PLEDGE AND SECURITY AGREEMENT (Membership Interest Pledge Agreement)
EXHIBIT 10.15
(Membership Interest Pledge Agreement)
This PLEDGE AND SECURITY AGREEMENT (as amended and in effect from time to time, this “Pledge
Agreement”), dated as of August 1, 2008, is by each of the undersigned Persons (as defined in the
Loan Agreement, as hereinafter defined) (each a “Pledgor”, and, collectively, the “Pledgors”) to
and in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, in its capacity as
agent (in such capacity, “Pledgee”) pursuant to the Loan Agreement (as hereinafter defined) acting
for and on behalf of the Lenders (as defined in the Loan Agreement).
W I T N E S S E T H:
WHEREAS, each Pledgor is now the direct and beneficial owner of all of the issued and
outstanding Interests (as defined below) of the limited liability companies listed on Exhibit A
hereto (which may be amended, updated or otherwise modified from time to time pursuant to the terms
hereof);
WHEREAS, Pledgee and the Lenders have entered into or are about to enter into financing
arrangements pursuant to which Lenders (or Pledgee on behalf of Lenders) may make loans and
advances and provide other financial accommodations to Xxxxxxx Fabrics, Inc, a Delaware corporation
(“Parent”), HF Merchandising, Inc., a Delaware corporation (“Merchandising”), Xxxxxxx Fabrics of
MI, Inc., a Delaware corporation (“Fabrics MI”), xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation
(“Xxxxxxx.xxx”), and Xxxxxxx Fabrics, LLC, a Delaware limited liability company (“Fabrics LLC”, and
together with Parent, Merchandising, Fabrics MI and Xxxxxxx.xxx, each individually a “Borrower” and
collectively, “Borrowers”) as set forth in the Loan and Security Agreement, dated of even date
herewith, by and among Borrowers, certain affiliates of Borrowers, Pledgee and Lenders (as the same
now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the “Loan Agreement”) and other agreements, documents and instruments referred to therein
or at any time executed and/or delivered in connection therewith or related thereto, including, but
not limited to, the Guarantee (as hereinafter defined) and this Pledge Agreement (all of the
foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, being collectively referred to
herein as the “Financing Agreements”);
WHEREAS, each Pledgor has absolutely and unconditionally guaranteed the payment and
performance of the Obligations as set forth in the Guarantee, dated of even date herewith, by
Pledgors in favor of Pledgee and Lenders (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the “Guarantee”); and
WHEREAS, in order to induce Pledgee and Lenders to enter into the Loan Agreement and the other
Financing Agreements and to make loans and advances and provide other financial accommodations to
Borrowers pursuant thereto, each Pledgor has agreed to secure the payment and performance of the
Obligations and to accomplish same by (i) executing and delivering to
Pledgee this Pledge Agreement and (ii) delivering to Pledgee any and all other documents which
Pledgee deems necessary to protect Pledgee’s and Lenders’ interests hereunder.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby agrees as
follows:
1. DEFINITIONS All capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Loan Agreement, and the following terms shall have the following
meanings:
(a) “Interests” shall mean all limited liability membership units, together with all voting
trust certificates evidencing the right to vote the foregoing subject to any voting trust.
(b) “Issuers” shall mean the limited liability companies now owned or hereafter acquired
(whether in connection with any recapitalization, reclassification or reorganization of the capital
of any such company or any successors in interest thereto) by any Pledgor, including, without
limitation, the limited liability companies listed on Exhibit A attached hereto.
(c) “Pledged Interests” shall mean all Interests of the Issuers, including, without
limitation, the Interests listed on Exhibit A hereto (which may be amended, updated or otherwise
modified from time to time) pledged by the Pledgors pursuant to this Pledge Agreement.
2. GRANT OF SECURITY INTEREST
(a) As collateral security for the prompt performance, observance and indefeasible payment in
full in cash of all of the Obligations, each Pledgor hereby assigns, pledges, hypothecates,
transfers and sets over to Pledgee and grants to Pledgee, for itself and for the benefit of
Lenders, a security interest in and lien upon the following (collectively, the “Collateral”): (i)
the Pledged Interests owned by such Pledgor and all other ownership interests of such Pledgor in
any Issuer in which such Pledgor has an ownership interest, all certificates (if any) at any time
representing or evidencing such ownership interests (including without limitation the membership
certificate described on Exhibit A hereto) and (A) all of such Pledgor’s right, title and interest
in, to and under any operating agreement to which such Pledgor is a party with respect to any such
Issuer as set forth on Exhibit A hereto (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated, or replaced, each an “LLC Agreement” and
collectively the “LLC Agreements”), including, without limitation, all of such Pledgor’s right,
title and interest as a member to participate in the operation or management of any such Issuer and
all of such Pledgor’s ownership interests under any such LLC Agreement, and (B) all present and
future rights of such Pledgor to receive payment of money or other distribution of payments arising
out of or in connection with the Pledged Interests owned by such Pledgor and all other ownership
interests and its rights under any such LLC Agreement now or hereafter owned by such Pledgor, (ii)
all additional Interests of any Issuer in which such Pledgor now has an ownership interest or any
other Person from time to time acquired or formed by such Pledgor in any manner (which additional
Interests shall be
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deemed part of the Pledged Interests whether or not Exhibit A has been updated in accordance
with the terms hereof) and any certificates representing such Interests, (iii) all proceeds of and
to any of the property of such Pledgor described above, including, without limitation, all causes
of action, claims and warranties now or hereafter held by such Pledgor in respect of any of the
items listed above and (iv) such Pledgor’s books and records with respect to any of the foregoing.
(b) This Pledge Agreement is executed only as security for the Obligations and, therefore, the
execution and delivery of this Pledge Agreement shall not subject Pledgee or any Lender to, or
transfer or pass to Pledgee or any Lender, or in any way affect or modify, the liability of any
Pledgor under any LLC Agreement to which such Pledgor is a party or any related agreements,
documents or instruments or otherwise. In no event shall the acceptance of this Pledge Agreement
by Pledgee or Lenders or the exercise by Pledgee or any Lender of any rights hereunder or assigned
hereby, constitute an assumption of any liability or obligation of any Pledgor to, under or in
connection with any such LLC Agreement or any related agreements, documents or instruments or
otherwise.
(c) Each Pledgor agrees that the Pledgee may from time to time attach as Exhibit A
hereto an updated list of the Interests, securities or other equity interests at the time pledged
to the Pledgee hereunder without the consent of any Pledgor hereunder.
3. OBLIGATIONS SECURED
The security interest, lien and other interests granted to Pledgee (for itself and on behalf
of Lenders) pursuant to this Pledge Agreement shall secure the prompt performance and payment in
full of any and all Obligations.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Pledgor hereby represents, warrants and covenants with and to Pledgee and Lenders the
following (all of such representations, warranties and covenants being continuing so long as any of
the Obligations are outstanding):
(a) The Pledged Interests owned by such Pledgor are duly authorized, validly existing, fully
paid and non-assessable and constitute all of the issued and outstanding membership interests in
any Issuer in which such Pledgor has an ownership interest, and such Pledgor is the registered
owner of such membership interests. Such Pledgor is the holder of one hundred (100%) percent of
the membership interests therein and is the sole member of any such Issuer.
(b) The Collateral pledged by such Pledgor is directly, legally and beneficially owned by such
Pledgor, free and clear of all claims, liens, pledges and encumbrances of any kind, nature or
description, except for (i) the pledge, lien and security interest in favor of Pledgee, for itself
and the benefit of Lenders and (ii) the subordinated lien permitted pursuant to Section 9.8(n) of
the Loan Agreement.
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(c) The Collateral pledged by such Pledgor is not subject to any restrictions relative to the
transfer thereof and such Pledgor has the right to transfer and hypothecate such Collateral free
and clear of any liens, encumbrances or restrictions.
(d) The Collateral pledged by such Pledgor is duly and validly pledged to Pledgee, for itself
and for the benefit of Lenders; no consent or approval of any governmental or regulatory authority
or of any securities exchange or the like, nor any consent or approval of any other third party,
was or is necessary to the validity and enforceability of this Pledge Agreement.
(e) Such Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the Collateral
pledged by such Pledgor, (ii) perform any and all other acts which Pledgee in good xxxxx xxxxx
reasonable and/or necessary for the protection and preservation of such Collateral or its value or
Pledgee’s security interest therein, including, without limitation, transferring, registering or
arranging for the transfer or registration of such Collateral to or in Pledgee’s, or any Lender’s,
own name and receiving the income therefrom as additional security for the Obligations and (iii)
pay any charges or expenses which Pledgee deems necessary for the foregoing purpose, but without
any obligation to do so. Any obligation of Pledgee for reasonable care for such Collateral in
Pledgee’s possession shall be limited to the same degree of care which Pledgee uses for similar
property pledged to Pledgee by other Persons.
(f) As of the date hereof, there are no certificates or other written instruments evidencing
or representing the Pledged Interests owned by such Pledgor (except for the membership
certificate(s) described on Exhibit A hereto, which certificate(s) is/are being pledged and
delivered to Pledgee herewith, accompanied by an assignment of such certificate, duly endorsed by
such Pledgor in blank). If at any time after the date hereof such Pledgor shall become entitled to
receive or acquire, or shall receive any other membership interest certificate, or option or right
with respect to any membership interests of any Issuer in which such Pledgor has an ownership
interest (including without limitation, any certificate representing a distribution or exchange of
or in connection with reclassification of any Pledged Interest pledged by such Pledgor) whether as
an addition to, in substitution of, or in exchange for any of the Collateral pledged by such
Pledgor or otherwise, such Pledgor agrees to accept same as Pledgee’s agent, to hold same in trust
for Pledgee and to deliver same forthwith to Pledgee or Pledgee’s agent or bailee in the form
received, with the endorsement(s) of such Pledgor where necessary and/or appropriate powers and/or
assignments duly executed to be held by Pledgee or Pledgee’s agent or bailee subject to the terms
hereof, as further security for the Obligations.
(g) The Collateral pledged by such Pledgor is not and shall not at any time hereafter be
investment property or otherwise subject to Article 8 of the UCC, except as Pledgee may otherwise
expressly agree.
(h) Such Pledgor shall keep full and accurate books and records relating to the Collateral
pledged by such Pledgor and stamp or otherwise xxxx such books and records in such manner as
Pledgee may require in order to reflect the security interests granted by this Pledge Agreement.
(i) Such Pledgor shall not, without the prior consent of Pledgee, directly or indirectly,
sell, assign, transfer, or otherwise dispose of, or grant any option with respect to the
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Collateral pledged by such Pledgor, nor shall such Pledgor create, incur or permit any further
pledge, hypothecation, encumbrance, lien, mortgage or security interest with respect to such
Collateral.
(j) So long as no Event of Default (as hereinafter defined) has occurred and is continuing,
such Pledgor shall have the right to exercise all limited liability company rights with respect to
the Collateral pledged by such Pledgor, except as expressly prohibited herein or in any of the
other Financing Agreements, and to receive any distributions payable in respect of such Collateral
(but subject to terms of the Loan Agreement with respect thereto).
(k) Such Pledgor has delivered to Pledgee a true, correct and complete copy of the LLC
Agreements to which such Pledgor is a party and the certificate of formation of any Issuer in which
such Pledgor has an ownership interest. There are and shall be no other agreements governing the
formation, organization or terms of the membership interests with respect to any such Issuer.
(l) Such Pledgor shall not permit any Issuer in which such Pledgor has an ownership interest,
directly or indirectly, to (i) issue, sell, grant, assign, transfer or otherwise dispose of, any
additional membership interests of such Issuer or any option or warrant with respect to, or other
right or security convertible into, any additional membership interests, now or hereafter
authorized, unless all such additional membership interests, options, warrants, rights or other
such securities are made and shall remain part of the Collateral pledged by such Pledgor subject to
the pledge and security interest granted herein, (ii) take any action to withdraw the authority of
or to limit or restrict the authority of the managers or officers of such Issuer to deal and
contract with Pledgee and to bind and obligate such Issuer, or (iii) pay any interim distribution
in cash or other assets to any member, except as permitted in the Loan Agreement. Any distribution
by such Issuer other than as permitted in the Loan Agreement shall constitute a “wrongful
distribution” for purposes of applicable law.
(m) Such Pledgor shall promptly notify Pledgee in writing of the occurrence of any event
specified in any LLC Agreement to which such Pledgor is a party or the certificate of formation of
any Issuer in which such Pledgor has an ownership interest that may result in such Issuer’s
dissolution or liquidation.
(n) Such Pledgor shall not, and shall not permit any Issuer in which such Pledgor has an
ownership interest, directly or indirectly, to, amend, modify or supplement any of the provisions
of any LLC Agreement to which such Pledgor is a party or the certificate of formation of the
applicable Issuer without the prior written consent of Pledgee if any such amendment, modification
or supplement would or could affect any rights of Pledgee hereunder or under any of the other
Financing Agreements or would limit or restrict the permissible activities in which such Issuer may
engage.
(o) In accordance with the LLC Agreement(s) to which such Pledgor is a party, Pledgor, as the
sole member of the applicable Issuer, hereby acknowledges and agrees that Pledgee or any of its
successors, assigns or designees, shall, at Pledgee’s option upon written notice to such Pledgor of
Pledgee’s intent to be admitted itself (or to have any such successor, assignee or designee
admitted) as a member of such Issuer at any time an Event of Default exists
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or has occurred and is continuing, be admitted as a member of any such Issuer without any
further approval of such Pledgor and without compliance by Pledgee or any other Person with any of
the conditions or other requirements of such LLC Agreement and without conferring upon any member
thereof any option (whether under such LLC Agreement or otherwise) to acquire the membership
interests so transferred to Pledgee, its successors, assigns, or designees. Such Pledgor agrees to
take such other action and execute such further documents as Pledgee may reasonably request from
time to time in order to give effect to the foregoing provisions of this Section 4.
(p) Such Pledgor shall pay all charges and assessments of any nature against the Collateral
pledged by such Pledgor or with respect thereto prior to said charges and/or assessments being
delinquent.
(q) Such Pledgor shall promptly reimburse Pledgee and Lenders, on demand, together with
interest at the highest rate then applicable to the Obligations set forth in the Loan Agreement,
for any charges, assessments or expenses paid or incurred by Pledgee for the protection,
preservation and maintenance of the Collateral pledged by such Pledgor and the enforcement of
Pledgee’s or Lenders’ rights hereunder, including, without limitation, attorneys’ fees and legal
expenses incurred by Pledgee in seeking to protect, collect or enforce its rights in such
Collateral or otherwise hereunder. Any such amounts paid or incurred by Pledgee shall constitute
part of the Obligations secured hereby and may be charged by Pledgee to any loan account of such
Pledgor maintained by Pledgee or any Lender, at its option.
(r) Such Pledgor shall furnish, or cause to be furnished, to Pledgee such information
concerning any Issuer in which such Pledgor has an ownership interest and the Collateral pledged by
such Pledgor as may from time to time be required under the Loan Agreement.
(s) Pledgee may notify any Issuer in which such Pledgor has an ownership interest or the
appropriate transfer agent of the Collateral pledged by such Pledgor to register the security
interest and pledge granted herein and to honor the rights of Pledgee with respect thereto.
(t) Such Pledgor authorizes Pledgee to (i) perform any and all other acts which Pledgee deems
reasonable and/or necessary for the protection and preservation of the Collateral pledged by such
Pledgor or its value or Pledgee’s security interest therein and (ii) pay any charges or expenses
which Pledgee deems necessary for the foregoing purpose, but without any obligation to do so (and
any amounts so paid shall constitute Obligations).
(u) Such Pledgor waives: (i) all rights to require Pledgee or Lenders to proceed against any
other Person, entity or collateral or to exercise any remedy, (ii) the defense of the statute of
limitations in any action upon any of the Obligations, (iii) any right of subrogation or interest
in the Obligations or the Collateral until all Obligations have been indefeasibly paid in full in
immediately available funds and the Loan Agreement has been terminated, (iv) any rights to notice
of any kind or nature whatsoever, unless specifically required in this Pledge Agreement, the Loan
Agreement (to the extent applicable to this Pledge Agreement) or non-waivable under any applicable
law, and (v) to the extent permissible, its
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rights under Section 9-207 of the UCC. Such Pledgor agrees that the Collateral, other
collateral, or any other guarantor or endorser may be released, substituted or added with respect
to the Obligations, in whole or in part, without releasing or otherwise affecting the liability of
such Pledgor, the pledge and security interests granted hereunder, or this Pledge Agreement.
Pledgee is entitled to all of the benefits of a secured party set forth in Section 9-207 of the
UCC.
5. AUTHORIZATION TO PLEDGE IN LLC AGREEMENT.
(a) Each Pledgor hereby represents, warrants and covenants with and to Pledgee and Lenders
that as of the date hereof:
(i) each LLC Agreement to which such Pledgor is a party permits such Pledgor to pledge and
assign any and all membership interests in (or other ownership interests of) the applicable Issuer
(including, without limitation, the Pledged Interests owned by such Pledgor) to Pledgee, for itself
and the ratable benefit of Lenders, and such LLC Agreement shall not be amended, modified, altered
or changed in such a manner to limit, restrict or prevent such pledge and assignment; and
(ii) each LLC Agreement to which such Pledgor is a party permits Pledgee and its successors,
assigns and designees to be admitted to the applicable Issuer as a member thereof upon transfer of
membership interests to Pledgee as provided in Section 8 hereof without compliance by Pledgee or
any other Person with any of the conditions or other requirements of such LLC Agreement and without
conferring upon such Issuer or any other member thereof any option to acquire the membership
interests so transferred to Pledgee or its designees.
(b) Such Pledgor agrees to take such other action and execute such further documents as
Pledgee may from time to time request in order to give effect to the foregoing provisions of this
Section 5.
6. NO ASSUMPTION OF LIABILITIES.
(a) Nothing herein shall be construed to make Pledgee or any Lender liable as a member of any
Issuer, and neither Pledgee nor any Lender, by virtue of this Pledge Agreement or otherwise, shall
have any of the duties, obligations or liabilities of a member of such Issuer. The parties hereto
expressly agree that this Pledge Agreement shall not be construed as creating a partnership or
joint venture among Pledgee or any Lender and any Pledgor and/or any Issuer.
(b) By accepting this Pledge Agreement, Pledgee and Lenders do not intend to become a member
of any Issuer or otherwise be deemed to be a co-venturer with respect to any Pledgor or any Issuer
either before or after an Event of Default shall have occurred. Pledgee and Lenders shall have
only those powers set forth herein and shall assume none of the duties, obligations or liabilities
of any Pledgor or of a member of any Issuer. Pledgee and Lenders shall not be obligated to perform
or discharge any obligation of any Pledgor as a result of the pledge hereby effected.
(c) The acceptance by Pledgee and Lenders of this Pledge Agreement, with all of the rights,
powers, privileges and authority so created, shall not at any time or in any event obligate Pledgee
or any Lender to appear in or defend any action or proceeding relating to the
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Collateral to which it is not a party, or to take any action hereunder or thereunder, or to
expend any money or incur any expense or perform or discharge any obligation, duty or liability
hereunder or otherwise with respect to the Collateral.
7. EVENTS OF DEFAULT
The occurrence or existence of any Event of Default under and as defined in any of the
Financing Agreements is referred to herein individually as an “Event of Default” and collectively
as “Events of Default”.
8. RIGHTS AND REMEDIES
At any time an Event of Default exists or has occurred and is continuing, in addition to all
other rights and remedies of Pledgee and Lenders, whether provided under this Pledge Agreement, the
Loan Agreement, the other Financing Agreements, applicable law or otherwise, Pledgee shall have the
following rights and remedies which may be exercised without notice to, or consent by, any Pledgor
except as such notice or consent is expressly provided for hereunder or under the Loan Agreement
(to the extent applicable to this Pledge Agreement):
(a) Pledgee, at its option, shall be empowered to exercise its continuing right to instruct
any Issuer (or the appropriate transfer agent of the Collateral) to register any or all of the
Collateral in the name of Pledgee or in the name of Pledgee’s nominee and Pledgee may complete, in
any manner Pledgee may deem expedient, any assignments or other documents heretofore or hereafter
executed in blank by such Pledgor and delivered to Pledgee. After said instruction, and without
further notice, Pledgee shall have the exclusive right to exercise all rights with respect to the
Collateral (including all voting and limited liability company rights), and exercise any and all
rights of conversion, redemption, exchange, subscription or any other rights, privileges, or
options pertaining to the Collateral as if Pledgee were the absolute owner thereof, including,
without limitation, the right to exchange, in its discretion, any and all of the Collateral upon
any merger, consolidation, reorganization, recapitalization or other readjustment with respect
thereto. Upon the exercise of any such rights, privileges or options by Pledgee, Pledgee shall
have the right to deposit and deliver any and all of the Collateral to any committee, depository,
transfer agent, registrar or other designated agency upon such terms and conditions as Pledgee may
determine, all without liability, except to account for property actually received by Pledgee.
However, Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options
(all of which are exercisable in the sole discretion of Pledgee) and shall not be responsible for
any failure to do so or delay in doing so.
(b) Upon prior written notice thereof to the applicable Issuer and the applicable Pledgor, (i)
Pledgee may transfer the membership interests of such Pledgor in such Issuer into the name of
Pledgee (or its successors or assignees, or designee) and (ii) Pledgee (or its successors,
assignees, or designees) shall be admitted as a member of such Issuer in the place of such Pledgor.
(c) In addition to all the rights and remedies of a secured party under the UCC or other
applicable law, Pledgee shall have the right, at any time and without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
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below of time and place of public or private sale) to or upon any Pledgor or any other Person
(all and each of which demands, advertisements and/or notices are hereby expressly waived to the
extent permitted by applicable law), to proceed forthwith to collect, redeem, recover, receive,
appropriate, realize, sell, or otherwise dispose of and deliver the Collateral or any part thereof
in one or more lots at public or private sale or sales at any exchange, broker’s board or at any of
Pledgee’s offices or elsewhere at such prices and on such terms as Pledgee may deem best. The
foregoing disposition(s) may be for cash or on credit or for future delivery without assumption of
any credit risk, with Pledgee having the right to purchase all or any part of the Collateral so
sold at any such sale or sales, public or private, free of any right or equity of redemption in
such Pledgor, which right or equity is hereby expressly waived or released by such Pledgor. The
proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or
other disposition, after deducting all costs and expenses of every kind incurred relative thereto
or incidental to the care, safekeeping or otherwise of any and all of the Collateral or in any way
relating to the rights of Pledgee hereunder, including attorneys’ fees and legal expenses, shall be
applied first to the satisfaction of the Obligations (in such order as Pledgee may elect and
whether or not due) and then to the payment of any other amounts required by applicable law,
including Section 9-615(a)(3) of the UCC, with such Pledgor to be and remain liable for any
deficiency. Each Pledgor shall be jointly and severally liable to Pledgee and Lenders for the
payment on demand of all such costs and expenses, together with interest at the highest rate then
applicable to Obligations set forth in the Loan Agreement and any attorneys’ fees and legal
expenses incurred by Pledgee. Any such amounts shall constitute Obligations under the Loan
Agreement and may be charged by Pledgee to the loan account of the Borrowers maintained by Pledgee
at its option. Each Pledgor agrees that ten (10) days prior written notice by Pledgee designating
the place and time of any public sale or of the time after which any private sale or other intended
disposition of any or all of the Collateral is to be made, is reasonable notification of such
matters.
(d) Each Pledgor recognizes that Pledgee may be unable to effect a public sale of all or part
of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933 (as
amended and as now or hereafter in effect, the “Act”) or in applicable Blue Sky or other state
securities law, as now or hereafter in effect, but may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree, among other things,
to acquire the Collateral for their own account for investment and not with a view to the
distribution or resale thereof. If at the time of any sale of the Collateral or any part thereof,
the same shall not, for any reason whatsoever, be effectively registered (if required) under the
Act (or other applicable state securities law), as then in effect, Pledgee in its sole and absolute
discretion is authorized to sell the Collateral or such part thereof by private sale in such manner
and under such circumstances as Pledgee or its counsel may deem necessary or advisable in order
that such sale may legally be effected without registration. Each Pledgor agrees that private
sales so made may be at prices and other terms less favorable to the seller than if the Collateral
were sold at public sale, and that Pledgee has no obligation to delay the sale of any the
Collateral for the period of time necessary to permit any Issuer, even if such Issuer would agree,
to register the Collateral for public sale under such applicable securities laws. Each Pledgor
agrees that any private sales made under the foregoing circumstances shall be deemed to have been
conducted in a commercially reasonable manner. If Pledgee determines in its sole discretion that
it is necessary or advisable to effect a public registration of all or part of the
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Pledged Interests pursuant to the Act, such Pledgor shall cooperate in all respects to
effectuate such registration.
(e) All of the rights and remedies of Pledgee and Lenders, including, but not limited to, the
foregoing and those otherwise arising under this Pledge Agreement, the Loan Agreement and the other
Financing Agreements, the instruments comprising the Collateral, applicable law or otherwise, shall
be cumulative and not exclusive and shall be enforceable alternatively, successively or
concurrently as Pledgee may deem expedient. No failure or delay on the part of Pledgee or any
Lender in exercising any of its options, powers or rights or partial or single exercise thereof,
shall constitute a waiver of such option, power or right.
9. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
(a) The validity, interpretation and enforcement of this Pledge Agreement and any dispute
arising out of the relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York without regard to
principles of conflicts of law or choice of law (other than Section 5-1401 and Section 5-1402 of
the General Obligations Laws of the State of New York).
(b) Each Pledgor irrevocably consents and submits to the non exclusive jurisdiction of the
Supreme Court of the State of New York in New York County and the United States District Court for
the Southern District of New York, whichever Pledgee may elect, and waives any objection based on
venue or forum non conveniens with respect to any action instituted therein arising under this
Pledge Agreement or in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Pledge Agreement or the transactions related hereto or thereto,
in each case whether now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the
courts described above (except that Pledgee shall have the right to bring any action or proceeding
against any Pledgor or its property in the courts of any other jurisdiction which Pledgee deems
necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights
against such Pledgor or its property).
(c) Each Pledgor hereby waives personal service of any and all process upon it and consents
that all such service of process may be made by U.S. certified mail (return receipt requested)
directed to its address set forth herein and service so made shall be deemed to be completed
immediately upon receipt thereof by such Pledgor, or, at Pledgee’s option, by service upon such
Pledgor in any other manner provided under the rules of any such courts. Within thirty (30) days
after such service, such Pledgor shall appear in answer to such process, failing which such Pledgor
shall be deemed in default and judgment may be entered by Pledgee against such Pledgor for the
amount of the claim and other relief requested.
(d) PLEDGORS AND PLEDGEE EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF ANY
PLEDGOR AND PLEDGEE OR ANY
10
LENDER IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH PLEDGOR HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT SUCH PLEDGOR OR PLEDGEE MAY FILE A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Pledgee and Lenders shall not have any liability to any Pledgor (whether in tort,
contract, equity or otherwise) for losses suffered by any Pledgor in connection with, arising out
of, or in any way related to the transactions or relationships contemplated by this Pledge
Agreement, or any act, omission or event occurring in connection herewith, unless it is determined
by a final and non-appealable judgment or court order binding on Pledgee or such Lender, that the
losses were the result of acts or omissions constituting gross negligence or willful misconduct by
Pledgee or such Lender. In any such litigation, Pledgee and Lenders shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary
care in the performance by it of the terms of this Pledge Agreement.
10. MISCELLANEOUS
(a) Each Pledgor agrees that at any time and from time to time upon the written request of
Pledgee, such Pledgor shall execute and deliver such further documents, in form satisfactory to
Pledgee, and will take or cause to be taken such further acts as Pledgee may request in order to
effect the purposes of this Pledge Agreement and perfect or continue the perfection of the security
interest in the Collateral pledged by such Pledgor to Pledgee hereunder.
(b) Beyond the exercise of reasonable care to assure the safe custody of the Collateral
(whether such custody is exercised by Pledgee, or Pledgee’s nominee, agent or bailee), Pledgee or
Pledgee’s nominee agent or bailee shall have no duty or liability to protect or preserve any rights
pertaining thereto and shall be relieved of all responsibility for such Collateral upon
surrendering it to the applicable Pledgor or foreclosure with respect thereto.
(c) All notices, requests and demands to or upon the respective parties hereto shall be in
writing and shall be deemed to have been duly given or made: if delivered in person, immediately
upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service with instructions to
deliver the next business day, one (1) business day after sending; and if by registered or
certified mail, return receipt requested, five (5) days after mailing by deposit (postage prepaid)
in the U.S. mail. All notices, requests and demands upon the parties are to be given to the
following addresses (or to such other address as any party may designate by notice in accordance
with this Section 10):
If to any Pledgor:
|
c/o Hancock Fabrics, Inc. | |
| Xxx Xxxxxxx Xxx | ||
| Xxxxxxx, Xxxxxxxxxxx 00000 |
11
| Attention: Xxxxxx Xxxxxxxx, CFO | ||
| Telephone No.: (000) 000-0000 | ||
| Telecopy No.: (000) 000-0000 | ||
with a copy to:
|
Baker, Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, PC | |
| 000 Xxxxxxx Xxxxxx | ||
| Xxxxx Xxxxxxxxx Xxxxxxxx | ||
| Xxxxxxx, XX 00000 | ||
| Attention: Xxx X. Xxxxxxx, Esq. | ||
| Telephone No.: (000) 000-0000 | ||
| Telecopy No.: (000) 000-0000 | ||
If to Pledgee:
|
General Electric Capital Corporation, as Agent | |
| 000 Xxxxxxx 0, X.X. Xxx 0000 | ||
| Xxxxxxx, XX 00000-0000 | ||
| Attention: Xxxxxxx Fabrics Account Manager | ||
| Telephone No.: (000) 000-0000 | ||
| Telecopy No.: (000) 000-0000 | ||
with copies to:
|
Xxxxxxx XxXxxxxxx LLP | |
| Xxx Xxxxxxx Xxxxxx | ||
| Xxxxxx, XX 00000 | ||
| Attention: Xxxxxx X. X. Xxxxx, Esq. | ||
| Telephone No.: (000) 000-0000 | ||
| Telecopy No.: (000) 000-0000 | ||
and
|
General Electric Capital Corporation | |
| 000 Xxxxxxx 0 | ||
| Xxxxxxx, XX 00000 | ||
| Attention: Corporate Counsel — Corporate Lending | ||
| Telephone No.: (000) 000-0000 | ||
| Telecopy No.: (000) 000-0000 |
(d) All references to the plural herein shall also mean the singular and to the singular shall
also mean the plural. All references to any Pledgor, Borrowers, any Issuer, Pledgee or any Lender
pursuant to the definitions set forth in the recitals hereto, or to any other Person herein, shall
include their respective successors and assigns. The words “hereof,” “herein,” “hereunder,” “this
Pledge Agreement” and words of similar import when used in this Pledge Agreement shall refer to
this Pledge Agreement as a whole and not any particular provision of this Pledge Agreement and as
this Pledge Agreement now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced. An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 10(g) hereof or the provisions of the
Loan Agreement.
12
(e) This Pledge Agreement shall be binding upon each Pledgor and its successors and assigns
and inure to the benefit of and be enforceable by Pledgee and its successors and assigns.
(f) If any provision of this Pledge Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Pledge Agreement as a whole, but this
Pledge Agreement shall be construed as though it did not contain the particular provision held to
be invalid or unenforceable and the rights and obligations of the parties shall be construed and
enforced only to such extent as shall be permitted by applicable law.
(g) Neither this Pledge Agreement nor any provision hereof shall be amended, modified, waived
or discharged orally or by course of conduct, but only by a written agreement signed by an
authorized officer of Pledgee. Pledgee and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of their respective rights, powers
and/or remedies unless such waiver shall be in writing and signed by an authorized officer of
Pledgee. Any such waiver shall be enforceable only to the extent specifically set forth therein.
A waiver by Pledgee or any Lender of any right, power and/or remedy on any one occasion shall not
be construed as a bar to or waiver of any such right, power and/or remedy which Pledgee or such
Lender would otherwise have on any future occasion, whether similar in kind or otherwise.
(h) This Pledge Agreement may be executed in any number of counterparts, each of which shall
be an original, but all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of this Pledge Agreement by telefacsimile or other means of
electronic transmission shall have the same force and effect as the delivery of an original
executed counterpart of this Pledge Agreement. Any party delivering an executed counterpart of
this Pledge Agreement by telefacsimile or other means of electronic transmission shall also deliver
an original executed counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of this Pledge Agreement.
(i) New Subsidiaries of the Pledgors or other entities (each an “Additional Pledgor”) may
hereafter become parties to this Pledge Agreement by executing a counterpart hereof or,
alternatively, by executing a joinder agreement in form and substance satisfactory to Pledgee, and
there shall be no need to re-execute, amend or restate this Pledge Agreement in connection
therewith. Upon such execution and delivery by any Additional Pledgor, such Additional Pledgor
shall be deemed to have made the representations and warranties set forth in Section 4 hereof, and
shall be bound by all of the terms, covenants and conditions hereof to the same extent as if such
Additional Pledgor had executed this Pledge Agreement as of the Closing Date, and Pledgee and the
Lenders shall be entitled to all of the benefits of such Additional Pledgor’s obligations
hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, each Pledgor has executed this Pledge Agreement as of the day and year
first above written.
| PLEDGORS XXXXXXX FABRICS, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Senior Vice President and Chief Financial Officer | |||
| HF MERCHANDISING, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Senior Vice President and Chief Financial Officer | |||
| XXXXXXX FABRICS OF MI, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Senior Vice President and Chief Financial Officer | |||
| XXXXXXXXXXXXXX.XXX, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Treasurer | |||
| XXXXXXX FABRICS, LLC |
||||
| By: | /s/ Xxxxx X. Fair | |||
| Name: | Xxxxx X. Fair | |||
| Title: | Treasurer | |||
| HF ENTERPRISES, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Vice President | |||
| HF RESOURCES, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Vice President | |||
[Signature Page to Pledge and Security Agreement (LLCs)]
| No. of | ||||||||||||||||
| Operating | Certificate | Membership | Percentage | |||||||||||||
| Pledgor | Issuer | Agreement (Date) | No. | Interests | Interest Owned | |||||||||||
HF
Enterprises,
Inc.
|
Xxxxxxx Fabrics, LLC | January 28, 2002, as amended | 2 | 1 | 100 | % | ||||||||||
A-1
