Exhibit 10.11
PLEDGE AGREEMENT
This Pledge Agreement is entered into as of the 19th day of
December, 2002, by and between:
PLEDGOR: U.S. PLASTIC LUMBER FINANCE CORPORATION
AND
PLEDGEE: GUARANTY BUSINESS CREDIT CORPORATION
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Capitalized terms, unless otherwise defined herein, shall have the meanings
assigned to them in the Loan Agreement (defined below).
1. Pledge of Collateral and Delivery of Pledged
Collateral.
1.1 Pledgor hereby pledges and assigns to
Pledgee and grants to Pledgee a security interest in all of the Collateral
described in Section 2 below, whether now owned or hereafter acquired, now or at
any time hereafter in the possession, custody or control of Pledgee or its
agents, whether held for safekeeping, in a safe deposit box, or otherwise
("Collateral") to secure prompt payment and full performance of the obligations
described in Section 3 below (collectively, "Obligations").
1.2 All certificates or instruments, if any,
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of Pledgee pursuant hereto and 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 satisfactory to Pledgee in its
discretion reasonably exercised. Pledgee shall have the right, at any time,
after the occurrence and during the continuance of an Event of Default (as
defined herein), in its reasonable discretion and without notice to Pledgor, to
transfer to or to register in the name of Pledgee or any of its nominees any or
all of the Collateral. In addition, Pledgee shall have the right at any time to
exchange certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
2. Collateral. The Collateral consists of the
following:
2.1 All shares of stock of U.S. Plastic Lumber
IP Corporation ("Subsidiary") owned beneficially and of record by Pledgor and
listed on Schedule I attached hereto and made a part hereof, and all cash,
dividends, other securities, instruments, rights and other property at any time
and from time to time received or receivable in respect thereof or in exchange
for all or any part thereof, including without limitation, dividends,
distributions, warrants, profits, rights to subscribe, rights to return of its
contribution, conversion rights, liquidating dividends and other rights, and in
the event Pledgor receives any of the foregoing, Pledgor acknowledges that the
same shall be received IN TRUST for Pledgee and agrees immediately to deliver
the same to Pledgee in original form of receipt, together with any stock or bond
powers, assignments, endorsements or other documents or instruments as Pledgee
may request to establish, protect or perfect Pledgee's interest in respect of
such Collateral; and
2.2 All other property hereafter delivered to
Pledgee (or any agent or bailee holding on behalf of Pledgee) by Pledgor in
substitution for or in addition to any of the foregoing, all certificates and
instruments representing or evidencing such other property and all cash,
dividends, other securities, instruments, rights and other property at any time
and from time to time received or receivable in respect thereof or in exchange
for all or any part thereof, including without limitation, dividends,
distributions, warrants, profits, rights to subscribe, conversion rights,
liquidating dividends and other rights, and in the event Pledgor receives any of
the foregoing, except as set forth in Section 7.1 hereof, Pledgor acknowledges
that the same shall be received IN TRUST for Pledgee and agrees immediately to
deliver the same to Pledgee in original form of receipt, together with any stock
or bond powers, assignments, endorsements or other documents or instruments as
Pledgee may request to establish, protect or perfect Pledgee's interest in
respect of such Collateral; and
2.3 All proceeds of all of the foregoing.
3. Obligations. The Obligations secured under this Pledge
Agreement are (i) the obligations of Pledgor under this Pledge Agreement and
(ii) the obligations of Pledgor under Pledgor's Secured Continuing Corporate
Guaranty in favor of Pledgee dated as of even date (the "Guaranty") guarantying
the obligations of U.S. Plastic Lumber Ltd. ("Borrower") to Pledgee under that
certain Loan and Security Agreement dated concurrently herewith between Borrower
and Pledgee (the "Loan Agreement") and all extensions, amendments, modifications
and renewals of any of the foregoing.
4. Representations and Warranties. Pledgor represents
and warrants on the date hereof, and shall be deemed to represent and warrant on
the date of each loan or advance made by Pledgee to Borrower that:
4.1 Except as heretofore disclosed to Pledgee in
writing, Pledgor is the sole legal, beneficial and, if applicable, record owner
of the Collateral (or, in the case of after-acquired Collateral, will be the
sole such owner thereof), having good and marketable title thereto, free of all
liens, security interests, encumbrances or claims of any kind other than
Permitted Encumbrances (as defined in the Loan Agreement);
4.2 All information heretofore, herein or
hereafter given to Pledgee by or on behalf of Pledgor with respect to the
subject matter of this Pledge Agreement is complete, true and correct in all
material respects;
4.3 All shares of stock constituting Collateral
(a) have been duly and validly issued in compliance with all applicable state
and federal laws (including, without
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limitation, the Securities Act of 1933, as amended (the "Securities Act")), (b)
are fully paid, nonassessable and free of preemptive rights, (c) are not subject
to any restrictions upon the voting rights or upon the transfer thereof, and (d)
constitute 100% of the issued and outstanding capital stock of Subsidiary;
4.4 No litigation is threatened or pending
against Pledgor which, taken in the aggregate and if adversely determined, could
have a material adverse effect on Pledgor's financial condition;
4.5 No "event of default" shall have occurred
under any agreement, document, or instrument evidencing indebtedness of Pledgor,
and no indebtedness of Pledgor in excess of $50,000 in the aggregate is
accelerated or called for payment prior to the due date thereof;
4.6 The execution, delivery and performance by
Pledgor of this Pledge Agreement have been authorized by all necessary action
and do not and shall not constitute a violation of any applicable law or of
Pledgor's charter or a material breach of any other document, agreement or
instrument to which Pledgor is a party or by which Pledgor or any of its assets
are bound or governed by; and
4.7 This Pledge Agreement is the legal, valid
and binding obligation of Pledgor enforceable against Pledgor in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws or equitable principles affecting
creditors generally.
5. Covenants of Pledgor. Until the Obligations are paid
in full, Pledgor agrees to:
5.1 Preserve and protect the Collateral,
provided that this obligation shall not require Pledgor to protect or preserve
physical stock certificates to the extent such certificates are in the
possession of Pledgee;
5.2 Not create, incur, assume or permit to exist
any liens, encumbrances, security interests, levies, assessments or charges on
or in any of the Collateral, except Permitted Encumbrances;
5.3 Promptly pay and discharge before the same
become delinquent all taxes, assessments and governmental charges or levies
imposed on Pledgor or any of the Collateral except such taxes, assessments and
governmental charges or levies, if any, which are being contested in good faith
and as to which, at Pledgee's option, a reserve against Borrower's Availability
may be created;
5.4 Not sell, encumber, or otherwise dispose of
or transfer any Collateral, or any right or interest therein (other than
Permitted Encumbrances) and agrees that it will (i) cause Subsidiary not to
issue any other voting stock in addition to or in substitution for the
Collateral, except to Pledgor, or in connection with outstanding stock options
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or with the prior written consent of Pledgee and (ii) pledge hereunder,
immediately upon Pledgor's acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of Subsidiary;
5.5 Appear in and defend, at Pledgor's own
expense, any action or proceeding which may affect Pledgor's title to or
Pledgee's interest in the Collateral;
5.6 Procure or execute and deliver, from time to
time, in form and substance satisfactory to Pledgee in its discretion reasonably
exercised, any stock powers, bond powers, endorsements, assignments, financing
statements, estoppel certificates or other writings deemed necessary or
appropriate by Pledgee to perfect, maintain or protect Pledgee's security
interest in the Collateral and the priority thereof, and take such other action
and deliver such other documents, instruments and agreements pertaining to the
Collateral as Pledgee may reasonably request to effectuate the intent of this
Pledge Agreement;
5.7 If Pledgee gives value to enable Pledgor to
acquire rights in or use of any Collateral, use such value only for such
purpose;
5.8 Keep separate, accurate and complete records
of the Collateral and provide Pledgee with access thereto with the right to make
extracts therefrom;
5.9 Provide Pledgee with copies of all reports,
if any, filed by Pledgor with the Securities and Exchange Commission within ten
(10) business days after the last date such report is required to be filed
(including any extensions to such date);
5.10 Provide Pledgee with such other information
pertaining to the Collateral as Pledgee may reasonably request from time to
time; and
5.11 Maintain and preserve its legal existence
and all rights, privileges, franchises and other authority necessary for the
conduct of its business.
6. Authorized Action by Pledgee.
6.1 Pledgor hereby irrevocably appoints Pledgee
as its attorney-in-fact to do (but Pledgee shall not be obligated to and shall
not incur any liability to Pledgor or any third party for failure so to do) any
act which Pledgor is obligated by this Pledge Agreement to do, and to exercise
such rights and powers as Pledgor might exercise with respect to the Collateral,
including, without limitation, the right to:
6.1.1 upon the occurrence and during the
continuance of an Event of Default, collect by legal proceedings or otherwise
and endorse, receive and receipt for all payments, proceeds and other sums and
property now or hereafter payable on or in respect of proceeds and other sums
and property now or hereafter payable on or in respect of the Collateral,
including dividends, profits and interest payments;
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6.1.2 upon the occurrence and during the
continuance of an Event of Default, enter into any extension, reorganization,
deposit, merger or consolidation
agreement or other agreement pertaining to the Collateral, and in connection
therewith may deposit or surrender control of the Collateral thereunder, accept
other property in exchange therefor, and do and perform such acts and things as
it may deem proper, and any money or property secured in exchange therefor shall
be applied to the Obligations or held by Pledgee pursuant to the provisions of
this Pledge Agreement;
6.1.3 protect and preserve the
Collateral;
6.1.4 following an Event of Default,
transfer the Collateral to its own or its nominee's name; and
6.1.5 upon the occurrence and during the
continuance of an Event of Default, make any reasonable compromise, settlement
or adjustment, and take any action it deems advisable, with respect to the
Collateral.
6.2 Pledgor agrees to reimburse Pledgee within
five (5) days after receipt of written demand (together with reasonable details
of the calculation of such amounts including invoices related thereto, if
available) for any costs and expenses, including reasonable attorneys' fees,
Pledgee may incur while acting as Pledgor's attorney-in-fact hereunder, all of
which costs and expenses are included in the Obligations secured hereby. While
the Collateral is in Pledgee's possession, Pledgee agrees to give such care to
the safekeeping of the Collateral as Pledgee gives to the safekeeping of its own
property of like kind. It is further agreed and understood between the parties
hereto that such care as Pledgee gives to the safekeeping of its own property of
like kind shall constitute reasonable care of the Collateral when in Pledgee's
possession; provided, however, that Pledgee shall not be required to make any
presentment, demand or protest, or give any notice and need not take any action
to preserve any rights against any prior party or any other person in connection
with the Obligations or with respect to the Collateral.
6.3 All the foregoing powers authorized herein,
being coupled with an interest, are irrevocable so long as any Obligations are
outstanding.
7. Transfer, Voting, Dividends, Etc.
7.1 Notwithstanding any other provision hereof,
so long as no Event of Default (as defined herein) shall have occurred and be
continuing:
7.1.1 Pledgor shall be entitled to
exercise all voting powers pertaining to all shares of stock and other
securities constituting Collateral for all purposes not inconsistent with the
terms of this Pledge Agreement;
7.1.2 Pledgor shall be entitled to
receive and retain all dividends (other than shares of stock or liquidating
dividends) and all interest payments payable in respect of the Collateral;
provided, however, that such dividends and/or interest payments are made in
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accordance with the terms of the Loan Agreement and the Transaction Documents,
as defined therein; and provided further, however, that all shares of stock or
property representing shares of stock or liquidating dividends or a distribution
or return of capital upon or in respect of the shares of stock constituting
Collateral or resulting from a split-up, revision or reclassification of such
Collateral or received in exchange therefor, as a result of a merger,
consolidation or otherwise, shall be paid or transferred directly to Pledgee
immediately upon receipt thereof by Pledgor, and shall be retained by Pledgee as
Collateral hereunder (or applied to the Obligations, consistent with the terms
of the Loan Agreement); and
7.1.3 in order to permit Pledgor to
exercise such voting powers and to receive such dividends Pledgee shall, if
necessary, upon the written request of the Pledgor, from time to time, execute
and deliver to Pledgor appropriate proxies.
7.2 If any Event of Default (as defined herein)
shall have occurred and while the same is continuing:
7.2.1 Pledgee, or its nominee or
nominees, shall, if Pledgee so elects by written notice to Pledgor, have the
sole and exclusive right to exercise all voting powers pertaining to the shares
of stock constituting Collateral, and shall exercise such powers in such manner
as Pledgee may elect, and Pledgor hereby grants Pledgee an irrevocable proxy,
coupled with an interest to vote such shares of stock; provided, however, that
such proxy shall terminate upon termination of Pledgee's security interest in
the Collateral; and
7.2.2 All dividends and other
distributions and profits made upon or in respect of the Collateral and all
interest payments shall be paid directly to and shall be retained by Pledgee as
Collateral hereunder (or applied to the Obligations, consistent with the terms
of the Loan Agreement).
8. Default and Remedies.
8.1 The occurrence of any of the following
events or conditions (herein "Events of Default") shall, at the option of
Pledgee and without notice to or demand on Pledgor, constitute an Event of
Default hereunder:
8.1.1 any Event of Default under and as
defined in either Loan Agreement, shall have occurred and be continuing;
8.1.2 breach, violation or
non-performance of any warranty, covenant, agreement or undertaking on Pledgor's
part hereunder, under the Loan Agreement or under the Guaranty.
Any Event of Default that shall have occurred hereunder or under the Loan
Agreement at any time shall be deemed continuing unless such Event of Default is
(i) cured, provided that an Event of Default may only be cured within the
time-frame and only if so expressly permitted under the terms of this Agreement
or the Loan Agreement, as applicable or (ii) waived in writing by Pledgee.
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8.2 Upon the occurrence of any Event of Default,
Pledgee may, at its option, without notice to or demand on Pledgor, declare all
Obligations immediately due and payable, and Pledgee shall have all the default
rights and remedies of a secured party under the California Uniform Commercial
Code and other applicable law as well as the following rights and remedies, all
of which may be exercised with or without further notice to Pledgor, at
Pledgee's sole option and as Pledgee in its sole discretion may deem advisable:
8.2.1 to settle, compromise or release,
on terms reasonably acceptable to Pledgee, in whole or in part, any amounts
owing on the Collateral, and to extend the time of payment, in Pledgee's name or
in the name of Pledgor, in respect thereof;
8.2.2 to apply to the payment of the
Obligations, or collect the Collateral, notwithstanding any forfeiture of
interest or loss of other rights of Pledgor against any obligor on the
Collateral resulting from such action; and
8.2.3 to sell or otherwise dispose of the
Collateral, or any part thereof, either at public or private sale, on any
broker's board or securities exchange, in lots or in bulk, for cash, on credit
or otherwise, with or without representations or warranties, and upon such terms
as shall be acceptable to Pledgee.
8.3 The net cash proceeds resulting from the
collection, liquidation, sale, or other disposition of the Collateral shall be
applied first, to the expenses (including all reasonable attorneys' fees) of
holding, storing, preparing for sale, selling, collecting, liquidating and the
like, including any brokerage commissions and stamp or transfer taxes, and then
to the satisfaction of all Obligations secured hereby, application as to any
particular obligation or indebtedness or against principal or interest to be in
Pledgee's absolute discretion.
8.4 If by reason of any prohibition contained in
the Securities Act of 1933, as now or hereafter in effect, or in applicable
California, Delaware or other state securities laws, as now or hereafter in
effect, or in any rules or regulations pertaining to any of the foregoing laws,
Pledgee believes in its sole judgment that it is compelled to resort to one or
more private sales of the shares of stock constituting Collateral to a single
purchaser or a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof, Pledgor
acknowledges and agrees that private sales of such Collateral may be held
notwithstanding that such sales may be at prices and on other terms less
favorable to Pledgor than if such Collateral were sold at public sale. Pledgor
further agrees that Pledgee has no obligation to delay the sale of any such
Collateral for the period of time necessary to permit registration of the
Collateral, even if the issuer thereof would, or should, agree to register such
Collateral for public sale under applicable securities laws. Pledgor
specifically agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a "commercially reasonable" manner so long
as all other aspects of such private sales are commercially reasonable.
9. Duty of Pledgee. Pledgee shall not be under any
duty or obligation whatsoever to collect any dividends, interest, profits or
other payments due or accruing in respect
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of the Collateral or to take any action to preserve rights in connection with
any Collateral, including, without limitation, making or giving any presentment,
demands for performance, notices of non-performance, protests, notices of
protest or notices of dishonor in connection with any Collateral.
10. Cumulative Rights. The rights, powers and remedies of
Pledgee under this Pledge Agreement shall be in addition to all rights, powers
and remedies given to Pledgee under any statute or rule of law or any other
agreement, all of which rights, powers and remedies shall be cumulative and may
be exercised successively or concurrently.
11. Waiver. Any forbearance, failure or delay by Pledgee in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived in a
writing executed by Pledgee. Pledgor waives any right to require Pledgee to
proceed against any person or to exhaust any Collateral or to pursue any remedy
in Pledgee's power prior to pursuing Pledgor in respect of the Obligations.
12. Binding Upon Successors. All rights of Pledgee under
this Pledge Agreement shall inure to the benefit of its successors and assigns,
and all obligations of Pledgor shall bind the representatives, executors,
administrators, heirs, successors and assigns of the Pledgor.
13. Entire Agreement; Severability. This Pledge Agreement
contains the entire pledge agreement between Pledgee and Pledgor with respect to
the Collateral. If any of the provisions of this Pledge Agreement shall be held
invalid or unenforceable, this Pledge Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties hereto
shall be construed and enforced accordingly.
14. Return; Acquittance. Pledgee may at any time deliver
any Collateral to Pledgor and the receipt thereof by Pledgor shall be a complete
and full acquittance in respect of the Collateral so delivered, and Pledgee
shall thereafter be discharged from any liability or responsibility therefor.
15. References. The singular includes the plural. The
captions or titles of the sections of this Pledge Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
16. Choice of Law. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the State of California and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the California Uniform Commercial Code. Pledgor
irrevocably and unconditionally submits to the jurisdiction of the Superior
Court of the State of California for the County of Los Angeles or the United
States District Court for the District of California, as Pledgee may deem
appropriate, or if required, the Municipal Court of the State of California for
the County of Los Angeles, in connection with any legal action or proceeding
arising out of or relating to this Pledge Agreement, and Pledgor waives any
objection relating to the basis for personal or in rem
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jurisdiction or to venue which it may now or hereafter have in any such suit,
action or proceeding.
17. JURY TRIAL. PLEDGOR AND PLEDGEE WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO ANY OF THE OBLIGATIONS HEREIN.
18. Notice. Any written notice, consent or other
communication provided for in this Pledge Agreement shall be given and deemed
received as provided in the Guaranty.
19. Expenses. Pledgor will reimburse Pledgee for all
out-of-pocket expenses incurred by Pledgee arising out of the enforcement of
this Agreement, including without limitation, attorneys' fees and costs whether
or not suit is filed.
20. Indemnification. Pledgor agrees to pay, and on demand to
indemnify and hold harmless, Pledgee, its successors, assigns, agents and
servants, from and against any and all third party claims, damages, losses,
liabilities, demands, suits, judgments, causes of action and all legal
proceedings, whether civil or criminal, penalties, fines and other sanctions,
and any reasonable costs and expenses incurred in connection therewith,
including attorneys' fees, which may result from, relate to or arise out of this
Pledge Agreement or any Collateral, including the ownership, purchase, delivery,
acceptance or rejection, use, possession or disposition of any item of
Collateral, but not including any claims arising out of the gross negligence or
willful misconduct of Pledgee or its agents and servants.
[This space intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge
Agreement as of the date first written above.
PLEDGOR: U.S. PLASTIC LUMBER PLEDGEE: GUARANTY BUSINESS
FINANCE CORPORATION CREDIT CORPORATION
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------- ----------------------------------
By: Xxxxx X. Xxxxxxx By: Xxxxxx X. Xxxxxxxxxx
Its: Vice President and Secretary Its: Senior Vice President
SCHEDULE I
PLEDGED STOCK
---------------------------- ------------- -------------------------------- -----------------------------------
Type/Number of Shares Certificate Name of Subsidiary Pledged Shares as Percentage of
Number(s) Total Shares Issued
---------------------------- ------------- -------------------------------- -----------------------------------
1000 shares/common 0 X.X. Xxxxxxx Xxxxxx IP 100%
Corporation
---------------------------- ------------- -------------------------------- -----------------------------------
I-1
