Exhibit 10.4
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (as amended, modified or supplemented from
time to time in accordance with its terms, the "Agreement"), dated as of January
26, 2002, is made by SF HOLDINGS GROUP, INC., a Delaware corporation, whose
mailing address is 000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 (the "Grantor"),
in favor of TCW/CRESCENT MEZZANINE, L.L.C., in its capacity as collateral agent
for the purchasers (the "Purchasers") party to the Guaranty Agreement (as
hereinafter defined) (the "Collateral Agent").
RECITALS:
A. The Grantor is a party to that certain Guaranty Agreement dated
as of the date hereof (as amended, supplemented or otherwise modified from time
to time, the "Guaranty Agreement"), between the Grantor, the Purchasers and the
Collateral Agent. All terms, covenants, conditions, provisions and requirements
of the Guaranty Agreement are incorporated by reference in this Agreement.
B. The terms of the Guaranty Agreement require that the Grantor
execute and deliver this Agreement in order to secure the payment and
performance by the Grantor of all of its Obligations under the Guaranty
Agreement and the Collateral Documents to which the Grantor is a party
(collectively, the "Secured Obligations").
AGREEMENT
NOW, THEREFORE, in order to induce the Purchasers to purchase the
Notes, and for other good and valuable consideration, the receipt and adequacy
of which hereby is acknowledged, the Grantor hereby represents, warrants,
covenants, agrees and pledges as follows:
1. Definitions. This Agreement is the Pledge Agreement referred to
in the Guaranty Agreement and is one of the Collateral Documents referred to
therein. Terms defined in the Guaranty Agreement and not otherwise defined in
this Agreement shall have the meanings given those terms in the Guaranty
Agreement as though set forth herein in full unless the context otherwise
requires. In addition, the following terms shall have the meanings respectively
set forth after each:
"Bankruptcy Default" means a Default or Event of Default under
Sections 10.01(a)(7) or 10.01(a)(8) of the Guaranty Agreement without giving
effect to the passage of time.
"Capital Stock" has the meaning assigned in the Guaranty Agreement.
"Certificates" means all certificates, instruments or other
documents now or hereafter representing or evidencing any Pledged Securities.
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"Collateral Documents" means this Agreement and any other
agreements, instruments, financing statements or other documents that evidence
or set forth the security interest of the Collateral Agent in the Pledged
Collateral.
"Default Rate" means the lesser of (a) the maximum rate of interest
allowed by applicable law, and (b) two percent (2%) per annum in excess of the
interest rate borne by the Notes.
"Xxxxx" means The Xxxxx Group, Inc.
"Intercompany Notes" means all intercompany notes issued in favor of
the Grantor by any of the current and future Restricted Subsidiaries of the
Grantor, including Xxxxx and Sweetheart.
"Laws" means, collectively, all international, foreign, federal,
state and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"Notes" have the meaning assigned in the Guaranty Agreement.
"Payment Default" means a Default under Sections 10.01(a) of the
Guaranty Agreement, without giving effect to any notice and/or cure periods.
"Pledged Collateral" means any and all property of the Grantor now
or hereafter pledged and delivered to the Collateral Agent pursuant to and under
this Agreement, and includes without limitation the Pledged Securities, the
Certificates representing or evidencing same, the Intercompany Notes, all
Collateral Documents related thereto, any and all proceeds and products of any
of the foregoing, and any and all collections, dividends, distributions,
redemption payments or liquidation payments with respect to any of the
foregoing.
"Pledged Securities" means (i) prior to the refinancing of the
Indebtedness evidenced by the 10 1/2% Senior Subordinated Notes due 2003 of
Sweetheart Cup, (A) ninety percent (90%) of the issued and outstanding Capital
Stock of Sweetheart, (B) forty-eight percent (48%) of the issued and outstanding
Voting Stock of Sweetheart, (C) all of the issued and outstanding non-Voting
Stock of Sweetheart, and (D) any and all issued and outstanding Capital Stock of
Xxxxx, (ii) after the refinancing of the Indebtedness evidenced by the 10 1/2%
Senior Subordinated Notes due 2003 of Sweetheart Cup, any and all issued and
outstanding Capital Stock of each Restricted Subsidiary now or hereafter
directly owned by Grantor, including Sweetheart and Xxxxx and their respective
successors, (iii) any and all securities now or hereafter issued in
substitution, exchange or replacement thereof, or with respect thereto, (iv) any
and all warrants, options and other rights to subscribe to or acquire any
additional Capital Stock of each Restricted Subsidiary owned by the Grantor, and
(v) any and all additional Capital Stock hereafter acquired by the Grantor in
each Restricted Subsidiary.
"Restricted Subsidiary" has the meaning assigned in the Guaranty
Agreement.
"Sweetheart" means Sweetheart Holdings Inc. and its subsidiaries.
"Sweetheart Cup" means Sweetheart Cup Company, Inc., a Delaware
corporation.
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2. Creation of Security Interest.
2.1. Pledge of Pledged Collateral. The Grantor hereby pledges and
grants to the Collateral Agent a security interest in and to all Pledged
Collateral owned by the Grantor together with all products, proceeds, dividends,
redemption payments, liquidation payments, cash, instruments and other property,
and any and all rights, titles, interests, privileges, benefits and preferences
appertaining or incidental to the Pledged Collateral. The security interest and
pledge created by this Section shall continue in effect so long as any of the
Secured Obligations are owed to the Collateral Agent.
2.2. Delivery of Certain Pledged Collateral. On or before ten
(10) Business Days after the date hereof, the Grantor shall cause to be pledged
and delivered to the Collateral Agent the following Pledged Collateral:
(a) Certificates evidencing all issued and outstanding Pledged
Securities; and
(b) All issued and outstanding Intercompany Notes.
Additional Pledged Collateral may from time to time be delivered to the
Collateral Agent by agreement between the Collateral Agent and the Grantor or as
required by the Guaranty Agreement. All Certificates at any time delivered to
the Collateral Agent shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance reasonably satisfactory to the Collateral
Agent. The Collateral Agent shall hold all Certificates pledged hereunder
pursuant to this Agreement unless and until released in accordance with Sections
2.3 or 12 of this Agreement. The Intercompany Notes, when delivered and pledged
to the Collateral Agent hereunder, shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Collateral Agent. The Collateral Agent shall hold the Intercompany Notes
pursuant to this Agreement until released in accordance with Sections 2.3 or 12
of this Agreement, subject, however, to the provisions of Section 11 and other
related provisions of this Agreement.
2.3. Release of Pledged Collateral. Pledged Collateral that is
required to be released from the pledge and security interest created by this
Agreement in order to permit the Grantor to consummate any disposition of stock
or assets, merger, consolidation, amalgamation, investment, acquisition,
dividend or distribution that the Grantor is entitled to consummate pursuant to
the Guaranty Agreement, shall be so released by the Collateral Agent at such
times and to the extent necessary to permit the Grantor to consummate such
permitted transactions promptly following the Collateral Agent's receipt of a
written request therefore by the Grantor (which request shall be accompanied by
all documentation required under the Guaranty Agreement in connection with such
request) specifying the purpose for which release is requested and such further
certificates or other documents as the Collateral Agent reasonably shall request
in its discretion to confirm that the Grantor is permitted to consummate such
permitted transaction together with any other documents as may be required under
the Guaranty Agreement. Pledged Collateral that is required to be released from
the pledge and security interest created by this Agreement with respect to any
Restricted Subsidiary that the Board of
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Directors shall designate to be an Unrestricted Subsidiary in accordance with
the provisions of the Guaranty Agreement shall be released in accordance with
the foregoing provisions of this Section 2.3. Any request for any permitted
release shall be transmitted to the Collateral Agent. Subject to the provisions
of Section 11 and other related provisions of this Agreement, the Collateral
Agent, at the expense of the Grantor, promptly shall redeliver all Certificates
or other Pledged Collateral (other than cash) then subject to this Agreement and
shall execute and deliver to the Grantor all documents requested by the Grantor,
which documents shall be prepared by the Grantor, that are reasonably necessary
to release Pledged Collateral of record whenever the Grantor shall be entitled
to the release thereof in accordance with Section 12 of this Agreement or this
Section 2.3. Any such action taken by the Collateral Agent shall be without
warranty by or recourse to the Collateral Agent, except as to the absence of any
prior assignments by the Collateral Agent of its interests in the Pledged
Collateral, and shall be at the expense of the Grantor. The Collateral Agent may
conclusively rely on any certificate delivered to it by the Grantor stating that
the execution of such documents and release of the Pledged Collateral is in
accordance with and permitted by the terms of this Agreement and the Guaranty
Agreement.
2.4. Representations and Warranties Regarding Pledged Securities.
(a) Schedule "A", annexed hereto and made a part hereof, sets
forth with respect to the Grantor (i) the name of each Restricted
Subsidiary of the Grantor and (ii) with respect to each such Restricted
Subsidiary (x) the number of shares of each class of Capital Stock of
such Subsidiary that is issued and outstanding and (y) the number of
shares of each class of Capital Stock of such Subsidiary that is held
by the Grantor.
(b) As of the date hereof, except as set forth on Schedule "A"
there are no other shares of Capital Stock required to be pledged to
the Collateral Agent under the terms of this Agreement.
(c) As of the date hereof, all of the Pledged Securities of each
Restricted Subsidiary are free and clear of any security interest,
claim, lien, limitation on voting rights or encumbrance.
2.5. Representations and Warranties Regarding Intercompany Notes.
(a) Schedule "B", annexed hereto and made a part hereof, sets
forth with respect to each Restricted Subsidiary of the Grantor the
amount of each Intercompany Note of such Restricted Subsidiary that is
issued and outstanding and that is held by the Grantor.
(b) As of the date hereof, except as set forth on Schedule "B"
there are no other Intercompany Notes required to be pledged to the
Collateral Agent under the terms of this Agreement.
3. Security for Obligations. This Agreement and the pledges and
security interests granted herein secure the payment when due, in full in cash,
and full performance of, all Secured Obligations now or hereafter existing under
the Guaranty Agreement and the Collateral
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Documents, whether for principal, interest, premium, if any, fees, expenses or
otherwise, including without limitation all obligations of the Grantor now or
hereafter existing under this Agreement, and all interest that accrues or
accretes on all or any part of any of the Secured Obligations after the filing
of any petition or pleading against the Grantor for a proceeding under any
Bankruptcy Law.
4. Further Assurances. The Grantor agrees that at any time, and from
time to time, at the expense of the Grantor, it will promptly prepare, execute,
deliver and file or record all further financing statements, instruments and
documents, and will take all further actions, including causing the Grantor's
Restricted Subsidiaries to so execute, deliver, file or take other actions, that
may be necessary or desirable, or that the Collateral Agent reasonably may
request, in order to perfect and protect any pledge or security interest granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral and to preserve and
protect the Pledged Collateral, including, without limitation, payment prior to
delinquency of all taxes, assessments and other charges imposed on or relating
to the Pledged Collateral. The Grantor hereby consents and agrees that the
issuer of, or obligors on, the Pledged Collateral, or any registrar or transfer
agent or trustee for any of the Pledged Collateral, shall be entitled to accept
the provisions of this Agreement as conclusive evidence of the right of the
Collateral Agent to effect any transfer or exercise any right hereunder
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by the Grantor or any other Person to such issuers or such
obligors or to any such registrar or transfer agent or trustee. In addition to
the extent permitted by applicable law, Grantor hereby authorizes Collateral
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Pledged Collateral without the
signature of Grantor.
5. Voting Rights; Dividends; etc. So long as no Bankruptcy Default,
Payment Default or Event of Default under the Guaranty Agreement occurs and
remains continuing:
5.1. Voting Rights. The Grantor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Pledged Securities,
or any part thereof, for any purpose not inconsistent with the terms of this
Agreement or the Guaranty Agreement; provided, however, that the Grantor shall
not exercise, or shall refrain from exercising, any such right if it would
result in a Default or an Event of Default.
5.2. Dividend and Distribution Rights. The Grantor shall be
entitled to receive and to retain and use any and all dividends or distributions
paid in respect of the Pledged Securities other than distributions required to
be deposited with the Collateral Agent pursuant to the terms of the Guaranty
Agreement; provided, however, that any and all such dividends or distributions
received in the form of Capital Stock shall be, and the Certificates
representing such Capital Stock forthwith shall be delivered to the Collateral
Agent to hold as, Pledged Collateral and shall, if received by the Grantor, be
received in trust for the benefit of the Collateral Agent, be segregated from
the other property of the Grantor and forthwith be delivered to the Collateral
Agent as Pledged Collateral in the same form as so received (with any necessary
endorsements).
5.3. Rights Pursuant to Pledged Collateral. Prior to the
occurrence of a Bankruptcy Default, Payment Default or Event of Default, the
Grantor shall have the sole power,
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right and authority to (a) make demands for payment under the Intercompany Notes
and (b) exercise the rights and remedies provided for in the Intercompany Notes
(provided that no holder of any Intercompany Note other than the Grantor shall
be entitled to demand payment of any Intercompany Note prior to the acceleration
of the obligations evidenced by the Notes pursuant to the Guaranty Agreement.)
6. Rights During Event of Default. When a Bankruptcy Default,
Payment Default or Event of Default has occurred and is continuing:
6.1. Voting, Dividend and Distribution Rights. At the option of
the Collateral Agent, all rights of the Grantor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
Section 5.1 above, and to receive the dividends and distributions which it would
otherwise be authorized to receive and retain pursuant to Section 5.2 above,
shall cease upon one day's prior written notice to the Grantor, and all such
rights shall thereupon become vested in the Collateral Agent who shall thereupon
have the sole right to exercise such voting and other consensual rights and to
receive such dividends and distributions in accordance with the provisions of
the Guaranty Agreement.
6.2. Dividends and Distributions Held in Trust. All dividends and
other distributions which are received by the Grantor contrary to the provisions
of this Agreement or of the Guaranty Agreement shall be received in trust for
the benefit of the Collateral Agent, shall be segregated from other funds of the
Grantor and forthwith shall be paid over to the Collateral Agent for deposit in
the Collateral Account as Pledged Collateral in the same form as so received
(with any necessary endorsements) and held in the Collateral Account in
accordance with the provisions of the Guaranty Agreement.
6.3. Irrevocable Proxy. The Grantor hereby revokes all previous
proxies with regard to the Pledged Securities and appoints the Collateral Agent
as its proxyholder to attend and vote at any and all meetings of the
shareholders of the corporation(s) which issued the Pledged Securities, and any
adjournments thereof, held on or after the date of the giving of this proxy and
prior to the termination of this proxy and to execute any and all written
consents of shareholders of such corporation(s) executed on or after the date of
the giving of this proxy and prior to the termination of this proxy, with the
same effect as if the Grantor had personally attended the meetings or had
personally voted its shares or had personally signed the written consent;
provided, however, that (a) the proxyholder shall have rights hereunder only
upon the occurrence and during the continuance of a Bankruptcy Default, Payment
Default or Event of Default, and (b) the Collateral Agent shall have given the
notice to the Grantor specified by Section 6.1. The grantor hereby authorizes
the Collateral Agent to substitute another person as the proxyholder and, upon
the occurrence or during the continuance of any Bankruptcy Default, Payment
Default or Event of Default, hereby authorizes and directs the proxyholder to
file this proxy and the substitution instrument with the secretary of the
appropriate corporation. This proxy is coupled with an interest and is
irrevocable until such time as all Secured Obligations have been paid and
performed in full.
6.4. Collections. All collections or other amounts received by
the Grantor with respect to the Intercompany Notes or with respect to any
security therefor following the occurrence and during the continuance of a
Payment Default, a Bankruptcy Default or an
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Event of Default, or if any such collections or other amounts constitute funds
required to be deposited with the Collateral Agent pursuant to the provisions of
the Guaranty Agreement, shall be paid over to the Collateral Agent as provided
in the Guaranty Agreement.
7. Transfers and Other Liens. The Grantor agrees that, except as
specifically permitted under the Guaranty Agreement and the Option Agreement, it
will not (i) sell, assign, exchange, transfer or otherwise dispose of, or
contract to sell, assign, exchange, transfer or otherwise dispose of, or grant
any option with respect to, any of the Pledged Collateral, (ii) create or permit
to exist any Lien upon or with respect to any of the Pledged Collateral, except
for Liens in favor of the Collateral Agent, or (iii) take any action with
respect to the Pledged Collateral which is inconsistent with the provisions or
purposes of the Guaranty Agreement, this Agreement or any other Collateral
Document.
8. Collateral Agent Appointed Attorney-in-Fact. The Grantor hereby
irrevocably appoints the Collateral Agent as the Grantor's attorney-in-fact,
effective upon and during the continuance of a Default or Event of Default, with
full authority in the place and stead of the Grantor, and in the name of the
Grantor, or otherwise, from time to time, in the Collateral Agent's sole and
absolute discretion for the benefit of the Purchasers to do any of the following
acts or things: (a) to do all acts and things and to execute all documents
necessary or advisable to perfect and continue perfected the security interests
created by this Agreement and to preserve, maintain and protect the Pledged
Collateral; (b) to do any and every act which the Grantor is obligated to do
under this Agreement and which the Grantor shall have failed to do; (c) to
prepare, sign, file and record, in the Grantor's name, any financing statement
covering the Pledged Collateral; and (d) to endorse and transfer all of the
applicable portion of the Pledged Collateral upon foreclosure thereon by the
Collateral Agent; provided, however, that the Collateral Agent shall be under no
obligation whatsoever to take any of the foregoing actions, and the Collateral
Agent shall have no liability or responsibility for any act (other than the
Collateral Agent's own gross negligence or willful misconduct) or omission taken
with respect thereto. The Grantor hereby agrees to repay immediately upon demand
all reasonable costs and expenses, including attorneys' fees, incurred or
expended by the Collateral Agent in exercising any right or taking any action
under this Agreement, together with interest thereon at the Default Rate from
the date incurred. The parties hereto agree that the Collateral Agent shall have
no obligation to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder.
9. Collateral Agent May Perform Secured Obligations. If the Grantor
fails to perform any Secured Obligation, and any applicable cure period has
expired, the Collateral Agent may, but without any obligation to do so and
without demand upon or prior notice to the Grantor, perform the same and take
such other action as the Collateral Agent may deem necessary or desirable to
protect the Pledged Collateral or the Collateral Agent's security interests
therein, the Collateral Agent being hereby authorized (without limiting the
general nature of the authority hereinabove conferred) to pay, purchase, contest
and compromise any Lien which in the reasonable judgment of the Collateral Agent
appears to be prior or superior to the Collateral Agent's security interests
hereunder (other than Liens described in clauses (viii) of the definition of
Permitted Liens in the Guaranty Agreement), and in exercising any such powers
and authority to pay necessary expenses, employ counsel and pay reasonable
attorneys' fees, all
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of which shall be deemed to be Secured Obligations at the expense of the
grantor. The Collateral Agent shall notify the Grantor as soon as practicable of
any such action taken by the Collateral Agent, provided that the failure of the
Collateral Agent to so notify the Grantor shall not relieve the grantor of any
of its obligations hereunder. The Grantor hereby agrees to repay upon demand all
sums so expended by the Collateral Agent, together with interest at the Default
Rate from the date incurred. Except as expressly set forth in Section 16.11
hereof, the Collateral Agent shall be under no duty or obligation to (i)
preserve, maintain or protect the Pledged Collateral or any of the Grantor's
rights or interest therein, (ii) exercise any voting rights with respect to the
Pledged Collateral, whether or not a Bankruptcy Default, Payment Default or
Event of Default has occurred or is continuing, or (iii) except as otherwise
provided herein or in any other Collateral Document, make or give any notices of
default, presentments, demands for performance, notices of nonperformance or
dishonor, protests, notices of protest or notice of any other nature whatsoever
in connection with the Pledged Collateral on behalf of the Grantor or any other
person having any interest therein; and the Collateral Agent does not assume and
shall not be obligated to perform the obligations of the Grantor, if any, with
respect to the Pledged Collateral.
10. Reasonable Care. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially similar to that which the Collateral Agent accords its own
property, it being understood that the Collateral Agent shall not have any
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral, or (iii) any act
which does not constitute gross negligence.
11. Events of Default and Remedies.
11.1. The occurrence of any Event of Default under the Guaranty
Agreement shall constitute an Event of Default under this Agreement.
11.2. Rights Upon Event of Default. Upon the occurrence and
during the continuance of an Event of Default, the Grantor shall be in default
hereunder and the Collateral Agent shall, except as otherwise expressly provided
in the Series A Notes, have in any jurisdiction where enforcement is sought, in
addition to all other rights and remedies that the Collateral Agent may have
under this Agreement and under applicable Laws or in equity, all rights and
remedies of a secured party under the Uniform Commercial Code as enacted in any
such jurisdiction, and in addition the following rights and remedies, all of
which may be exercised with or without further notice to the Grantor except such
notice as may be specifically required herein:
(a) to notify any issuer of any Pledged Securities, and any and
all other obligors on any Pledged Collateral, that the same has been
pledged to the Collateral Agent and that all dividends and other
payments thereon are to be made directly and exclusively to the
Collateral Agent; to renew, extend, modify, amend, accelerate, accept
partial payments on, make allowances and adjustments and issue credits
with respect to, release, settle, compromise, compound, collect or
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otherwise liquidate, on terms acceptable to the Collateral Agent, in
whole or in part, the Pledged Collateral and any amounts owing thereon
or any guaranty or security therefor, and to give all consents,
waivers and ratifications with respect to the Pledged Collateral and
exercise all other rights (including voting rights), powers and
remedies and otherwise act with respect thereto as if the Collateral
Agent were the owner thereof;
(b) to enforce payment and prosecute any action or proceeding
with respect to any and all of the Pledged Collateral and take or
bring, in the Collateral Agent's name or in the name of the Grantor,
all steps, actions, suits or proceedings deemed by the Collateral
Agent necessary or desirable to effect collection of or to realize
upon the Pledged Collateral;
(c) in accordance with applicable Laws, to take possession of the
Pledged Collateral with or without judicial process;
(d) to endorse, in the name of the Grantor, all checks, notes,
drafts, money orders, instruments and other evidences of payment
relating to the Pledged Collateral;
(e) to transfer any or all of the Pledged Collateral into the
name of the Collateral Agent or its nominee or nominees; and
(f) in accordance with applicable Laws, to foreclose the Liens
and security interests created under this Agreement or under any other
agreement relating to the Pledged Collateral by any available judicial
procedure or without judicial process, and to sell, assign or
otherwise dispose of the Pledged Collateral or any part thereof,
either at public or private sale or at any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or for
future delivery, or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to the
Collateral Agent; all at the sole option of and in the sole discretion
of the Collateral Agent.
11.3. Notice of Sale. The Collateral Agent shall give the Grantor
at least ten (10) days' written notice of any sale of all or any part of the
Pledged Collateral. Any sale of the Pledged Collateral shall be held at such
time or times and at such place or places as the Collateral Agent my determine
in the exercise of its sole and absolute discretion. The Collateral Agent may
bid (which bid may be, in whole or in part, in the form of cancellation of
Secured Obligations) for and purchase for the amount of the Collateral Agent or
any nominee of the Collateral Agent the whole or any part of the Pledged
Collateral. The Collateral Agent shall not be obligated to make any sale of the
Pledged Collateral if it shall determine not to do so regardless of the fact
that notice of sale of the Pledged Collateral may have been given. The
Collateral Agent may, without notice or publication, except as required by
applicable law, adjourn the sale from time to time by announcement at the time
and place fixed for sale, and such sale may, without further notice (except as
required by applicable law), be made at the time and place to which the name was
so adjourned.
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11.4. Title of Purchasers. Upon consummation of any sale of
Pledged Collateral pursuant to this Section 11, the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Pledged Collateral so sold. Each such purchaser at any such sale shall hold
the Pledged Collateral sold absolutely free from any claim or right on the part
of the Grantor, and the Grantor hereby waives (to the extent permitted by
applicable Laws) all rights of redemption, stay and appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. If the sale of all or any part of the Pledged
Collateral is made on credit or for future delivery, the Collateral Agent shall
not be required to apply any portion of the sale price to the Secured
Obligations until such amount actually is received by the Collateral Agent, and
any Pledged Collateral so sold may be retained by the Collateral Agent until the
sale price is paid in full by the purchaser or purchasers thereof. The
Collateral Agent shall incur no liability in case any such purchaser or
purchasers shall fail to pay for the Pledged Collateral so sold, and, in the
case of any such failure, the Pledged Collateral may be sold again upon like
notice.
11.5. Disposition of Proceeds of Sale. The cash proceeds
resulting from the collection, liquidation, sale or other disposition of the
Pledged Collateral shall be deposited in the Cash Collateral Account and be
applied, first, to the costs and expenses (including attorneys' fees) of
retaking, holding, storing, processing and preparing for sale, selling,
collecting and liquidating the Pledged Collateral, and the like; second, to the
satisfaction of all Secured Obligations, with application as to any particular
Secured Obligations to be in the order set forth in the Guaranty Agreement or as
determined by the Collateral Agent; and third, any surplus remaining after the
satisfaction of all Secured Obligations, to be paid over to the Grantor or to
whomsoever may be lawfully entitled to receive such surplus.
11.6. Option Agreement. Notwithstanding anything to the contrary
set forth herein, in the event the Conversion Option granted under the Option
Agreement is exercised by the Holders of the Series A Notes thereof in
accordance with the terms thereof, the Collateral to be transferred to such
Holders under the terms of the Option Agreement shall be transferred to such
Holders free and clear of the Liens granted under this Agreement and the
Collateral Agent shall take all actions required to release the Liens granted
under this Agreement with respect to the Collateral transferred to such Holders
pursuant to the exercise of the Conversion Option.
12. Release of the Grantor. This Agreement and the Collateral
Agent's security interest in the Pledged Collateral then subject to this
Agreement shall be released (i) when all Secured Obligations have been paid in
full in cash or otherwise performed in full or (ii) upon the request of Holders
of at least eighty percent (80%) of the aggregate outstanding principal amount
of the Notes, subject however, to the provisions of Section 11 and other related
provisions of this Agreement. Upon such release of the Grantor's Pledged
Collateral hereunder, the Collateral Agent shall return all Certificates
representing the Pledged Collateral then subject to this Agreement to the
Grantor and shall prepare, endorse, execute, deliver, record and file all
instruments and documents, which shall be prepared by the Grantor and do all
other acts and things, reasonably required for the return of the Pledged
Collateral to the Grantor and to evidence or document the release of the
Collateral Agent's interests arising under this Agreement, all as requested by,
and at the expense of, the Grantor. In addition to the foregoing, the Grantor
shall
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have the release rights set forth in Section 2.3. Any such action taken by the
Collateral Agent shall be without warranty by or recourse to the Collateral
Agent, except as to the absence of any prior assignments by the Collateral Agent
of its interest in the Pledged Collateral, and shall be at the expense of the
Grantor. The Collateral Agent may conclusively rely on any certificate delivered
to it by the Grantor stating that the execution of such documents and release of
the Pledged Collateral is in accordance with and permitted by the terms of this
Agreement and the Guaranty Agreement.
13. Covenant Not to Issue Uncertificated Securities. The Grantor
represents and warrants to the Collateral Agent that all of the Capital Stock
issued by its Restricted Subsidiaries is in certificated form and covenants to
the Collateral Agent that it will not cause or permit any Restricted Subsidiary
to issue any Capital Stock in uncertificated form or seek to convert all or any
part of its existing common stock into uncertificated form.
14. Covenant Not to Dilute Interests of the Collateral Agent in
Pledged Securities. The Grantor represents, warrants and covenants to the
Collateral Agent that it will not at any time cause or permit any of its
Restricted Subsidiaries to issue any additional Capital Stock or any warrants,
options, or other rights to acquire any additional Capital Stock, if the effect
thereof would be to dilute in any way the interests of the Collateral Agent in
any Pledged Securities.
15. Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Grantor from
any provision of this Agreement shall be effective only if made or given in
compliance with all of the terms and provisions of the Guaranty Agreement and
neither the Collateral Agent nor any Purchaser shall be deemed, by any act,
delay, indulgence, omission or otherwise, to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. Failure of the Collateral
Agent to exercise, or delay in exercising, any right, power or privilege
hereunder shall not operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Collateral Agent or any Purchaser of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy that
the Collateral Agent or such Purchaser would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
16. General Provisions.
16.1 Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner provided in and delivered to the Grantor at the address set forth in
the Guaranty Agreement
16.2 No Adverse Interpretation of Other Agreements. This
Agreement may not be used to interpret another pledge, security or debt
agreement of the Grantor or any subsidiary of the Grantor. No such pledge,
security or debt agreement may be used to interpret this Agreement.
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16.3 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
16.4 Headings. The headings in this Agreement have been inserted
for convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.
16.5 Counterpart Originals. This Agreement may be signed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement.
16.6 Benefits of Agreement; Successors and Assigns. Nothing in
this Agreement, express or implied, shall give to any person, other than the
Collateral Agent, the Purchasers and their respective successors, transferees
and assigns hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be binding upon the Grantor,
its successors and assigns, and inure, together with the rights and remedies of
the Collateral Agent hereunder, to the benefit of the Collateral Agent, the
Purchasers and their respective successors, transferees and assigns. The Grantor
shall not, without the prior written consent of the Collateral Agent, assign any
rights, duties or obligations under this Agreement.
16.7 Reinstatement. This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Collateral Agent or any Purchaser in respect of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Collateral Agent or
any Purchaser upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Grantor or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Grantor or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
16.8 Survival of Provisions. All representations, warranties and
covenants of the Grantor contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance of the Secured Obligations.
16.9 Waivers. The Grantor waives presentment and demand for
payment of any of the Secured Obligations, protest and notice of dishonor or
default with respect to any of the Secured Obligations, and all other notices to
which the Grantor might otherwise be entitled, except as otherwise expressly
provided herein or in the Guaranty Agreement.
16.10 Authority of the Collateral Agent. (i) The Collateral Agent
shall have and be entitled to exercise all powers hereunder that are
specifically granted to the Collateral Agent by the terms hereof, together with
such powers as are reasonably incident thereto. The Collateral Agent may perform
any of its duties hereunder or in connection with the Pledged Collateral by or
through agents or employees and shall be entitled to retain counsel and to act
in reliance upon the advise of counsel concerning all such matters. Neither the
Collateral
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Agent, any director, officer, employee, attorney or agent of the Collateral
Agent nor the Purchasers shall be liable to the Grantor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Collateral Agent be responsible
for the validity, effectiveness or sufficiency hereof or of any document or
security furnished pursuant hereto. The Collateral Agent and its directors,
officers, employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document believed by it or them to be genuine and
correct and to have been signed or sent by the proper person or persons.
(ii) The Grantor acknowledges that the rights and
responsibilities of the Collateral Agent under this Agreement with respect to
any action taken by the Collateral Agent or the exercise or non-exercise by the
Collateral Agent of any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Agreement shall,
as between the Collateral Agent and the Purchasers, be governed by the Guaranty
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Collateral Agent and the Grantor,
the Collateral Agent shall be conclusively presumed to be acting as agent for
the Purchasers with full and valid authority so to act or refrain from acting,
and the Grantor shall not be obligated or entitled to make any inquiry
respecting such authority.
16.11 No Duty. The powers conferred on the Collateral Agent and
the Purchasers hereunder are solely to protect their interests in the Pledged
Collateral and shall not impose any duty upon them to exercise any such powers.
Except for the safe custody of any Pledged Collateral that may come into its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Pledged Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Pledged Collateral. The Collateral Agent shall be
deemed to exercise reasonable care in the custody and preservation of the
Pledged Collateral if such Pledged Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords similar property
in similar situations, it being understood that the Collateral Agent shall have
no responsibility or liability for the collection of any proceeds of any Pledged
Collateral or by reason of any invalidity, lack of value or uncollectibility of
any of the payments received by it from obligors or otherwise.
16.12 Payment of Fees and Expenses. The Grantor will upon demand
pay to the Collateral Agent, or advance if requested, without duplication, the
amount of any and all expenses with interest thereof at the Default Rate from
the date incurred, including, without limitation, the fees and disbursements of
its counsel and of any experts and agents, that the Collateral Agent may incur
in connection with (i) the administration of this Agreement, (ii) the custody,
preservation, or the sale of, collection from, or other realization upon, any of
the Pledged Collateral, (iii) the exercise or enforcement of any of the rights
of the Collateral Agent hereunder or (iv) the failure by the Grantor to perform
or observe any of the provisions hereof.
16.13 Final Expression. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of this Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
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16.14 Grantor Remains Liable; Obligations Absolute. (i) Anything
herein to the contrary notwithstanding: (a) the Grantor shall remain liable
under any Intercompany Notes (and any documents related thereto) included in the
Pledged Collateral, to the extent set forth therein, to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, (b) the exercise by the Collateral Agent of any of the rights
hereunder shall not release the Grantor from any of its duties or obligations
under the Intercompany Notes (and any documents related thereto) included in the
Pledged Collateral, and (c) the Collateral Agent shall not have any obligation
or liability under any Intercompany Notes (and any documents related thereto)
included in the Pledged Collateral by reason of this Agreement; nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of the
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
(iii) All obligations of the Grantor hereunder shall be absolute
and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Grantor
or any Restricted Subsidiary;
(b) any lack of validity or enforceability of the Guaranty
Agreement or any other Collateral Document, or any other agreement or instrument
relating thereto;
(c) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Guaranty
Agreement or any other Collateral Document, or any other agreement or instrument
relating thereto;
(d) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any departure
from any guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any
rights, remedy, power or privilege under or in respect of this Agreement or any
other Collateral Document except as specifically set forth in a waiver granted
pursuant to the provisions of Section 15 hereof or the provisions of such other
Collateral Document; or
(f) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, the Grantor.
16.15 Rights of Purchasers. No Purchaser shall have any
independent rights hereunder other than those rights granted to individual
Purchasers pursuant to the Guaranty Agreement; provided that nothing in this
Section 16.15 shall limit any rights granted to the Collateral Agent under the
Notes, the Guaranty Agreement or the Collateral Documents.
16.16 Liens; Setoff. The Grantor hereby grants to the Collateral
Agent a continuing Lien for all of the Secured obligations upon any and all
monies, securities, and other
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property of the Grantor, now or hereafter held or received by or in transit to,
the Collateral Agent, from or for the Grantor. Without implying any limitation
on any other rights the Collateral Agent may have under the Collateral Documents
or applicable Laws, during the continuance of an Event of Default, the
Collateral Agent is hereby authorized by the Grantor at any time and from time
to time, without notice to the Grantor, to offset and apply to all or any part
of the Secured Obligation then outstanding (whether or not then due) all moneys,
credits and other property of any nature whatsoever of the Grantor now or at any
time hereafter in the possession of, in transit to or from, under the control or
custody of, or one deposit with, the Collateral Agent or any Affiliate of the
Collateral Agent, all in such order and manner as shall be determined by the
Collateral Agent in its sole and absolute discretion.
17. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Waiver of Damages.
(I) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE GRANTOR
AND THE COLLATERAL AGENT ON BEHALF OF THE PURCHASERS IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF
LAWS PROVISIONS) OF THE STATE OF NEW YORK.
(II) THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS
CAPACITY AS THE COLLATERAL AGENT OR IN THE NAME AND ON BEHALF OF ANY
PURCHASER(S), HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION
REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE COLLATERAL AGENT TO REALIZE ON
SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE COLLATERAL AGENT. THE GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE
COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF THE COLLATERAL AGENT. THE GRANTOR WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS.
(III) THE GRANTOR AND THE COLLATERAL AGENT EACH WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING DISPUTES, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY
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DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(IV) THE GRANTOR AGREES THAT NEITHER THE COLLATERAL AGENT NOR ANY
PURCHASER SHALL HAVE ANY LIABILITY TO THE GRANTOR (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE GRANTOR IN CONNECTION WITH,
ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE
RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR
SUCH PURCHASER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH PURCHASER, AS THE CASE MAY
BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(V) THE GRANTOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY PURCHASER OF ITS RIGHTS
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE PLEDGED
COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE PLEDGED
COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS. THE GRANTOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY PURCHASER
IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF,
REPLEVY, ATTACH OR LEVY UPON PLEDGED COLLATERAL OR OTHER SECURITY FOR THE
SECURED OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE COLLATERAL AGENT OR ANY PURCHASER, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION
THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT AMONG THE GRANTOR ON THE ONE
HAND AND THE COLLATERAL AGENT AND/OR THE PURCHASERS ON THE OTHER HAND.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered as of the date first above written.
"Grantor"
SF HOLDINGS GROUP, INC.
By: /s/ Xxxx X. Xxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxx
Title: Senior Vice President
"Collateral Agent"
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
TCW/CRESCENT MEZZANINE, L.L.C.,
as Collateral Agent
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Director
SCHEDULE "A"
Pledged Securities: Stock of Restricted Subsidiaries
Number of Shares of Number of Shares of
Restricted Each Class of Issued & Each Class of Capital
Subsidiary Outstanding Capital Stock Stock Held by Grantor
---------- ------------------------- ---------------------
The Xxxxx Group, Inc. 100 shares of Common 100 shares of Common
Stock, par value $.001 Stock, par value $.001
Sweetheart Holdings, Inc. 1,046,000 shares of 502,080 shares of
Sweetheart Class A Sweetheart Class A
Common Stock Common Stock
Sweetheart Holdings, Inc. 4,393,200 shares of 4,393,200 shares of
Sweetheart Class B Sweetheart Class B
Common Stock Common Stock
SCHEDULE "B"
Intercompany Notes of Restricted Subsidiaries
Amount of Each Issued and
Restricted Subsidiary Outstanding Intercompany Note
--------------------- -----------------------------
The Xxxxx Group, Inc. None.
Sweetheart Holdings, Inc. None.
