EXHIBIT 10.36
PLEDGE AGREEMENT
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This Pledge Agreement (the "Agreement") is made on March 26, 1999, by
Khaledi Family Partnership I, a California general partnership, Khaledi Family
Trust Dated May 17, 1995, Xxxxxx Xxxxx and Xxxx Xxxxx (jointly and severally,
the "Pledgor"), whose address is c/o K.V. Mart Co., 0000 X. Xxxxxx Xxxxxx Xxxx,
Xxxxxx, Xxxxxxxxxx 00000-0000, Attention: President, in favor of Grocers Capital
Company, a California corporation ("GCC"), whose address is 0000 Xxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000, Attention: Secretary.
1. Recital. This Agreement is made wit respect to the following facts and
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circumstances:
(a) GCC, K.V. Mart Co. (the "Company"), and the Pledgor, are
entering into a Stock Purchase Agreement (the "Purchase Agreement"), dated
the date hereof, pursuant to which GCC is selling certain shares of the
capital stock of the Company to the Pledgor in consideration for, among
other things, the execution and delivery by the Pledgor to GCC of a
Promissory Note (the "Note") in the principal amount of $3,600,000.00.
(b) GCC would not sell said capital stock to the Pledgor nor
enter into the Purchase Agreement or accept the Note from the Pledgor
unless the Pledgor agreed to enter into this Agreement, and the Pledgor, as
a material inducement and consideration to GCC to sell said capital stock
to the Pledgor and to enter into the Purchaser Agreement and accept the
Note, is willing to execute and deliver this Agreement and agree to and be
bound by its terms.
2. Definitions. In addition to capitalized terms elsewhere defined in
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this Agreement, the following terms shall have the following meanings:
2.1 "Obligations" means all of the indebtedness, obligations and
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liabilities of Pledgor GCC, individually or collectively, whether direct or
indirect, joint or several, absolute or contingent, liquidated or disputed, due
or to become due, now existing or hereafter arising under the Purchase Agreement
and/or the Note.
2.2 "Pledged Collateral" means Pledgor's Securities, together with
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all proceeds thereof, including any securities and monies received and at the
time held by GCC hereunder.
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2.3 "Securities" means all stock aid other securities of the Company
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now owned or hereafter acquired by Pledgor, including, without limitation, the
Securities listed on Exhibit A attached hereto.
3. Pledge of Securities.
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3.1 Pledge. To secure the Obligations, Pledgor hereby (a) grants to
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GCC a first priority security interest in the Pledged Collateral; (b) pledges
and deposits as security with GCC the Securities owned by Pledgor on the date
hereof and delivers to GCC certificates therefor accompanied by stock powers
duly executed in blank by Pledgor or such other instruments of transfer as are
acceptable to GCC; and (c) pledges, assigns, transfers, hypothecates, mortgages
and sets over to GCC all of Pledgor's right, title and interest in and to the
Pledged Collateral, (and in and to the certificates or instruments evidencing
any Pledged Collateral), to be held by GCC upon the terms and conditions set
forth in this Agreement.
3.2 Subsequently Acquired Securities. If Pledgor shall acquire (by
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purchase, stock dividend or otherwise) any additional Securities, at any time or
from time to time after the date hereof, Pledgor will forthwith pledge and
deposit such Securities as security with GCC and deliver to GCC certificates
therefor accompanied by stock powers duly executed in blank by Pledgor or such
other instruments of transfer as are acceptable to GCC, and will concurrently
deliver to GCC a certificate executed by Pledgor describing such Securities and
certifying that the same have been duly pledged with GCC hereunder.
4. Representations and Warranties. Pledgor represents and warrants that
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on the hereto:
4.1 Securities. The Securities consist of the number and type of
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Securities listed on Exhibit A attached hereto, Pledgor is the holder of record
and beneficial owner of such Securities, and such Securities are validly issued
and fully paid and nonassessable.
4.2 Title. Pledgor is, or will be as the case may be, the legal,
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record and beneficial owner of, and has good and marketable title to, the
Securities, pledged by it hereunder, subject to no security interest, lien,
adverse claim or other encumbrance (except the security interest created by this
Agreement).
4.3 Authority. Pledgor has full power, authority and legal right to
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pledge all pledged Collateral pursuant to this Agreement an this Agreement
creates a valid, first priority perfected security interest enforceable against
the Pledged Collateral, in which Pledgor now has rights, and will create a
valid, first priority perfected security interest enforceable against the
Pledged Collateral in which Pledgor later acquires rights when Pledgor acquires
those rights.
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4.4 Consents. No consent, filing, recording or registration is
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required in connection with Pledgor's execution and delivery of this Agreement
and pledge of the Pledged Collateral, nor is any such required to perfect the
security interest in the Pledged Collateral granted under this Agreement.
4.5 No Violations. Neither the execution and delivery of this
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Agreement, nor the taking of any action in compliance with it, will violate or
breach any law, regulation, rule, order or judicial action binding on Pledgor or
any agreement or instrument to which Pledgor is a party, or result in the
creation of any lien, security interest, adverse claim or other encumbrance,
against the Pledged Collateral except that created by this Agreement.
4.6 No Defaults. No Default (as defined in Section 9 of this
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Agreement) has occurred or is continuing.
4.7 Representations and Warranties. Each of the representations and
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warranties of Pledgors contained in the Purchase Agreement are true and correct.
5. Appointment of Agents; Endorsements. GCC shall have the right to
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appoint one or more agents for the purpose of retaining physical possession of
the Securities, which may be held (in GCC's discretion) in the name of Pledgor,
endorsed or assigned in blank or in favor of GCC or any nominee or nominees of
GCC or an agent appointed by GCC, or in the name of GCC as pledgee.
6. Voting Rights, Dividends and Distributions.
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6.1 Voting and Dividends. Unless and until a Default (as defined in
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Section 9 of this Agreement) shall have occurred and be continuing: (a) Pledgor
shall be entitled to vote any and all Securities and to give consents, waivers
or ratifications in respect thereof, provided that no vote shall be cast nor any
consent, waiver or ratification given or any action taken which would violate or
be inconsistent with any of the terms of this Agreement or which could cause a
violation of any of the covenants and agreements of the Company or the Pledgor
contained in the Purchase Agreement; and, (b) all cash dividends payable in
respect of the Pledged Collateral shall be paid to Pledgor, provided that all
cash dividends payable in respect of the Pledged Collateral which are determined
by GCC, in its discretion, to represent in whole or in part an extraordinary,
liquidating or other distribution in return of capital shall be paid to GCC and
retained by it as part of the Pledged Collateral.
6.2 Distributions. Whether or not a Default (as defined in Section 9
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of this Agreement) shall have occurred or be continuing, GCC shall be entitled
to receive directly, and to retain as part of the Pledged Collateral, (a) all
other or additional stock or securities or property (other than cash) paid or
distributed by way of dividend in respect of any Securities; (b) all other or
additional stock or other securi-
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ties or property (including cash) paid or distributed in respect of any
Securities by way of stock split, spinoff, split-up, reclassification,
combination of shares or similar rearrangement; and, (c) all other or additional
stock or other securities or property (including cash) which may be paid in
respect of the Pledged Collateral by reason of any consolidation, merger,
exchange of stock, conveyance of assets, liquidation or similar corporate
reorganization.
7. Covenants. Pledgor covenants and agrees that: (a) Pledgor will defend
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GCC's right, title and security interest in and to the Pledged Collateral
against the claims and demands of all persons and entitled; (b) Pledgor will pay
all expenses, including attorneys' fees, incurred by GCC in the perfection,
preservation, realization, enforcement and exercise of its rights under his
Agreement; (c) Pledgor will indemnify, defend and hold GCC harmless from and
against any and all claims, losses, liabilities, actions, costs and expenses
(including reasonable attorneys' fees and costs) suffered or incurred by GCC
arising out of or resulting from its interest in the Pledged Collateral; (d)
Pledgor will not sell or otherwise transfer or dispose of, grant any option or
right with respect to, or create, incur, assume or suffer to exist any lien,
security interest, claim or other encumbrance in or against the Pledged
Collateral or any portion of it (except the security interest created by this
Agreement); (e) Pledgor will give GCC notice of any litigation or adverse claim
concerning or involving the Pledged Collateral or any part of it; (f) Pledgor
will notify GCC promptly in writing of any Default (as defined in Section 9 of
this Agreement) or any event or occurrence that might have an adverse effect on
the Pledged Collateral or any part of it; (g) Pledgor will execute and deliver
to GCC all financing statements and other documents and instruments that GCC
requests, in order to maintain a valid, first priority perfected security
interest in the Pledged Collateral and every part of it; and, (h) Pledgor will
promptly furnish to GCC such reports and other information relating to the
Pledged Collateral and any part of it as GCC may from time to time request.
8. GCC's Duties. GCC has no duty or liability for the Pledged Collateral
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except to exercise reasonable care while it is in GCC's possession and except as
otherwise expressly set forth in this Agreement. It is understood and agreed
that the obligation of GCC as holder of the Pledge Collateral and interests
therein and with respect to the disposition thereof, and otherwise under this
Agreement, are only those expressly set forth in this Agreement. Without
limiting the foregoing:
8.1 Preservation of Rights. GCC shall not be required to take any
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steps necessary to reserve any rights in any Pledged Collateral against prior
parties or to protect, perfect, preserve or maintain any security interest given
to secure any Pledged Collateral.
8.2 Reasonable Care. GCC shall be deemed to have exercised reasonable
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care in the custody and preservation of the Pledged Collateral in its
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possession if it deals with the Pledged Collateral in such manner as GCC deals
with similar property for its own account.
8.3 Accountability. GCC shall be accountable only for any amounts it
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actually receives, and it shall not be liable to Pledgor for any act or failure
to act.
9. Default. The occurrence of any one or more of the following shall
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constitute a Default under this Agreement: (a) a breach or default by the
Company or the Pledgor under the Purchase Agreement or a breach or default by
the Pledgor under the Note; (b) Pledgor fails or refuses to perform or discharge
any covenant or obligation under this Agreement, or any present or further
rider, amendment or supplement to this Agreement, or any other agreement between
Pledgor and GCC evidencing the Obligations or securing them; (c) any
representation or warranty made by or on behalf of Pledgor in or with respect to
this Agreement or made by or on behalf of Pledgor in or with respect to the
Purchase Agreement is false; (d) there is a seizure or attachment of, or a levy
on, the Pledged Collateral or any part of it; (e) Pledgor does or fails to do
anything that allows obligations to become due before their stated maturity, or
becomes insolvent or unable to meet its debts as they mature; or (f) Pledgor
files, or acquiesces in or consents to the filing of, any proceedings under the
Federal Bankruptcy Code or any other law providing for the relief of debtors, or
is the subject of any involuntary proceedings under the Federal Bankruptcy Code
or any other law providing for the relief of debtors and such involuntary
proceedings are not dismissed within thirty (30) days of their commencement.
10. Remedies. At any time when a Default has occurred and is continuing:
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10.1 Remedies. In addition to any other rights or remedies which GCC
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may have under this Agreement or at law or equity, GCC may:
(a) Exercise any and all right and remedies which GCC may have
under or with respect to the Purchase Agreement and the Note, all to the
extent and in such order as GCC may determine in its sole discretion.
(b) Exercise any and all right and remedies available to a
secured part after default, including, without limitation, the rights and
remedies of secured parties under the California Uniform Commercial Code.
(c) Perform any of the Pledgor's obligations under this
Agreement for the Pledgor's account, and any money extended or obligations
incurred in doing so, including reasonable attorneys' fees and cost and
interest at the highest rate permitted by law, will be charged to the
Pledgor and secured by the security interest granted under this Agreement.
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(d) Receive all amounts payable in respect to the Pledged
Collateral otherwise payable to Pledgor; transfer all or any part of the
Pledged Collateral into GCC's name or the name of its nominee or nominees;
and, vote all or any part of the Pledged Collateral (whether or not
transferred into the name of GCC) and give all consents, waivers and
ratifications in respect of all or any part of the Pledged Collateral and
exercise all rights, options and privileges and otherwise act with respect
to the Pledged Collateral as though GCC were the owner thereof (Pledgor
hereby irrevocably constituting GCC the proxy and attorney-in-fact of
Borrower, with full power of substitution to do so).
(e) At any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the Pledged
Collateral, or any interest therein, at public or private sale, without
demand of performance, advertisement or notice of intention to sell, or of
the time or place of sale, or adjournment thereof, or redeem or otherwise
(all of which are hereby waived by Pledgor), for cash on credit or for
other property, for immediate for future delivery without any assumption of
credit risk, and for such price or prices and on such terms as GCC in its
absolute discretion may determine, provided that notice of the time an
place of any such sale shall be given to Pledgor in the manner provided in
this Section 10.2 of this Agreement. Pledgor hereby waives and releases to
the fullest extent permitted by law any right or equity of redemption with
respect to the Pledged Collateral, whether before or after sale under this
Agreement, and all rights, if any, of marshaling the Pledged Collateral and
any other security for any Obligations or otherwise. At any such sale,
unless prohibited by applicable law, GCC may bid for and purchase all or
any part of the pledged Collateral so sold free from any such right or
equity of redemption. GCC shall not be liable for failure to collect or
realize upon any or all of the Pledged Collateral or for any delay in so
doing nor shall GCC be under any obligation to take any action whatsoever
with regard thereto.
10.2 Notice of Sale. GCC's notice of the time and place of public sale
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of the Pledged Collateral, or the time on or after which a private sale or other
disposition of the Pledged Collateral will be made, is reasonable if given to
Pledgor in the manner for giving notices under this Agreement at east five (5)
days before the public or private sale.
10.3 Pledgor's Duties. Pledgor must assemble all records relating to
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the Pledged Collateral and make them available to GCC as GCC directs, and
execute all documents and instruments on GCC's request that GCC considers
necessary or advisable to exercise its rights under this Agreement.
11. Registration. If at any time when GCC shall determine to exercise its
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right to sell all or any Securities, such Securities or the part thereof to be
sold shall not, for any reason whatsoever, be effectively registered under the
Securities Act of 1933,
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as then in effect, GCC may, in its sole discretion, sell, any such Securities by
private sale in such manner and under such circumstances as GCC reasonably may
deem necessary or advisable in order that such sale may legally be effected
without such registration, provided that notice of the time and place of any
such sale shall be given to Pledgor in the manner provided in Section 10.2 of
this Agreement and that such sale shall be conducted in a commercially
reasonable manner. Without limiting the generality of the foregoing, in any such
event, GCC, in its sole discretion, may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Securities or part thereof shall have been filed under such Securities Act,
may approach and negotiate with a single possible purchaser to effect such sale,
and may restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a view
to the distribution or sale of such Securities or any part thereof. In the event
of any such sale, GCC shall incur no responsibility or liability for selling all
or any Securities at a price which GCC may in good xxxxx xxxx reasonable under
the circumstances, notwithstanding the possibility that a substantially higher
price might be realized if such Securities were registered as aforesaid.
12. Termination. When all Obligations have been irrevocably paid,
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performed and discharged in full, this Agreement shall terminate, and GCC, at
the request and expense of Pledgor, promptly will execute and deliver to Pledgor
a proper instrument or instruments acknowledging the satisfaction and
termination of this Agreement, and will assign, transfer and deliver to Pledgor
(without recourse and without any representation or warranty) such of the
Pledged Collateral as may be in the possession of GCC and has not theretofore
been sold or otherwise applied or released pursuant to this Agreement.
13. Other Provisions.
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13.1 Expenses. The Pledgor agrees to pay all attorneys' fees and all
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other costs and expenses which may be incurred by GCC in the enforcement or
collection of this Agreement whether or not suit is filed.
13.2 Interest. All amounts required to be paid to GCC by the Pledgor
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pursuant to the provisions of this Agreement shall bear interest from the date
upon which such amounts are due to the date of payment thereof at the highest
rate permitted by law. All payments of such amounts by the Pledgor shall include
any such accrued interest.
13.3 Governing Law. The validity, construction and performance of this
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Agreement shall be governed by the laws, without regard to the laws as to choice
or conflict of laws, of the State of California.
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13.4 Entire Agreement. This Agreement embodies the entire agreement
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and understanding between GCC and the Pledgor pertaining to the subject matter
of this Agreement, and supersedes all prior agreements, understandings,
negotiations, representations and discussions, whether verbal or written, of
such parties, pertaining to that subject matter.
13.5 Assignment; Binding Effect. Neither this Agreement nor any
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rights or obligations under this Agreement may be assigned by the Pledgor
without the prior written consent of GCC. Subject to the foregoing, the
provisions of this Agreement shall bind and inure to the benefit of GCC and the
Pledgor and their respective heirs, executors, personal representatives,
successors and assigns.
13.6 Notices. Whenever GCC or the Pledgor desire or are required to
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give any notice, demand or request with respect to this Agreement, each such
communication shall be in writing and shall be given by personal service or
mailed by Certified Mail, postage prepaid, return receipt requested, addressed
as set forth in the first paragraph of this Agreement. Such communications sent
shall be effectively given when they are received by the addressee thereof, but
if sent by Certified Mail, they shall be effectively given three (3) days after
being deposited in the United States Mail. GCC and the Pledgor may change their
respective address for such communications by giving notice to the other in
conformity with this Section.
13.7 Amendment and Waiver. This Agreement may not be amended,
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modified or supplemented except by a writing duly executed by the Pledgor and a
duly authorized officer of GCC. No provision of this Agreement or right of GCC
under this Agreement can be waived except by a writing duly executed by a duly
authorized officer of GCC. No waiver by GCC of a Default under this Agreement
shall be construed as a waiver of any subsequent or different Default, and no
forbearance by GCC to seek a remedy for any Default by Pledgor shall be
construed as a waiver of any right or remedy with respect to such Default.
13.8 Severability. The invalidity or unenforceability of any
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particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if any invalid or
unenforceable provision were omitted.
13.9 Further Action. The Pledgor agrees to perform any further acts
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and to execute and deliver any other documents or instruments which may be
necessary in the sole discretion of GCC to effect the provisions of this
Agreement.
13.10 Headings. The Section and other headings contained in this
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Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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13.11 Joint and Several. If this Agreement is signed by more than one
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party as Pledgor, each and all of the agreements and obligations contained
herein shall be deemed to be the joint and several agreements and obligations of
each such party executing this Agreement as Pledgor.
[SIGNATURES ARE ON THE NEXT PAGE]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the year and date first above written.
GCC: PLEDGOR:
Grocers Capital Company, Khaledi Family Partnership I, a California
a California corporation general partnership
By _______________________________ By ________________________________
Xxxxx X. Xxxxxxxx, Xxxxxxxx Xxxxxxx,
Vice President & CFO Trustee of the Khaledi Family
Trust dated May 17,
1995, Managing General Partner
By _______________________________
Xxxxxx X. Xxxx, Xx,
Secretary
Khaledi Family Trust Dated May 17,
1995
By ________________________________
Xxxxxxxx Xxxxxxx, Trustee
___________________________________
Xxxxxx Xxxxx,
___________________________________
Xxxx Xxxxx
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EXHIBIT A
SECURITIES LIST
Certificate Number Registered
No./Date Title of Shares Owner
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3/23/89 Common Stock 1,755 Khaledi Family Partnership I
21 Common Stock 2,965 Khaledi Family Partnership I
22 Common Stock 2,115 Xxxxxx Xxxxx and Xxxx Xxxxx
3/23/89 Common Stock 1,245 Xxxxxx Xxxxx and Xxxx Xxxxx
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