EXHIBIT 10.34
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") made as of the 28th day of
February 2002, among PAT SERVICES, INC., the sole shareholder of Arthur
Treacher's, Inc., a Delaware corporation with an office at 5 Dakota Drive, Suite
303, Lake Success, New York 11042 (the "Corporation") (such shareholder, with
the same address as the Corporation, hereinafter referred to as the "Pledgor"),
and DIGITAL CREATIVE DEVELOPMENT CORPORATION, a Delaware corporation having an
office 101 Larkspur Circle, Larkspur, California 94939 ("Secured Party").
W I T N E S S E T H :
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WHEREAS, the Pledgor owns 100% of the issued and outstanding capital stock
of the Corporation;
WHEREAS, the Pledgor has on this day become a debtor under that certain
Amended and Restated Senior Secured Promissory Note of even date herewith (the
"Note") to the Secured Party; and
WHEREAS, the Pledgor has agreed to secure the Pledgor's debts,
obligations, and liabilities under the Note with a pledge of 41,594,709 shares
of common stock, $.0001 par value per share of the Corporation (the "Common
Stock"), which represents 80% of the outstanding capital stock of the
Corporation; and
WHEREAS, the Pledgor will derive benefits from the loan evidenced by
the Note and the transactions giving rise thereto; and
WHEREAS, the Pledgor has agreed to execute and deliver this Agreement with
the Secured Party;
NOW THEREFORE, in consideration of these premises, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Pledged Interests. The term "Pledged Stock" as used herein
shall mean and include 41,594,709 shares of Common Stock, represented by one or
more stock certificates of the Corporation and any stock certificate, option or
rights issued by the Corporation as an addition to, in substitution of, or in
exchange for any such 41,594,709 shares, and any and all proceeds thereof, now
or hereafter owned or acquired by the Pledgor.
2. Pledge.
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The Pledgor agrees as follows:
a) As collateral security for the due payment and performance
of all indebtedness and other liabilities and obligations of the Pledgor under,
arising out of, or in any way connected with the Note and all instruments,
agreements and documents executed, issued and delivered pursuant thereto,
including, without limitation, this Agreement, whether now existing or hereafter
arising (all hereinafter referred to collectively as the "Obligations"), the
Pledgor hereby pledges, assigns, hypothecates, delivers and sets over to the
Secured Party all the Pledged Stock owned by the Pledgor, and hereby grants to
the Secured Party a first lien and security interest in all the Pledged Stock
and in the proceeds thereof.
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b) If the Pledgor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital), option or rights, whether
as an addition to, in substitution of, or in exchange for any shares of the
Pledged Stock, or otherwise, the Pledgor shall accept any such instruments as
the Secured Party's agent, shall hold them in trust for the Secured Party, and
shall deliver them forthwith to the Secured Party in the exact form received,
with the Pledgor's endorsement when necessary and/or appropriate stock powers
duly executed in blank, to be held by the Secured Party, subject to the terms
hereof, as further collateral security for the Obligations.
c) In the event of the occurrence and continuation of any
Event of Default defined or specified in the Note, the Secured Party or his
nominee may, in addition to any other rights the Secured Party may possess in
such event and without notice, exercise the right to receive dividends payable
thereon, the right to exchange, at its discretion, any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
readjustment of the Corporation or upon the exercise by the Corporation of any
right, privilege or option pertaining to any shares of the Pledged Stock, and in
connection therewith, to deposit and deliver any and all of the Pledged Stock
with any committee, depository, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine, all without liability
except to account for property actually received by him, but the Secured Party
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.
d) In the event of the occurrence of any Event of Default
defined or specified in the Note, all distributions with respect to any part of
the Pledged Stock shall be paid to the Secured Party to be held by the Secured
Party as additional security hereunder until applied to the Obligations.
e) In the event of the occurrence and continuation of any
Event of Default defined or specified in the Note, the Secured Party 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)
to or upon the Pledgor or any other person (all and each of which demands,
advertisements and/or notices are, to the extent permitted by law, hereby
expressly waived), may forthwith collect, receive, appropriate and realize upon
the Pledged Stock, or any part thereof, take title to and hold the Pledged
Stock, or any part thereof, and/or may forthwith, to the extent permitted by
applicable law, sell, assign, give an option or options to purchase, contract to
sell or otherwise dispose of and deliver said Pledged Stock, or any part
thereof, in one or more parcels at public or private sale or sales, at any
exchange, broker's board or at any of the Secured Party's offices or elsewhere
at such prices and on such terms (including, without limitation, a requirement,
if necessary under applicable securities laws, that any purchaser of all or any
part of the Pledged Stock shall be required to purchase the Pledged Stock for
investment and without any intention to make a distribution thereof) as shall be
commercially reasonable, for cash or on credit or for future delivery without
assumption of any credit risk, with the right to the Secured Party or any
purchaser upon any such sale or sales, whether public or private, to purchase
the whole or any part of the Pledged Stock so sold, free of any right in the
Pledgor, which right is hereby expressly waived and released.
f) The proceeds of any collection, recovery, receipt, appropriation,
realization or sale as aforesaid, shall be applied as follows:
First, to the 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 Stock or in any way relating to the rights of the Secured Party
hereunder, including reasonable attorneys' fees and legal expenses;
Second, to the satisfaction of the Obligations;
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Third, to the payment of any other amounts required by applicable law
(including, without limitation, Section 9-504(1)(c) of the Uniform Commercial
Code); and
Fourth, to the Pledgor to the extent of the surplus
proceeds, if any.
g) The Secured Party shall give not less than ten (10) days'
notice of the time and place of any public or private sale and such notice shall
be deemed to be reasonable notification of such matters so long as such notice
is given in accordance with ss.8 hereof and, with respect to a private sale,
includes a description of the sale terms.
3. Representations and Warranties. The Pledgor represents and warrants
that: ------------------------------
a) The Pledgor is, as of the date hereof, the direct and beneficial owner
of the number of shares of the Pledged Stock pledged hereby;
b) The Pledged Stock constitutes eighty percent (80%) of the issued and
outstanding shares of capital stock of the Corporation;
c) All of the shares of the Pledged Stock have been duly and
validly issued, are fully paid and non-assessable and are owned by the Pledgor
free and clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance
or any security interest in such interest or the proceeds thereof except for the
security interests granted to the Secured Party;
d) Upon delivery of the Pledged Stock to the Secured Party or
an agent of the Secured Party, this Pledge Agreement creates and grants a valid
first lien on and perfected security interest in the shares of the Pledged Stock
and the proceeds thereof, subject to no prior security interest, lien, charge or
encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Pledgor which would include
the Pledged Stock;
e) The Pledgor has the power and authority to execute, deliver and perform
this Agreement. All necessary action to authorize the execution, delivery and
performance of this Agreement has been duly and properly taken;
f) The execution, delivery and performance of this Agreement
will not i) violate any provision of law or any order of any court or other
agency or instrumentality of government, or any material indenture, agreement or
other instrument to which the Pledgor is a party or by which any of the property
or assets of the Pledgor is bound, or ii) except as set forth on Schedule 1
hereto, be in conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or iii) except as contemplated by this Agreement, result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Pledgor, the result of any
of which would materially adversely affect enforcement of this Agreement; and
g) There are no actions, suits or
proceedings (whether or not purportedly on behalf of
the Pledgor), pending or, to the best of the
Pledgor's knowledge, threatened against or affecting
the Pledgor, at law or in equity or before or by any
Federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which involve
or affect this Agreement, the Pledged Stock or the
assignment of the Pledged Stock. Pledgor is not in
default with respect to any judgment, writ,
injunction, decree, rule or regulation of any court
or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or
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instrumentality, domestic or foreign (having
jurisdiction) which could directly or indirectly
affect the performance under this Agreement.
h) Pledgor is not required to give
any notice to, make any filing with, or obtain any
authorization, consent or approval of any
governmental entity or any other person for the
execution, delivery and performance of this Agreement
and the Note.
4. Covenants.
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a) The Pledgor hereby covenants that for so long as the
Obligations shall be outstanding and unpaid, in whole or in part, the Pledgor
will not sell, convey or otherwise dispose of any shares of the Pledged Stock or
any interest therein, nor will the Pledgor create, incur or permit to exist any
pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever
with respect to any of the Pledged Stock or the proceeds thereof other than that
created hereby, nor will the Pledgor consent to or approve the issuance of any
additional shares of any class of the issuer of the Pledged Stock without the
Secured Party's prior written consent.
b) The Pledgor warrants and will
defend the Secured Party's right, title and security
interest in and to the Pledged Stock against the
claims of any person, firm, corporation or other
entity.
c) Without the prior written
consent of the Secured Party, Pledgor shall have no
right to reach the Collateral or to withdraw any part
thereof from the possession of the Secured Party or
to in any way control the Secured Party regarding the
disposition of the Collateral, except as otherwise
provided in this Agreement or by operation of law.
d) The Pledgor will warrant and
defend the title of the Secured Party to the
Collateral against the claims and demands of all
persons.
5. Further Assurances. The Pledgor shall at any time and from
time to time upon the written request of the Secured Party, execute and deliver
such further documents and do such further acts and things as the Secured Party
may reasonably request in order to effect the purposes of this Agreement
including, without limitation, delivering to the Secured Party on the date
hereof or at any time hereafter irrevocable proxies in respect of the Pledged
Stock in the form of Exhibit A annexed hereto.
6. Duties.
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a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Stock while held hereunder and except as otherwise
provided herein, the Secured Party shall have no duty or liability to preserve
rights pertaining thereto, and shall be relieved of all responsibility for the
Pledged Stock upon surrendering it to the Pledgor in the share amount set forth
on Schedule A annexed hereto.
b) No course of dealing between the Pledgor and the Secured
Party, nor any failure to exercise, nor any delay in exercising, on the part of
the Secured Party, any right, power or privilege hereunder or under the Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
c) So far as the Pledgor is concerned, the Secured Party may,
at any time and from time to time, without the consent of, or notice to, the
Pledgor, and without impairing or releasing any of the obligations of the
Pledgor, upon or without any terms or conditions and in whole or in part, sell,
exchange,
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release, surrender, realize upon or otherwise deal with, in any manner and in
any order, any other property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing the Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset or right with respect thereto, all in accordance with
and subject to applicable agreements with respect to such other property or
applicable law.
d) The rights and remedies herein provided, and provided in
the Note and in all other agreements, instruments and documents delivered
pursuant to the Note, are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law including, without limitation, the
rights and remedies of a the Secured Party under the Uniform Commercial Code.
e) The provisions of this Agreement
are severable, and if any clause or provision shall
be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or
provision in any other jurisdiction, or any other
clause or provision in this Agreement in any
jurisdiction.
7. Notices. All notices and other communications to the
Pledgor pursuant to this Agreement shall be in writing, sent by letter
(delivered by hand or sent by registered or certified mail, return receipt
requested) addressed to the Pledgor at its address set forth above, and shall be
deemed to have been given on the day delivered by hand or on the earlier of
actual receipt by the Pledgor or three (3) days after deposited in the mails,
postage prepaid.
8. Successors. This Agreement shall
inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto.
Notwithstanding the foregoing, the Pledgor shall not
have the right to assign or delegate any of its
rights or obligations hereunder without the prior
written consent of the Secured Party, and any
purported assignment or delegation in the absence of
such consent shall be void.
9. Governing Law; Jurisdiction. (i)
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK
WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF
THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S
CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY. (ii) EACH PARTY CONSENTS THAT ANY
LEGAL ACTION OR PROCEEDING AGAINST IT UNDER, ARISING
OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT,
OR ANY OTHER INSTRUMENT OR DOCUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH, SHALL BE BROUGHT
EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK OR IF SUCH COURT
LACKS SUBJECT MATTER JURISDICTION THEN IN ANY COURT
OF THE STATE OF NEW YORK. EACH PARTY, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY
AND IRREVOCABLY
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CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF
ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS.
EACH PARTY AGREES THAT TO THE EXTENT PERMITTED BY
APPLICABLE LAW PERSONAL JURISDICTION OVER IT MAY BE
OBTAINED BY THE DELIVERY OF A SUMMONS (POSTAGE
PREPAID) IN ACCORDANCE WITH THE PROVISIONS OF SECTION
7 OF THIS AGREEMENT. ASSUMING DELIVERY OF THE SUMMONS
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 7 OF
THIS AGREEMENT, EACH PARTY HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES ANY ALLEGED LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OF FORUM NON CONVENIENS
OR ANY SIMILAR BASIS.
10. Counterparts. This Agreement may be signed in any ------------ number
of counterparts with the same effect as if the signatures hereto and thereto
were upon the same instrument.
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IN WITNESS WHEREOF, the parties have caused these presents to
be duly executed and delivered the day and year first above written.
PAT SERVICES, INC.
By:_______________________________
Name:
Title:
DIGITAL CREATIVE DEVELOPMENT
CORPORATION, a Delaware corporation
By:_____________________________
Name:
Title:
This Corporation is signing below to confirm its consent to the pledge described
above.
ARTHUR TREACHER'S, INC.
By:__________________________
Name:
Title:
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EXHIBIT A
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS that the undersigned does
hereby make, constitute and appoint DIGITAL CREATIVE DEVELOPMENT CORPORATION, a
Delaware corporation ("DCDC"), its true and lawful attorney, for it and in its
name, place and stead, to act as its proxy in respect of all of the shares of
capital stock of ARTHUR TREACHER'S INC., a Delaware corporation (hereinafter
referred to as the "Corporation"), which it now or hereafter may own or hold,
including, without limitation, the right, on its behalf, to demand the call by
any proper officer of the Corporation pursuant to the provisions of its
Certificate of Incorporation or By-Laws and as permitted by law of a meeting of
its shareholders and at any such meeting of shareholders, annual, general or
special, to vote for the transaction of any and all business that may come
before such meeting, or at any adjournment thereof, including, without
limitation, the right to vote for the sale of all or any part of the assets of
the Corporation and/or the liquidation and dissolution of the Corporation;
giving and granting to its said attorney full power and authority to do and
perform each and every act and thing whether necessary or desirable to be done
in and about the premises, as fully as it might or could do if personally
present with full power of substitution, appointment and revocation, hereby
ratifying and confirming all that its said attorney shall do or cause to be done
by virtue hereof.
This Proxy is given to DCDC in order to carry out the covenant of the
undersigned contained in a certain Pledge Agreement of even date herewith
between the undersigned and DCDC and this Proxy shall not be revocable or
revoked by the undersigned, shall be binding upon its successors and assigns
until the payment in full of all of the Obligations (as defined in the Pledge
Agreement) and may be exercised only after an Event of Default has occurred and
is continuing under and as specified in the Note (as defined in such Pledge
Agreement). This Proxy shall survive more than eleven (11) months.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Irrevocable Proxy as of the 28th day of February, 2002.
PAT SERVICES, INC.
By:________________________________
Name:
Title:
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