Exhibit 10.4
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT is dated as of November 15, 2004 and
made by AMERICAN BUSINESS FINANCIAL SERVICES, INC., a Delaware corporation (the
"Grantor"), in favor of THE PATRIOT GROUP, LLC, a Delaware limited liability
company (the "Secured Party").
Recitals
The Secured Party has entered into a Commitment Letter, dated as of
October 27, 2004 (as modified pursuant to the terms of that certain letter
agreement dated November 15, 2004 between the Secured Party and the Grantor, the
"Commitment Letter"), with the Grantor.
It is a condition precedent to providing the Facility contemplated by
the Commitment Letter that the Grantor shall have executed and delivered this
Agreement.
Agreement
NOW, THEREFORE, in order to induce the Secured Party to provide the
Facility and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantor hereby represents,
warrants, covenants, agrees, assigns and grants as follows:
SECTION 1. Definitions. Terms defined in the Commitment Letter and not
otherwise defined herein have the same respective meanings when used herein.
Unless the context otherwise requires, terms defined in the Uniform Commercial
Code of the State of New York (the "Uniform Commercial Code") and not otherwise
defined in this Agreement or in the Commitment Letter shall have the meanings
defined for those terms in the Uniform Commercial Code. In addition, the
following terms shall have the meanings respectively set forth after each:
"Collateral": all present and future right, title and interest of the
Grantor in or to the following personal property:
(a) Grantor's 100% ownership interest in the issued and outstanding
capital stock of Holdings;
(b) All rights, remedies, powers and/or privileges of the Grantor with
respect to the foregoing; and
(c) Any and all proceeds and products of the foregoing, including all
money, accounts, general intangibles, Deposit Accounts, documents, instruments,
letter-of-credit rights, investment property, chattel paper, goods, insurance
proceeds and any other tangible or intangible property received upon the sale or
disposition of the foregoing;
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"Commitment Letter Event of Default": as defined in Section 11(a)
hereof.
"Financing Documents": the Commitment Letter, the Repurchase Agreement
and any related documents.
"Governmental Authority": any nation or government, any state or other
political subdivision, agency or instrumentality thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
the Grantor or any of its properties.
"Holdings": ABFS Consolidated Holdings, Inc., a Delaware corporation.
"Repurchase Agreement": the Master Repurchase Agreement dated as of
November [5], 2004, by and among the Secured Party, ABFS Warehouse Trust 2004-2,
the Grantor and Holdings.
"Secured Party": The Patriot Group, LLC and its affiliates, successors
and assigns.
SECTION 2. Creation of Security Interest. The Grantor hereby assigns
and pledges to the Secured Party, and grants to the Secured Party, a security
interest in and to, all right, title and interest of the Grantor in and to all
presently existing and hereafter acquired Collateral.
SECTION 3. Security for Obligations. This Agreement and the assignments
and pledges made, and security interests granted herein, secure the prompt
payment, in full in cash, of all obligations owed to the Secured Party under the
Program Documents (collectively, the "Obligations").
SECTION 4. Further Assurances. (a) At any time and from time to time at
the request of the Secured Party, the Grantor shall execute and deliver to the
Secured Party, at the Grantor's expense, all such financing statements and other
instruments, certificates and documents in form and substance reasonably
satisfactory to the Secured Party, and perform all such other acts as shall be
necessary or reasonably desirable to fully perfect or protect or maintain, when
filed, recorded, delivered or performed, the Secured Party's security interests
granted pursuant to this Agreement or to enable the Secured Party to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, the Grantor hereby authorizes
the filing of such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or reasonably
desirable, or as the Secured Party may reasonably request, in order to perfect
and preserve, with the required priority, the security interests granted, or
purported to be granted hereby.
(b) The Grantor shall furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Party may
reasonably request.
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SECTION 5. Restrictions on Future Agreements. The Grantor agrees that
until all the Obligations shall have been satisfied in full, the Grantor will
not, without the Secured Party's prior written consent, take any action, or
permit any action to be taken by any other Persons to the extent that such
Persons are subject to its control, or fail to take any action, which would
affect the validity, priority, perfection or enforcement of the rights granted
to the Secured Party under this Agreement, and any such agreement or action if
it shall take place shall be null and void and of no effect whatsoever.
SECTION 6. Grantor's Representations and Warranties. The Grantor
represents and warrants as follows:
(a) as of the date of this Agreement, the Grantor has exclusive
possession and control of the Collateral;
(b) The Grantor is the legal and beneficial owner of the Collateral
free and clear of all Liens. The Grantor has the power, authority and legal
right to pledge the Collateral purported to be pledged hereby, and to execute,
deliver and perform this Agreement. The pledge of the Collateral pursuant to
this Agreement creates a valid security interest in the Collateral.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority (other than such authorizations,
approvals and other actions as have already been taken and are in full force and
effect) are required (i) for the pledge of the Collateral hereby or for the
execution, delivery or performance of this Agreement by the Grantor, or (ii) for
the exercise by the Secured Party of the rights or remedies in respect of the
Collateral hereunder.
(d) So long as any Obligations remain outstanding, the Grantor will not
execute any document or instrument covering the Collateral except as otherwise
contemplated or permitted hereby.
SECTION 7. Grantor's Covenants. In addition to the other covenants and
agreements set forth herein and in the other Financing Documents, the Grantor
covenants and agrees as follows:
(a) The Grantor will pay, prior to delinquency, all taxes, governmental
charges, Liens and assessments against the Collateral owned by it, except those
with respect to which the amount or validity is being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Grantor.
(b) The Collateral will not be used in violation of any law, regulation
or ordinance applicable to the Grantor, nor used in any way that will void or
impair any insurance required to be carried in connection therewith.
(c) The Grantor will deal with the Collateral in all such ways as are
considered customary practice by owners of like property.
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(d) The Grantor will take all reasonable steps to preserve and protect
the Collateral.
SECTION 8. Secured Party's Rights Regarding Collateral. The Grantor
shall keep proper books and records and accounts in which full, true and correct
entries in conformity with GAAP and all applicable laws, rules and regulations
shall be made of all material dealings and transactions pertaining to the
Collateral. The Secured Party shall at all reasonable times on reasonable notice
have full access to and the right to audit any and all of the Grantor's books
and records pertaining to the Collateral, and to confirm and verify the value of
the Collateral. The Secured Party shall not be under any duty or obligation
whatsoever to take any action to preserve any rights of or against any prior or
other parties in connection with the Collateral, to exercise any voting rights
or managerial rights with respect to any Collateral or to make or give any
presentments for payment, demands for performance, notices of non-performance,
protests, notices of protest, notices of dishonor or notices of any other nature
whatsoever in connection with the Collateral or the Obligations. Subject to the
Secured Party's obligation to exercise reasonable care with respect to any
Collateral in its possession, custody or control as set forth in Section 8
hereof, the Secured Party shall not be under any duty or obligation whatsoever
to take any action to protect or preserve the Collateral or any rights of the
Grantor therein, or to make collections or enforce payment thereon, or to
participate in any foreclosure or other proceeding in connection therewith.
Nothing contained herein or in any consent by the Secured Party shall constitute
an assumption by the Secured Party of any obligations of the Grantor under the
contracts assigned hereunder unless the Secured Party shall have given written
notice to the counterparty to such assigned contract of the Secured Party's
intention to assume such contract. The Grantor shall continue to be liable for
performance of its obligations under such contracts.
SECTION 9. Collections on Collateral. The Grantor shall have the right
to receive dividends and other proceeds from the Collateral in the ordinary
course of business so long as the Obligations are being paid to the Secured
Party in accordance with the Program Documents. If any of the Obligations are
not paid in accordance with the Program Documents, at the option of the Secured
Party, the Grantor's right to receive dividends and other proceeds of the
Collateral and to use or dispose of such proceeds shall terminate, and any and
all dividends and proceeds then held or thereafter received on or on account of
the Collateral will be held or received by the Grantor in trust for the Secured
Party and immediately delivered in kind to the Secured Party (duly endorsed to
the Secured Party, if required), to be applied to the Obligations or held as
Collateral, as the Secured Party shall elect. Upon such an occurrence, the
Secured Party shall have the right at all times to receive, receipt for,
endorse, assign, deposit and deliver, in the name of the Secured Party or in the
name of the Grantor, any and all checks, notes, drafts and other instruments for
the payment of money constituting proceeds of or otherwise relating to the
Collateral; and the Grantor hereby authorizes the Secured Party to affix, by
facsimile signature or otherwise, the general or special endorsement of the
Grantor, in such manner as the Secured Party shall deem advisable, to any such
instrument in the event the same has been delivered to or obtained by the
Secured Party without appropriate endorsement, and the Secured Party and any
collecting bank are hereby authorized to consider such endorsement to be a
sufficient, valid and effective endorsement by the Grantor, to the same extent
as though it were manually executed by the duly authorized representative of the
Grantor, regardless of by whom or under what circumstances or by what authority
such endorsement actually is affixed, without duty of inquiry or responsibility
as to such matters, and the Grantor hereby expressly waives demand, presentment,
protest and notice of protest or dishonor and all other notices of every kind
and nature with respect to any such instrument.
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SECTION 10. Possession of Collateral by the Secured Party. All the
Collateral now, heretofore or hereafter delivered to the Secured Party shall be
held by the Secured Party in its possession, custody and control. Any or all of
the Collateral delivered to the Secured Party constituting cash or cash
equivalents shall, as long as the Obligations are being paid in accordance with
the Commitment Letter, be held in an interest-bearing account with the Secured
Party, and shall be, upon request of the Grantor, invested in investments
authorized by the Secured Party. Nothing herein shall obligate the Secured Party
to obtain any particular return thereon. In any Obligation is not paid in
accordance with the Program Documents, then the Secured Party may use and
consume the Collateral, whether for the purpose of preserving and/or protecting
the Collateral, or for the purpose of performing any of the Grantor's
Obligations with respect thereto, or otherwise, and any or all of the Collateral
delivered to the Secured Party constituting cash or cash equivalents shall be
applied by the Secured Party to payment of the Obligations or otherwise held as
Collateral as the Secured Party shall elect. The Secured Party may at any time
deliver or redeliver the Collateral or any part thereof to the Grantor, and the
receipt of any of the same by the Grantor shall be complete and full acquittance
for the Collateral so delivered, and the Secured Party thereafter shall be
discharged from any liability or responsibility arising after such delivery to
the Grantor. So long as the Secured Party exercises reasonable care with respect
to any Collateral in its possession, custody or control, the Secured Party shall
not have any liability for any loss of or damage to any Collateral, and in no
event shall the Secured Party have liability for any diminution in value of
Collateral occasioned by economic or market conditions or events, absent the
gross negligence or willful misconduct of the Secured Party. The Secured Party
shall be deemed to have exercised reasonable care within the meaning of the
preceding sentence if the Collateral in the possession, custody or control of
the Secured Party is accorded treatment substantially equal to that which the
Secured Party accords similar property for its own account, it being understood
that the Secured Party shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to any Collateral, whether or not the Secured Party
has or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any Person with respect to any Collateral.
SECTION 11. Remedies.
(a) Rights Regarding the Collateral. Upon the failure by the Grantor to
pay any Obligation in accordance with the Program Documents (an "Event of
Default"), the Grantor shall be in default hereunder and the Secured Party shall
have, in any jurisdiction where enforcement is sought, in addition to all other
rights and remedies that the Secured Party 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 in effect
at that time, 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 by applicable law: (i) to foreclose the
Liens and security interests created hereunder or under any other Financing
Document by any available judicial procedure or without judicial process; (ii)
to sell, assign, lease or otherwise dispose of any Collateral or any part
thereof, either at public or private sale or at any broker's board, in lot or in
bulk, for cash, on credit or otherwise, with or without representations or
warranties and upon such terms as shall be commercially reasonable; (iii) to
collect by legal proceedings or otherwise all dividends, distributions, or other
sums now or hereafter payable upon or on account of the Collateral; (vi) to
enter into any extension, reorganization, disposition, merger or consolidation
agreement, or any other agreement relating to or affecting the Collateral, and
in connection therewith the Secured Party may deposit or surrender control of
the Collateral and/or accept other property in exchange for the Collateral as
the Secured Party reasonably deems appropriate and is commercially reasonable;
(iv) to take or bring, in the name of the Secured Party or in the name of the
Grantor, any and all steps, actions, suits or proceedings deemed necessary or
reasonably desirable by the Secured Party to realize upon the Collateral,
including any judicial or nonjudicial foreclosure thereof or thereon, and the
Grantor waives, to the extent permitted by applicable law, any right to receive
notice of any public or private judicial or nonjudicial sale or foreclosure of
any security or any of the Collateral, and any money or other property received
by the Secured Party in exchange for or on account of the Collateral, whether
representing collections or proceeds of Collateral, and whether resulting from
voluntary payments or foreclosure proceedings or other legal action taken by the
Secured Party or the Grantor may be applied by the Secured Party, without notice
to the Grantor, to the Obligations in such order and manner as the Secured Party
in its sole discretion shall determine; (v) to insure, protect and preserve the
Collateral; and (vi) to exercise all rights, remedies, powers or privileges
provided under any of the Financing Documents.
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(b) Sale of Collateral. Any public or private sale or other disposition
of the Collateral may be held at any office of the Secured Party or at any other
place permitted by applicable law.. The Secured Party may direct the manner of
sale of the Collateral as it in its sole and absolute discretion may determine
provided such sale is commercially reasonable, and the Grantor expressly waives,
to the extent permitted by applicable law, any right to direct the manner of
sale of any Collateral. The Secured Party or any Person acting on the Secured
Party's behalf may bid and purchase at any such sale or other disposition.
(c) Notice of Sale. The Secured Party will give the Grantor reasonable
notice of the time and place of any public sale thereof or of the time on or
after which any private sale thereof is to be made. The requirement of
reasonable notice conclusively shall be met if such notice is mailed, certified
mail, postage prepaid, to the Grantor at its address set forth on the signature
pages hereto or delivered or otherwise sent to the Grantor, at least ten (10)
Business Days before the date of the sale. The Grantor expressly waives, to the
fullest extent permitted by applicable law, any right to receive notice of any
public or private sale of any Collateral or other security for the Obligations
except as expressly provided for in this paragraph. The Secured Party shall not
be obligated to make any sale of the Collateral if it shall determine not to do
so regardless of the fact that notice of sale of the Collateral may have been
given. The Secured Party 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 same
was so adjourned.
(d) Title of Purchasers. Upon consummation of any sale of Collateral
hereunder, the Secured Party shall have the right to assign, transfer and
deliver to the purchaser(s) thereof the Collateral so sold. Such purchaser(s)
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of the Grantor or any other Person claiming through 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 Collateral is made on credit or
for future delivery, the Secured Party shall not be required to apply any
portion of the sale price to the Obligations until such amount actually is
received by the Secured Party, and any Collateral so sold may be retained by the
Secured Party until the sale price is paid in full by the purchaser or
purchasers thereof. The Secured Party shall not incur any liability in case any
such purchaser or purchasers shall fail to pay for the Collateral so sold, and,
in case of any such failure, the Collateral may be sold again.
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(e) Disposition of Proceeds of Sale. The proceeds resulting from the
sale or other disposition of the Collateral shall be applied, first, to the
reasonable costs and expenses (including reasonable attorneys' fees) of
preparing for sale and selling the Collateral; second, to the satisfaction of
all outstanding Obligations; and, third, any surplus remaining after the
satisfaction of all outstanding Obligations to be paid over to the Grantor or to
whomsoever may be lawfully entitled to receive such surplus.
(f) Certain Waivers. To the extent permitted by applicable law, the
Grantor waives all claims, damages and demands against the Secured Party arising
out of the repossession, retention or sale of the Collateral, or any part or
parts thereof, except to the extent any such claims, damages and awards arise
out of the gross negligence or willful misconduct of the Agents or the Secured
Party.
(g) Remedies Cumulative. The rights and remedies provided under this
Agreement are cumulative and may be exercised singly or concurrently, and are
not exclusive of any other rights and remedies provided by law or equity.
SECTION 12. Secured Party Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Secured Party as the Grantor's attorney-in-fact,
effective upon and during the continuance of an 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 Secured Party's sole and absolute
discretion to do any of the following acts or things: (a) to do all acts and
things and to execute all documents necessary or reasonably desirable to perfect
and continue perfected the pledge and security interest created by this
Agreement and to preserve, maintain and protect the Collateral; (b) to do any
and every act which the Grantor is obligated to do under this Agreement; (c) to
prepare, sign, file and record, in the Grantor's name, any financing statement
covering the Collateral; and (d) to endorse and transfer the Collateral upon
foreclosure by the Secured Party; provided, however, that the Secured Party
shall be under no obligation whatsoever to take any of the foregoing actions,
and the Secured Party shall not have any liability or responsibility for any act
or omission (other than the Secured Party's own gross negligence or willful
misconduct) taken with respect thereto.
SECTION 13. Costs and Expenses. The Grantor agrees to pay to the
Secured Party all reasonable costs and out-of-pocket expenses (including
reasonable attorneys' fees and disbursements) (a) of the Secured Party incurred
thereby in the enforcement or attempted enforcement of this Agreement, whether
or not an action is filed in connection therewith, and (b) of the Secured Party
incurred thereby in connection with any waiver or amendment of any term or
provision hereof. All reasonable advances, charges, costs and expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by the
Secured Party in exercising any right, privilege, power or remedy conferred by
this Agreement (including the right to perform any Obligation of the Grantor),
or in the enforcement or attempted enforcement thereof, shall be secured hereby
and shall become a part of the Obligations and shall be due and payable to the
Secured Party, as applicable, by the Grantor on demand therefor.
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SECTION 14. Transfers and Other Liens. The Grantor agrees that 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, the Collateral, or (ii) create or permit to exist any Lien upon
or with respect to the Collateral.
SECTION 15. Understandings with Respect to Waivers and Consents. The
Grantor warrants and agrees that each of the waivers and consents set forth
herein is made with full knowledge of its significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which the Grantor
otherwise may have against the Secured Party or others, or against the
Collateral. If any of the waivers or consents herein are determined to be
unenforceable under applicable law, such waivers and consents shall be effective
to the maximum extent permitted by law.
SECTION 16. Indemnity. The Grantor agrees to indemnify the Secured
Party from and against any and all claims, losses and liabilities growing out of
or resulting from this Agreement (including enforcement of this Agreement),
except to the extent such claims, losses or liabilities result from the Secured
Party's gross negligence or willful misconduct.
SECTION 17. Amendments, Etc. No amendment or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing, signed by
both the Secured Party and the Grantor, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 18. Notices. All notices and other communications provided for
hereunder shall be given in the manner, and to the respective addresses, set
forth on the signature pages hereto.
SECTION 19. Continuing Security Interest; Successors and Assigns. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until indefeasible payment in full in
cash of the Obligations, (b) be binding upon the Grantor and its successors and
assigns, and (c) inure, together with the rights and remedies of the Secured
Party hereunder, to the benefit of the Secured Party, any successor Secured
Party. The Secured Party may assign or otherwise transfer any rights in
Collateral held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to the Secured
Party herein or otherwise. The Grantor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession thereof or
therefor, provided that, none of the rights or obligations of the Grantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Secured Party.
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SECTION 20. Release of Grantor. This Agreement and all obligations of
the Grantor hereunder and all security interests granted hereby shall be
released and terminated when all Obligations have been indefeasibly paid in full
in cash. Upon such release and termination of all Obligations and the expiration
or termination of the pledge and security interest hereunder, all rights in and
to the Collateral pledged or assigned by the Grantor hereunder shall
automatically revert to the Grantor, and the Secured Party shall return any
pledged Collateral in its possession to the Grantor, or to the Person or Persons
legally entitled thereto, and shall endorse, execute, deliver, record and file
all instruments and documents, and do all other acts and things, reasonably
required for the return of the Collateral to the Grantor, or to the Person or
Persons legally entitled thereto, and to evidence or document the release of the
interests of the Secured Party arising under this Agreement, all as reasonably
requested by, and at the sole expense of, the Grantor.
SECTION 21. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
EXCEPT FOR THE CONFLICT OF LAWS RULES THEREOF (OTHER THAN NEW YORK GENERAL
OBLIGATIONS LAW SECTIONS 5-1401 AND 5-1402).
SECTION 22. Copies of Certificates Etc. Whenever the Grantor is
required to deliver notices, certificates, opinions, statements or other
information hereunder to the Secured Party, it shall do so in such number of
copies as the Secured Party shall reasonably specify.
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IN WITNESS WHEREOF, the Grantor and the Secured Party have executed
this Agreement by their duly authorized representative as of the date first
written above.
GRANTOR
AMERICAN BUSINESS FINANCIAL
SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
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Title: Executive Vice President,
General Counsel and Secretary
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Address for Notices:
American Business Financial Services, Inc
The Xxxxxxxxx Building
000 Xxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
SECURED PARTY
THE PATRIOT GROUP, LLC
By: /s/ Xxxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxxx X. Xxxx
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Title: Senior Vice President
---------------------------------
Address for Notices:
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
D-1
