EXHIBIT 10.5
[EXECUTION COPY]
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of August __ 1997, made by XXXXX
INDUSTRIES, INC., a California corporation (the "Pledgor"), in favor of
NationsBank, N.A., a national banking association with its principal office
located in Atlanta, Georgia (the "Agent"), in its capacity as agent for the
financial institutions (the "Lenders") party from time to time to the Loan and
Security Agreement dated as of August __, 1997 (the same as it may be amended,
modified, supplemented, extended or refinanced from time to time, being the
"Loan Agreement"), between the Pledgor, the Lender and the Agent.
PRELIMINARY STATEMENT
Pursuant to the Loan Agreement, the Lenders have made or have
agreed to make certain financial accommodations to the Pledgor in the form of
revolving credit loans under a $15,000,000 revolving credit facility, on the
terms and conditions more particularly set forth in the Loan Agreement.
Terms defined in the Loan Agreement, unless otherwise defined herein, are
used herein as therein defined.
The Pledgor's obligations under the Loan Agreement are secured
by substantially all of the Pledgor's assets. The Pledgor is the owner of
all of the issued and outstanding capital stock of the companies listed on
ANNEX A attached hereto ("Pledged Shares"). The Lenders and the Agent have
required as a condition to entering into the Loan Agreement and extending the
credit and financial accommodations described therein that the Pledgor enter
into this Pledge Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to make Loans to the Pledgor under the Loan Agreement,
the Pledgor hereby agrees as follows:
Section 1. PLEDGE. The Pledgor hereby mortgages, pledges and
assigns to the Agent, for its benefit and the benefit of the Lenders, and
grants to the Agent, for its benefit and the benefit of the Lenders, a
security interest in the following (the "Pledged Collateral"):
(a) the Pledged Shares and the certificates representing
the Pledged Shares and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the Pledged Shares;
(b) Any additional shares of any class of stock of any
issuer of the Pledged Shares from time to time acquired by the
Pledgor in any manner and the certificates
representing such additional shares and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such shares; and
(c) all proceeds of the foregoing.
Section 2. SECURITY FOR OBLIGATIONS. This Pledge Agreement
secures the payment and performance of all of the Secured Obligations now or
hereafter existing.
Section 3. DELIVERY OF PLEDGED COLLATERAL. All certificates
representing or evidencing the Pledged Collateral shall be delivered to and
held by or on behalf of the Agent, for the benefit of the Lenders, 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 the Agent. The Agent shall have
the right, at any time in its discretion and without notice to the Pledgor,
when an Event of Default exists, to transfer to or to register in the name of
the Agent or any of its nominees, for the benefit of the Lenders, any or all
of the Pledged Collateral, subject only to the revocable rights specified in
SECTION 6(A). The Agent shall have the right at any time when an Event of
Default exists to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations. The Pledgor acknowledges that all certificates or
instruments deposited by the Pledgor or transferred to or registered in the
name of the Agent in accordance with this SECTION 3 are deposited,
transferred or registered to secure the payment and performance of the
Secured Obligations.
Section 4. REPRESENTATIONS AND WARRANTIES. The Pledgor
represents and warrants as follows:
(a) The execution, delivery and performance of this
Pledge Agreement in accordance with its terms and the grant
of the security interest hereunder are within the Pledgor's
corporate power and have been duly authorized by all necessary
corporate action on the part of the Pledgor. This Agreement has
been duly executed and delivered by an authorized officer of the
Pledgor and is a legal, valid and binding obligation of the
Pledgor enforceable against the Pledgor in accordance with its
terms.
(b) The execution, delivery and performance of this
Agreement in accordance with its terms and the grant of the
security interest hereunder do not and will not, by the passage
of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any
Applicable Law relating to the Pledgor, the violation of
which reasonably could be expected to have a Materially
Adverse Effect,
(ii) conflict with, result in a breach of or constitute
a default under the Pledgor's articles of incorporation or
bylaws,
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(iii) conflict with, result in a breach of or constitute
a default under any indenture, agreement or other instrument
to which the Pledgor is a party or by which it or any of its
properties may be bound or any Governmental Approval, if the
effect thereof, singly or in the aggregate, reasonably could
be expected to have a Materially Adverse Effect, or
(iv) result in or require the creation or imposition of
any Lien upon or with respect to any property now owned or
hereafter acquired by the Pledgor, other than the security
interest granted hereunder in favor of the Agent, for the
benefit of itself as Agent and the Lenders.
(c) No authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by the
Pledgor of the Pledged Collateral pursuant to this Agreement or
for the execution, delivery or performance of this Agreement by
the Pledgor, or (ii) for the exercise by the Agent of the
voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this
Agreement, other than the filing of financing statements for the
purpose of giving public notice of the security interest granted
hereby.
(d) The Pledged Shares are not subject to any restriction
prohibiting or limiting, in any material respect, the transfer
thereof either by the Pledgor in connection herewith or by the
Agent in connection with the exercise of its remedies hereunder,
other than under applicable securities laws.
(e) The Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable and
represent 100% of the issued and outstanding shares of each of
the Pledgor's Subsidiaries.
(f) The Pledgor is the legal and beneficial owner of the
Pledged Collateral free and clear of any lien, security interest,
option or other charge or encumbrance, except for the security
interest created by this Agreement.
(g) The pledge of the Pledged Shares pursuant to this
Pledge Agreement creates a valid security interest in the Pledged
Collateral, securing the payment of the Secured Obligations, and
all deliveries, filings or other actions necessary to perfect and
protect such security interest in the Pledged Shares have been
taken or will be taken simultaneously with the execution and
delivery of this Agreement.
(h) None of the Pledged Collateral is evidenced by any
instrument not delivered to the Agent in accordance with the
terms hereof.
(i) The principal place of business and chief executive
office of the Pledgor is located at 0000 Xxxxx Xxxxx Xxxxxx,
Xxx Xxxx, Xxxxxxxxxx 00000.
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Section 5. FURTHER ASSURANCES. The Pledgor agrees that at any time, and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Agent may request in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.
Section 6. VOTING RIGHTS, DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Agreement or the Loan Agreement; PROVIDED, HOWEVER,
that the Pledgor shall not exercise or shall refrain from exercising
any such right if, in the Agent's reasonable judgment, such action
would have a Materially Adverse Effect on the Agent's or any Lenders'
rights in the Pledged Collateral.
(ii) The Pledgor shall be entitled to receive and retain any
and all dividends paid in respect of the Pledged Collateral; PROVIDED,
HOWEVER, that any and all
(A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or
in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with
a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange for,
any Pledged Collateral,
shall be Pledged Collateral and shall be forthwith delivered to the
Agent to hold, for the benefit of itself as Agent and the Lenders, as
Pledged Collateral and shall, if received by the Pledgor, be received
in trust for the Agent, be segregated from the other property or funds
of the Pledgor and be forthwith delivered to the Agent, for the
benefit of itself as Agent and the Lenders, as Pledged Collateral in
the same form as so received (with any necessary endorsement).
(iii) The Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor
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may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which it is entitled to exercise
pursuant to CLAUSE (I) above and to receive the dividends or interest
payments which it is authorized to receive and retain pursuant to
CLAUSE (II) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) upon the Agent's election evidenced by a written notice
to the Pledgor, all rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to SECTION 6(A)(I) and to receive the dividends and
interest payments which it would otherwise be authorized to receive
and retain pursuant to SECTION 6(A)(II) shall cease, and all such
rights shall thereupon become vested in the Agent, for the benefit of
itself as Agent and the Lenders, who shall thereupon have the sole
right to exercise such voting and other consensual rights and to
receive and hold as Pledged Collateral such dividends and interest
payments; and
(ii) all dividends and interest payments which are received by
the Pledgor contrary to the provisions of CLAUSE (I) of this
SECTION 6(B) shall be received in trust for the Agent, for the benefit
of itself as Agent and the Lenders, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Agent,
for the benefit of itself as Agent and the Lenders, as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
Section 7. TRANSFERS AND OTHER LIENS.
(a) The Pledgor agrees that it will not (i) sell or otherwise dispose of,
or grant any option with respect to, any of the Pledged Collateral, or
(ii) create or permit to exist any lien, security interest, or other charge or
encumbrance upon or with respect to any of the Pledged Collateral, except for
the security interest granted to the Agent under this Agreement and Permitted
Liens.
(b) The Pledgor agrees that it (i) will cause the issuers of the Pledged
Shares not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuers, except to the
Pledgor, and (ii) will pledge hereunder, immediately upon the Pledgor's
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of the Pledged Shares, subject to the
limitations set forth herein.
Section 8. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints
the Agent as the Pledgor's attorney-in-fact, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Agent's discretion to take any action and to execute any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Pledge Agreement, including, without limitation, subject to the
provisions of SECTION 6, to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest payment or other
distribution that constitutes Pledged
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Collateral or that are payable to the Agent pursuant to the terms hereof and
to give full discharge for the same.
Section 9. AGENT MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor under SECTION 13.
Section 10. REASONABLE CARE. The Agent and the Lenders shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in the Agent's possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Agent accords its own property
of the same type or, if the Agent appoints an agent to hold the Pledged
Collateral on its behalf or on behalf of the Lenders, such agent agrees to be
bound by a similar standard of care, it being understood that neither the Agent,
any Lender nor any such agent shall have any responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Collateral, whether or not the
Agent, any Lender or any such agent has or is deemed to have knowledge of such
matters, or (ii) taking any necessary steps to preserve rights against any
parties with respect to any Pledged Collateral.
Section 11. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an Event of Default hereunder:
(a) the occurrence of any "Event of Default" under the Loan
Agreement; or
(b) if, at any time, any representation, warranty, certificate,
schedule or report made or delivered by the Pledgor to the Agent and the
Lenders hereunder shall prove to have been false or misleading in any
material respect as of the time made or furnished.
Section 12. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may, and at the direction of the Lenders in their sole
and absolute discretion shall, exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
upon default under the Uniform Commercial Code, and the Agent may also, and
at the direction of the Lenders in their sole and absolute discretion
shall, upon notice specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon such
other terms as the Agent may deem commercially reasonable. The Pledgor
agrees that, to the extent notice of sale shall be required by law, at
least five days' written notice to the Pledgor of the time and place of any
public sale or the time after which any private sale may be made shall
constitute reasonable notification. The Agent shall not be obligated to
make any sale of Pledged Collateral regardless of notice of sale having
been given. The Agent may adjourn any public or private sale from time to
time
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by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned. The Agent shall have the right to bid for and purchase any
of the Pledged Collateral at any such public sale and shall not be deemed
thereby to have retained the Pledged Collateral in satisfaction of the
Secured Obligations.
(b) Any cash held by the Agent as Pledged Collateral and all cash
proceeds received by the Agent in respect of any sale of, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of the Agent, be held by the Agent as collateral for, and/or
then or at any time thereafter applied (after payment of any amounts
payable to the Agent pursuant to SECTION 13) in whole or in part by the
Agent against, all or any part of the Secured Obligations in such order as
the Agent shall elect. Any surplus of such cash proceeds held by the Agent
and remaining after payment in full of all the Secured Obligations shall be
paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus. The Pledgor shall remain liable for any deficiency.
(c) The Pledgor acknowledges that compliance with applicable
securities laws may very strictly limit the Agent's conduct in the
disposition of all or any part of the Pledged Collateral in accordance with
this SECTION 12, and may also limit the extent to which or the manner in
which any subsequent transferee of any Pledged Collateral may dispose of
the same. Pledgor acknowledges and agrees that the Agent shall be entitled
to place all or any part of the Pledged Collateral for private placement by
an investment banking firm, that any such investment banking firm may
purchase all or any part of the Pledged Collateral for its own account and
that the Agent shall be entitled to place all or any part of the Pledged
Collateral privately with a purchaser or purchasers who will represent and
agree that they are purchasing the Pledged Collateral for their own account
for investment and not with a view to the distribution or sale thereof in
violation of applicable securities laws, notwithstanding the existence of a
public or private market upon which the quotations or sales prices may
exceed substantially the price at which the Agent sells the Pledged
Collateral.
Section 13. EXPENSES. The Pledgor will upon demand pay to the Agent and
each Lender the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel actually incurred and of any experts
and agents, which the Agent or such Lender may incur in connection with (a) the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (b) the exercise or enforcement of any of the rights of the Agent or
any Lender hereunder, or (c) the failure by the Pledgor to perform or observe
any of the provisions hereof. The Lenders shall to the extent reasonably
practicable coordinate their activities in the administration of this Pledge
Agreement through the Agent to avoid unnecessary duplication of costs and
expenses that the Pledgor is required to pay under this SECTION 13, provided
that neither the Lenders nor the Agent shall be under any obligation to
coordinate such activities during the continuation of an Event of Default.
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Section 14. SECURITY INTEREST ABSOLUTE. All rights of the Agent and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Loan
Agreement or the Notes or extension of the maturity date of any of the
Notes;
(c) any exchange, release or nonperfection of any other collateral
for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the Secured
Obligations or this Pledge Agreement or otherwise.
Section 15. RELEASE OF SECURITY INTERESTS. Upon the payment and
performance in full of the Secured Obligations and the termination of each of
the Lenders' Commitments under the Loan Agreement, the Agent shall release its
security interests hereunder in the Pledged Collateral, and the Pledgor shall be
entitled to the return, upon its request and at its expense, of such of the
Pledged Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof and the Agent shall, at the Pledgor's request and expense,
execute and deliver such other releases, confirmations and acknowledgments as
may reasonably be requested to evidence such release.
Section 16. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the Agent,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
Section 17. LITIGATION. THE PLEDGOR, THE AGENT AND EACH LENDER HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE
COMMENCED BY OR AGAINST THE PLEDGOR, THE AGENT OR SUCH LENDER ARISING OUT OF
THIS AGREEMENT OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE
PLEDGOR AND THE AGENT OR ANY LENDER OF ANY KIND OR NATURE.
Section 18. NOTICES. All notices and other communications provided for
hereunder shall be in writing and given in accordance with the provisions of
Section 14.1 of the Loan Agreement and such provisions are hereby incorporated
herein by this reference as if fully set forth herein.
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Section 19. CONTINUING SECURITY INTEREST This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (a) remain in
full force and effect until the release thereof as provided in SECTION 15,
(b) be binding upon the Pledgor, its successors and assigns, and (c) inure to
the benefit of the Agent and the Lenders and their respective successors and
assigns, provided that any assignment of the Agent's or any Lenders' rights
hereunder that is made other than during the continuance of an Event of Default
shall be made only in connection with an assignment of all or a portion of the
Loans and the Commitments that is permitted under the Loan Agreement.
Section 20. GOVERNING LAW; TERMS.
(a) This Agreement shall be construed in accordance with and governed by
the law of the State of New York.
(b) The Pledgor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Agent, or any Lender
may otherwise have to bring any action or proceeding relating to this Agreement
or the other Loan Documents against the Pledgor or its properties in the courts
of any jurisdiction.
(c) The Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in SECTION 20(B). Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in SECTION 18. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
IN WITNESS WHEREOF, the Pledgor and the Agent have caused this Agreement to
be duly executed and delivered under seal by their respective officers thereunto
duly authorized as of the date first above written.
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PLEDGOR:
XXXXX INDUSTRIES, INC.
[CORPORATE SEAL]
By: ________________________________
Name:
Attest: Title:
By: ______________________________
Name:
Title:
Agent:
NATIONSBANK, N.A.
By: ________________________________
Name:
Title:
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ANNEX A
Pledged Shares
COMPANY AUTHORIZED SHARES ISSUED SHARES CERTIFICATE NO.
Xxxxx Flooring 7500 100 1
Products, Inc.
Xxxxx Custom 7500 100 1
Processing, Inc.
Xxxxx Rubber 7500 100 1
Company, Inc.
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IRREVOCABLE STOCK TRANSFER POWER
FOR VALUE RECEIVED, XXXXX INDUSTRIES INC., a California corporation, hereby
sells, assigns, and transfers unto _____________________________100 shares of
_____ par value, Common Stock in XXXXX CUSTOM PROCESSING, INC., a California
corporation (the "Company"), represented by Certificate No. ______ herewith, and
hereby irrevocably constitutes and appoints _______________________________
attorney to transfer the said stock on the books of said Company, with full
power of substitution in the premises.
Dated:
XXXXX INDUSTRIES, INC.
Attest: By: _____________________________
Name:
Title:
________________________________
Name:
Title:
IRREVOCABLE STOCK TRANSFER POWER
FOR VALUE RECEIVED, XXXXX INDUSTRIES INC., a California corporation, hereby
sells, assigns, and transfers unto _____________________________100 shares of
_____ par value, Common Stock in XXXXX FLOORING PRODUCTS, INC., a California
corporation (the "Company"), represented by Certificate No. ______ herewith, and
hereby irrevocably constitutes and appoints _______________________________
attorney to transfer the said stock on the books of said Company, with full
power of substitution in the premises.
Dated:
XXXXX INDUSTRIES, INC.
Attest: By: ________________________________
Name:
Title:
__________________________________
Name:
Title:
IRREVOCABLE STOCK TRANSFER POWER
FOR VALUE RECEIVED, XXXXX INDUSTRIES INC., a California corporation, hereby
sells, assigns, and transfers unto _____________________________100 shares of
_____ par value, Common Stock in XXXXX RUBBER COMPANY, INC., a California
corporation (the "Company"), represented by Certificate No. ______ herewith, and
hereby irrevocably constitutes and appoints _______________________________
attorney to transfer the said stock on the books of said Company, with full
power of substitution in the premises.
Dated:
XXXXX INDUSTRIES, INC.
Attest: By: ______________________________
Name:
Title:
__________________________________
Name:
Title:
