or
(e) Any levy, seizure, attachment execution or similar process shall be
issued or levied on any of the Pledgor's property, which such process could have
a material adverse effect on the business of the Plegdor in the Pledgees'
reasonable judgment; or
(f) The Pledgor shall (i) apply for or consent to the appointment of a
receiver, conservator, trustee or liquidator of all or a substantial part of any
of its assets; (ii) be unable, or admit in writing its inability, to pay its
debts as they mature; (iii) file or permit the filing of any petition, case,
arrangement, reorganization, or the like under any insolvency or bankruptcy law,
or the adjudication of it as a bankrupt, or the making of an assignment for the
benefit of creditors or the consenting to any form of arrangement for the
satisfaction, settlement or delay of debt or the appointment of a receiver for
all or any part of its properties; or (iv) take any action for the purpose of
effecting any of the foregoing; or
(g) An order, judgment or decree shall be entered, or a case shall be
commenced, against the Pledgor, without the application, approval or consent of
the Pledgor by or in any court of competent jurisdiction, approving a petition
or permitting the commencement of a case seeking reorganization or liquidation
of the Pledgor or appointing a receiver, trustee, conservator or liquidator of
the Pledgor, or of all or a substantial part of its assets and the Pledgor, by
any act indicates its approval thereof, consent thereto, or acquiescence
therein, or, in any event, such order, judgment, decree or case shall continue
unstayed, or undismissed and in effect for any period of ninety (30) consecutive
days; or
(h) The Pledgor shall dissolve or liquidate, or be dissolved or
liquidated, or cease to exist legally, or merge or consolidate with, or be
merged or consolidated with or into any other entity other than HUMBOLDT OR
MAPLEWOOD; or
(j) Failure by the Pledgor to pay or perform any other Obligation
whether contingent or otherwise, or if any such other Obligation shall be
accelerated, or if there exists any event of default under any instrument,
document or agreement governing, evidencing or securing such other Obligation;
or
(k) The Pledgee reasonably believes that any material adverse change in
the assets, liabilities, financial condition or business of Pledgor has occurred
since the date of this Agreement, excepting the obligations incurred pursuant to
this transaction, including the purchase of the shares of HUMBOLDT AND MAPLEWOOD
;or
(l) The Pledgor sells, liquidates, transfers or otherwise disposes of
an asset not in strict accordance with the terms of this Agreement other than a
merger or reorganization between Pledgor and either HUMBOLDT OR MAPLEWOOD; or
(m) If at any time the Pledgor reasonably believes in good faith that
the prospect of payment of any Obligation or the performance of any agreement of
the Pledgor or any is materially impaired, or that there is such a change in the
assets, liabilities, financial condition or business of the Pledgor as the
Pledgee believes in good faith materially impairs the Pledgor's security or
increases its risk of performance by the Pledgor.
11. Further Assurances
The Pledgor agrees that it will join with the Pledgee in executing and,
at its own expense, file and refile under the UCC such financing statements,
continuation statements and other documents in such
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offices as the Pledgee may deem necessary or desirable and wherever required or
permitted by law in order to perfect and preserve the Pledgee's security
interest in the Collateral and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of the Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances. assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder.
12. Pledgee as Agent
The Pledgee will hold in accordance with this all items of the
Collateral at any time received under this Agreement. It is expressly understood
and agreed that the obligations of the Pledgee as holder of the Collateral and
interests therein and with respect to the disposition thereof, and otherwise
under this Agreement, are only those expressly set forth in this Agreement.
13. Transfer by Pledgor
The Pledgor will not sell or otherwise dispose of, grant any option
with respect to, or create, incur, assume or suffer to exist any Lien or any
portion of the Collateral (except the Lien created by this Agreement).
14. Representations, Warranties and Covenants of Pledgor
The Pledgor represents and warrants that: (i) it is the legal, record
and beneficial owner of, and has good and marketable title to, the Stock
described in Section 2, subject to no Lien (except the Lien created by this
Agreement); (ii) it has full power, authority and legal right to pledge all such
Stock pursuant to this Agreement; (iii) all the shares of such Stock have been
duly and validly issued, are fully paid and nonassessable; (iv) this Agreement
creates, as security for the Secured Obligations, a valid and enforceable
perfected Lien on all of the Collateral, in favor of the Pledgee for the benefit
of the Pledgee, subject to no Lien in favor of any other Person. The Pledgor
covenants and agrees that it will defend the Pledgee's right, title and Lien in
and to the Collateral against the claims and demands of all Persons; and the
Pledgor covenants and agrees that it will have like title to and right to pledge
any other property at any time hereafter pledged to the Pledgee as Collateral
hereunder.
15. Pledgor's Obligations Absolute, Etc.
The obligations of the Pledgor under this Agreement shall be absolute
and unconditional and shall remain in full force and effect without regard to,
and shall not be released, suspended, discharged, terminated or otherwise
affected by, any circumstance or occurrence whatsoever, including, without
limitation: (i) any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from, any of the above mentioned
documents or any other instrument or agreement referred to therein, or any
assignment or transfer of any thereof; (ii) any waiver, consent, extension,
indulgence or other action or inaction under or in respect of any such
instrument or agreement or this Agreement or any exercise or non-exercise of
any right remedy, power or privilege under or in respect of this Agreement
(iii) any furnishing of any additional security to the Pledgee or any
acceptance thereof or any sale, exchange, release, surrender or realization of
or upon any security by the Pledgee; or (iv) any invalidity, irregularity or
unenforceability of all or part of the obligations or of any security
therefor.
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16. Registration, Etc.
If at any time when the Pledgee shall determine to exercise
its right to sell all or any part of the Pledged Stock pursuant to Section 7,
such Pledged Stock or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as then
in effect the Pledgee may, in its sole and absolute discretion, sell such
Pledged Stock or part thereof by private sale in such manner and under such
circumstances as Pledgee may deem necessary or advisable in order that such sale
may legally be effected without such registration, provided that at least 10
days' notice of the time and place of any such sale shall be given to the
Pledgor. Without limiting the generality of the foregoing, in any such event the
Pledgee, in Its sole and absolute discretion (i) may proceed to make such
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Stock or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Stock or part thereof. In the event of any such sale, the Pledgee shall incur no
responsibility or liability for selling all or any part of the Pledged Stock at
a price which the Pledgee, in its sole and absolute discretion, may in good
▇▇▇▇▇ ▇▇▇▇ reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might be realized if the sale were deferred
until after registration as aforesaid.
17. Termination; Release
After the termination of the this Agreement, and when all Obligations
have been met by the Pledgor to the Pledgee, this Agreement shall terminate, and
the Pledgee, at the request and expense of the Pledgor, will execute and deliver
to the Pledgor a proper instrument or instruments acknowledging the satisfaction
and termination of this Agreement, and will duly assign, transfer and deliver to
the Pledgor (without recourse and without any representation or warranty) such
of the Collateral as may be in the possession of the Pledges and has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Pledgee hereunder.
18. Notices
All notices and other communications hereunder shall be made as
follows:
Pledgor: PetQuarters, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Plegdee: The Sun Valley Trust
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
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Law Office of ▇. ▇▇▇ ▇▇▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
19. Miscellaneous
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto;
provided, however, that the Pledgor may not assign or transfer any of its rights
or obligations hereunder without the prior written consent of the Pledgee. This
Agreement may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought . Without limiting the generality of the
preceding sentence, this Agreement may not be modified by oral agreement even if
such modification is supported by new consideration. This Agreement shall be
construed in accordance with and governed by the law of the State of Idaho. The
headings of the several Sections and subsections in this Agreement are inserted
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Agreement. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which together shall constitute one and the same instrument.
20. No Wasting of Assets of HUMBOLDT Industries, Inc. or MAPLEWOOD
Industries, Inc.
During the term of this Agreement, Pledgor agrees and warrants that it
will not cause any assets of HUMBOLDT or MAPLEWOOD, whether they be cash,
securities, real or personal property, inventory, personnel, trade names,
trademarks, or any other property owned or controlled by HUMBOLDT or MAPLEWOOD
to be transferred, pledged, moved, or in any manner used other than in the
normal course of HUMBOLDT's or MAPLEWOOD's business. Pledgor agrees, that,
although HUMBOLDT will be a wholly owned subsidiary of the Pledgor, Pledgor will
not, either physically or by any accounting method, convert HUMBOLDT's or
MAPLEWOOD's assets for the use of Pledgor. Pledgor specifically affirms that
such an action would cause a wasting of HUMBOLDT's or MAPLEWOOD's assets
severely impair the Pledgee's security, and constitute a Default under all of
the terms of this Agreement.
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers, duly authorized, as of
the date first above written.
Pledgor
PetQuarters, Inc.
BY /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
Title: President
Pledgor
PQ Acquisition Company, Inc.
BY /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
Title: President
The Sun Valley Trust, Pledgee
BY /s/
------------------------------------------
Trustee
