EXECUTION COPY
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SF HOLDINGS GROUP, INC.
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$144,000,000
144,000 UNITS CONSISTING OF
12 3/4% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2008 AND
288,000 SHARES OF CLASS C COMMON STOCK
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PLEDGE AGREEMENT
March 12, 1998
THE BANK OF NEW YORK
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PLEDGE AGREEMENT
This PLEDGE AGREEMENT (as amended, modified or supplemented
from time to time in accordance with its terms, the "Agreement"), dated as of
March 12, 1998, is made by SF HOLDINGS GROUP, INC., a Delaware corporation,
whose mailing address is 000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 (the
"Grantor"), in favor of THE BANK OF NEW YORK, in its capacity as trustee, for
the ratable benefit of the holders (the "Securityholders") from time to time of
the Senior Secured Discount Notes (as hereinafter defined) (the "Secured
Party").
RECITALS
A. The Grantor is a party to that certain indenture dated as
of the date hereof (as amended, supplemented or otherwise modified from time to
time, the "Indenture", between the Grantor and the Secured Party, pursuant to
which the Grantor will issue $77,538,240 in gross proceeds of 144,000 Units
(the "Units"), each consisting of $1,000 in aggregate principal amount at
maturity of its 12 3/4% Senior Secured Discount Notes due 2008 (including all
Series A and Series B Senior Secured Discount Notes to be issued from time to
time pursuant to the Indenture, collectively, the "Senior Secured Discount
Notes") and 2 shares (the "Shares") of Class C Common Stock, par value $.001
per share of the Company (the "Class C Common Stock"), the proceeds of which
will be used to fund the acquisition by the Grantor of 48% of the total
outstanding voting common stock, par value $.01 per share, of Sweetheart (the
"Sweetheart Class A Common Stock") and 100% of the total outstanding non-voting
common stock, par value $.01 per share, of Sweetheart (the "Sweetheart Class B
Common Stock" and together with the Sweetheart Class A Common Stock, the
"Sweetheart Common Stock"), which will represent 90% of the total outstanding
Sweetheart Common Stock (the "Sweetheart Investment"). All terms, covenants,
conditions, provisions and requirements of the Indenture are incorporated by
reference in this Agreement.
B. The terms of the Indenture require that the Grantor
execute and deliver this Agreement in order to secure the payment and
performance by the Grantor of all of its Obligations (as defined in the
Indenture) under the Indenture, the Senior Secured Discount Notes and the
Collateral Documents to which the Grantor is a party (collectively, the
"Secured Obligations").
AGREEMENT
NOW, THEREFORE, in order to induce the Securityholders to
purchase the Senior Secured Discount Notes, and for other good and valuable
consideration, the receipt and adequacy of which hereby is acknowledged, the
Grantor hereby represents, warrants, covenants, agrees and pledges as follows:
1. Definitions. This Agreement is the Pledge Agreement
referred to in the Indenture and is one of the Collateral Documents referred to
therein. Terms defined in the Indenture and not otherwise defined in this
Agreement shall have the meanings given those terms in the Indenture as though
set forth herein in full unless the context otherwise requires. In addition,
the following terms shall have the meanings respectively set forth after each:
"Accreted Value" has the meaning assigned in the Indenture.
"Bankruptcy Default" means a Default under Section 6.01(h) or (i) of
the Indenture without giving effect to the passage of time.
"Capital Stock" has the meaning assigned in the Indenture.
"Certificates" means all certificates, instruments or other
documents now or hereafter representing or evidencing any Pledged Securities.
"Collateral Documents" means this Agreement and any other
agreements, instruments, financing statements or other documents that evidence
or set forth the security interest of the Secured Party in the Pledged
Collateral.
"Default Rate" means the lesser of (a) the maximum rate of interest
allowed by applicable law, and (b) two percent (2%) per annum in excess of the
interest rate borne by the Senior Secured Discount Notes or, in the case where
a default occurs prior to March 15, 2003, the Accreted Value thereof.
"Xxxxx" means The Xxxxx Group, Inc.
"Intercompany Notes" means all intercompany notes issued in favor of
the Grantor by any of the current and future Restricted Subsidiaries of the
Grantor, including Xxxxx and Sweetheart.
"Laws" means, collectively, all international, foreign, federal,
state and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"Payment Default" means a Default under Section 6.01(a) or (b) of
the Indenture, without giving effect to any notice and/or cure periods.
"Pledged Collateral" means any and all property of the Grantor now
or hereafter pledged and delivered to the Secured Party pursuant to and under
this Agreement, and includes without limitation the Pledged Securities, the
Certificates representing or evidencing same, the Intercompany Notes, all
Collateral Documents related thereto, any and all proceeds and products of any
of the foregoing, and any and all collections, dividends, distributions,
redemption payments or liquidation payments with respect to any of the
foregoing.
"Pledged Securities" means (i) any and all issued and outstanding
Capital Stock of each Restricted Subsidiary, (ii) any and all securities now or
hereafter issued in substitution, exchange or replacement therefor, or with
respect thereto, (iii) any and all warrants, options or other rights to
subscribe to or acquire any additional Capital Stock of each Restricted
Subsidiary owned by the Grantor, and (iv) any and all additional Capital Stock
hereafter acquired by the Grantor in each Restricted Subsidiary; provided
however that if any Restricted Subsidiary is organized and existing under the
laws of any jurisdiction outside of the United States then only 65% of all
issued and outstanding Capital Stock of such entity shall be deemed to be
Pledged Securities and subject to this Agreement.
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"Restricted Subsidiary" has the meaning assigned in the Indenture.
"Sweetheart" means Sweetheart Holdings Inc. and its subsidiaries.
2. Creation of Security Interest.
2.1 Pledge of Pledged Collateral. The Grantor hereby pledges and
grants to the Secured Party a security interest in and to all Pledged
Collateral owned by the Grantor together with all products, proceeds,
dividends, redemption payments, liquidation payments, cash, instruments and
other property, and any and all rights, titles, interests, privileges, benefits
and preferences appertaining or incidental to the Pledged Collateral. The
security interest and pledge created by this Section shall continue in effect
so long as any of the Secured Obligations are owed to the Secured Party.
2.2 Delivery of Certain Pledged Collateral. On or before the date
hereof, the Grantor shall cause to be pledged and delivered to the Secured
Party the following Pledged Collateral:
(a) Certificates evidencing all issued and outstanding Pledged
Securities; and
(b) All issued and outstanding Intercompany Notes.
Following the date hereof, additional Pledged Collateral may from time to time
be delivered to the Secured Party by agreement between the Secured Party and
the Grantor or as required by the Indenture. All Certificates at any time
delivered to the Secured Party 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 reasonably satisfactory to the
Secured Party. The Secured Party shall hold all Certificates pledged hereunder
pursuant to this Agreement unless and until released in accordance with Section
2.3 or 12 of this Agreement. The Intercompany Notes, when delivered and pledged
to the Secured Party hereunder, 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 reasonably satisfactory to the
Secured Party. The Secured Party shall hold the Intercompany Notes pursuant to
this Agreement until released in accordance with Section 2.3 or 12 of this
Agreement, subject, however, to the provisions of Section 11 and other related
provisions of this Agreement.
2.3 Release of Pledged Collateral. Pledged Collateral that is
required to be released from the pledge and security interest created by this
Agreement in order to permit the Grantor to consummate any disposition of stock
or assets, merger, consolidation, amalgamation, investment, acquisition,
dividend or distribution that the Grantor is entitled to consummate pursuant to
the Indenture, shall be so released by the Secured Party at such times and to
the extent necessary to permit the Grantor to consummate such permitted
transactions promptly following the Secured Party's receipt of a written
request therefor by the Grantor (which request shall be accompanied by all
documentation required under the Indenture in connection with such request)
specifying the purpose for which release is requested and such further
certificates or other documents as the Secured Party reasonably shall request
in its discretion to confirm that the Grantor is permitted to consummate such
permitted transaction together with any other documents as may be required
under the Indenture. Pledged Collateral that is required to be released from
the pledge and security interest created by this Agreement with respect to any
Restricted Subsidiary that the Board of Directors shall designate to be an
Unrestricted Subsidiary in accordance with the provisions of the Indenture
shall be released in accordance with the foregoing provisions of this Section
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2.3. Any request for any permitted release shall be transmitted to the Secured
Party. Subject to the provisions of Section 11 and other related provisions of
this Agreement, the Secured Party, at the expense of the Grantor, promptly
shall redeliver all Certificates or other Pledged Collateral (other than cash)
then subject to this Agreement and shall execute and deliver to the Grantor all
documents requested by the Grantor, which documents shall be prepared by the
Grantor, that are reasonably necessary to release Pledged Collateral of record
whenever the Grantor shall be entitled to the release thereof in accordance
with Section 12 of this Agreement or this Section 2.3. Any such action taken by
the Secured Party shall be without warranty by or recourse to the Secured
Party, except as to the absence of any prior assignments by the Secured Party
of its interests in the Pledged Collateral, and shall be at the expense of the
Grantor. The Secured Party may conclusively rely on any certificate delivered
to it by the Grantor stating that the execution of such documents and release
of the Pledged Collateral is in accordance with and permitted by the terms of
this Agreement and the Indenture.
2.4 Representations and Warranties Regarding Pledged Securities.
(a) Schedule "A", annexed hereto and made a part hereof, sets forth
with respect to the Grantor (i) the name of each Restricted Subsidiary of the
Grantor and (ii) with respect to each such Restricted Subsidiary (x) the number
of shares of each class of Capital Stock of such Subsidiary that is issued and
outstanding and (y) the number of shares of each class of Capital Stock of such
Subsidiary that is held by the Grantor.
(b) As of the date hereof, except as set forth on Schedule "A" there
are no other shares of Capital Stock required to be pledged to the Secured
Party under the terms of this Agreement.
(c) As of the date hereof, all of the Pledged Securities of each
Restricted Subsidiary are free and clear of any security interest, claim, lien,
limitation on voting rights or encumbrance.
2.5 Representations and Warranties Regarding Intercompany Notes.
(a) Schedule "B", annexed hereto and made a part hereof, sets forth
with respect to each Restricted Subsidiary of the Grantor the amount of each
Intercompany Note of such Restricted Subsidiary that is issued and outstanding
and that is held by the Grantor.
(b) As of the date hereof, except as set forth on Schedule "B" there
are no other Intercompany Notes required to be pledged to the Secured Party
under the terms of this Agreement.
3. Security for Obligations. This Agreement and the pledges and
security interests granted herein secure the payment when due, in full in cash,
and full performance of, all Secured Obligations now or hereafter existing
under the Indenture, the Senior Secured Discount Notes and the Collateral
Documents, whether for principal, interest, premium, if any, fees, expenses or
otherwise, including without limitation all obligations of the Grantor now or
hereafter existing under this Agreement, and all interest that accrues or
accretes on all or any part of any of the Secured Obligations after the filing
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of any petition or pleading against the Grantor for a proceeding under any
Bankruptcy Law.
4. Further Assurances. The Grantor agrees that at any time, and from
time to time, at the expense of the Grantor, it will promptly prepare, execute,
deliver and file or record all further financing statements, instruments and
documents, and will take all further actions, including causing the Grantor's
Restricted Subsidiaries to so execute, deliver, file or take other actions,
that may be necessary or desirable, or that the Secured Party reasonably may
request, in order to perfect and protect any pledge or security interest
granted hereby or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral and to
preserve and protect the Pledged Collateral, including, without limitation,
payment prior to delinquency of all taxes, assessments and other charges
imposed on or relating to the Pledged Collateral. The Grantor hereby consents
and agrees that the issuers of, or obligors on, the Pledged Collateral, or any
registrar or transfer agent or trustee for any of the Pledged Collateral, shall
be entitled to accept the provisions of this Agreement as conclusive evidence
of the right of the Secured Party to effect any transfer or exercise any right
hereunder, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by the Grantor or any other Person to such
issuers or such obligors or to any such registrar or transfer agent or trustee.
5. Voting Rights; Dividends; etc. So long as no Bankruptcy Default,
Payment Default or Event of Default under the Indenture occurs and remains
continuing:
5.1 Voting Rights. The Grantor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Securities, or
any part thereof, for any purpose not inconsistent with the terms of this
Agreement or the Indenture; provided, however, that the Grantor shall not
exercise, or shall refrain from exercising, any such right if it would result
in a Default or an Event of Default.
5.2 Dividend and Distribution Rights. The Grantor shall be entitled
to receive and to retain and use any and all dividends or distributions paid in
respect of the Pledged Securities other than distributions required to be
deposited with the Secured Party pursuant to the terms of the Indenture;
provided, however, that any and all such dividends or distributions received in
the form of Capital Stock shall be, and the Certificates representing such
Capital Stock forthwith shall be delivered to the Secured Party to hold as,
Pledged Collateral and shall, if received by the Grantor, be received in trust
for the benefit of the Secured Party, be segregated from the other property of
the Grantor and forthwith be delivered to the Secured Party as Pledged
Collateral in the same form as so received (with any necessary endorsements).
5.3 Rights Pursuant to Pledged Collateral. Prior to the occurrence
of a Bankruptcy Default, Payment Default or Event of Default, the Grantor shall
have the sole power, right and authority to (a) make demands for payment under
the Intercompany Notes and (b) exercise the rights and remedies provided for in
the Intercompany Notes (provided that no holder of any Intercompany Note other
than the Grantor shall be entitled to demand payment of any Intercompany Note
prior to the acceleration of the obligations evidenced by the Senior Secured
Discount Notes pursuant to the Indenture).
6. Rights During Event of Default. When a Bankruptcy Default,
Payment Default or Event of Default has occurred and is continuing:
6.1 Voting, Dividend and Distribution Rights. At the option of the
Secured Party, all rights of the Grantor to exercise the voting and other
consensual rights which it would
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otherwise be entitled to exercise pursuant to Section 5.1 above, and to receive
the dividends and distributions which it would otherwise be authorized to
receive and retain pursuant to Section 5.2 above, shall cease upon one day's
prior written notice to the Grantor, and all such rights shall thereupon become
vested in the Secured Party who shall thereupon have the sole right to exercise
such voting and other consensual rights and to receive such dividends and
distributions to be held in the Cash Collateral Account in accordance with the
provisions of the Indenture.
6.2 Dividends and Distributions Held in Trust. All dividends and
other distributions which are received by the Grantor contrary to the
provisions of this Agreement or of the Indenture shall be received in trust for
the benefit of the Secured Party, shall be segregated from other funds of the
Grantor and forthwith shall be paid over to the Secured Party for deposit in
the Collateral Account as Pledged Collateral in the same form as so received
(with any necessary endorsements) and held in the Collateral Account in
accordance with the provisions of the Indenture.
6.3 Irrevocable Proxy. The Grantor hereby revokes all previous
proxies with regard to the Pledged Securities and appoints the Secured Party as
its proxyholder to attend and vote at any and all meetings of the shareholders
of the corporation(s) which issued the Pledged Securities, and any adjournments
thereof, held on or after the date of the giving of this proxy and prior to the
termination of this proxy and to execute any and all written consents of
shareholders of such corporation(s) executed on or after the date of the giving
of this proxy and prior to the termination of this proxy, with the same effect
as if the Grantor had personally attended the meetings or had personally voted
its shares or had personally signed the written consents; provided, however,
that (a) the proxyholder shall have rights hereunder only upon the occurrence
and during the continuance of a Bankruptcy Default, Payment Default or Event of
Default, and (b) the Secured Party shall have given the notice to the Grantor
specified by Section 6.1. The Grantor hereby authorizes the Secured Party to
substitute another person as the proxyholder and, upon the occurrence or during
the continuance of any Bankruptcy Default, Payment Default or Event of Default,
hereby authorizes and directs the proxyholder to file this proxy and the
substitution instrument with the secretary of the appropriate corporation. This
proxy is coupled with an interest and is irrevocable until such time as all
Secured Obligations have been paid and performed in full.
6.4 Collections. All collections or other amounts received by the
Grantor with respect to the Intercompany Notes or with respect to any security
therefor following the occurrence and during the continuance of a Payment
Default, a Bankruptcy Default or an Event of Default, or if any such
collections or other amounts constitute funds required to be deposited with the
Trustee pursuant to the provisions of the Indenture, shall be paid over to the
Secured Party to be held in the Cash Collateral Account as provided in the
Indenture.
7. Transfers and Other Liens. The Grantor agrees that, except as
specifically permitted under the Indenture, 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, any of the Pledged Collateral, (ii) create or permit to exist any Lien upon
or with respect to any of the Pledged Collateral, except for Liens in favor of
the Secured Party, or (iii) take any action with respect to the Pledged
Collateral which is inconsistent with the provisions or purposes of the
Indenture, this Agreement or any other Collateral Document.
8. 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
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of a Default or 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 for the benefit of the
Securityholders to do any of the following acts or things: (a) to do all acts
and things and to execute all documents necessary or advisable to perfect and
continue perfected the security interests created by this Agreement and to
preserve, maintain and protect the Pledged Collateral; (b) to do any and every
act which the Grantor is obligated to do under this Agreement and which the
Grantor shall have failed to do; (c) to prepare, sign, file and record, in the
Grantor's name, any financing statement covering the Pledged Collateral; and
(d) to endorse and transfer all or the applicable portion of the Pledged
Collateral upon foreclosure thereon 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 have no liability or
responsibility for any act (other than the Secured Party's own gross negligence
or willful misconduct) or omission taken with respect thereto. The Grantor
hereby agrees to repay immediately upon demand all reasonable costs and
expenses, including attorneys' fees, incurred or expended by the Secured Party
in exercising any right or taking any action under this Agreement, together
with interest thereon at the Default Rate from the date incurred. The parties
hereto agree that the Secured Party shall have no obligation to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder.
9. Secured Party May Perform Secured Obligations. If the Grantor
fails to perform any Secured Obligation contained herein, and any applicable
cure period has expired, the Secured Party may, but without any obligation to
do so and without demand upon or prior notice to the Grantor, perform the same
and take such other action as the Secured Party may deem necessary or desirable
to protect the Pledged Collateral or the Secured Party's security interests
therein, the Secured Party being hereby authorized (without limiting the
general nature of the authority hereinabove conferred) to pay, purchase,
contest and compromise any Lien which in the reasonable judgment of the Secured
Party appears to be prior or superior to the Secured Party's security interests
hereunder (other than Xxxxx described in clauses (iii), (iv), (vii), (viii) and
(x) and all amendments, modifications, successors to and replacements of such
Liens to the extent permitted under clause (xi) of the definition of Permitted
Liens in the Indenture), and in exercising any such powers and authority to pay
necessary expenses, employ counsel and pay reasonable attorneys' fees, all of
which shall be deemed to be Secured Obligations at the expense of the Grantor.
The Secured Party shall notify the Grantor as soon as practicable of any such
action taken by the Secured Party, provided that the failure of the Secured
Party to so notify the Grantor shall not relieve the Grantor of any of its
obligations hereunder. The Grantor hereby agrees to repay upon demand all sums
so expended by the Secured Party, together with interest at the Default Rate
from the date incurred. Except as expressly set forth in Section 16(k) hereof,
the Secured Party shall be under no duty or obligation to (i) preserve,
maintain or protect the Pledged Collateral or any of the Grantor's rights or
interest therein, (ii) exercise any voting rights with respect to the Pledged
Collateral, whether or not a Bankruptcy Default, Payment Default or Event of
Default has occurred or is continuing, or (iii) except as otherwise provided
herein or in any other Collateral Document, make or give any notices of
default, presentments, demands for performance, notices of nonperformance or
dishonor, protests, notices of protest or notice of any other nature whatsoever
in connection with the Pledged Collateral on behalf of the Grantor or any other
Person having any interest therein; and the Secured Party does not assume and
shall not be obligated to perform the obligations of the Grantor, if any, with
respect to the Pledged Collateral.
10. Reasonable Care. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially similar to that which the Secured Party accords its own
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property, 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 relative to any
Pledged Collateral, whether or not the Secured Party has or is deemed to have
knowledge of such matters, (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral, or (iii) any act
which does not constitute gross negligence.
11. Events of Default and Remedies.
11.1 The occurrence of any Event of Default under the Indenture
shall constitute an Event of Default under this Agreement.
11.2 Rights Upon Event of Default. Upon the occurrence and during
the continuance of 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, 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 herein:
(a) to notify any issuer of any Pledged Securities, and any and all
other obligors on any Pledged Collateral, that the same has been pledged to the
Secured Party and that all dividends and other payments thereon are to be made
directly and exclusively to the Secured Party; to renew, extend, modify, amend,
accelerate, accept partial payments on, make allowances and adjustments and
issue credits with respect to, release, settle, compromise, compound, collect
or otherwise liquidate, on terms acceptable to the Secured Party, in whole or
in part, the Pledged Collateral and any amounts owing thereon or any guaranty
or security therefor; and to give all consents, waivers and ratifications with
respect to the Pledged Collateral and exercise all other rights (including
voting rights), powers and remedies and otherwise act with respect thereto as
if the Secured Party were the owner thereof;
(b) to enforce payment and prosecute any action or proceeding with
respect to any and all of the Pledged Collateral and take or bring, in the
Secured Party's name or in the name of the Grantor, all steps, actions, suits
or proceedings deemed by the Secured Party necessary or desirable to effect
collection of or to realize upon the Pledged Collateral;
(c) in accordance with applicable Laws, to take possession of the
Pledged Collateral with or without judicial process;
(d) to endorse, in the name of the Grantor, all checks, notes,
drafts, money orders, instruments and other evidences of payment relating to
the Pledged Collateral;
(e) to transfer any or all of the Pledged Collateral into the name
of the Secured Party or its nominee or nominees; and
(f) in accordance with applicable Laws, to foreclose the Liens and
security interests created under this Agreement or under any other agreement
relating to the Pledged Collateral by any available judicial procedure or
without judicial process, and to sell, assign or otherwise dispose of the
Pledged Collateral or any part thereof, either at public or private sale or at
any broker's
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board or securities exchange, in lots or in bulk, for cash, on credit or for
future delivery, or otherwise, with or without representations or warranties,
and upon such terms as shall be acceptable to the Secured Party; all at the
sole option of and in the sole discretion of the Secured Party.
11.3 Notice of Sale. The Secured Party shall give the Grantor at
least ten (10) days' written notice of any sale of all or any part of the
Pledged Collateral. Any sale of the Pledged Collateral shall be held at such
time or times and at such place or places as the Secured Party may
determine in the exercise of its sole and absolute discretion. The Secured
Party may bid (which bid may be, in whole or in part, in the form of
cancellation of Secured Obligations) for and purchase for the account of the
Secured Party or any nominee of the Secured Party the whole or any part of the
Pledged Collateral. The Secured Party shall not be obligated to make any sale
of the Pledged Collateral if it shall determine not to do so regardless of the
fact that notice of sale of the Pledged 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.
11.4 Title of Purchasers. Upon consummation of any sale of Pledged
Collateral pursuant to this Section 11, the Secured Party shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the
Pledged Collateral so sold. Each such purchaser at any such sale shall hold the
Pledged Collateral sold absolutely free from any claim or right on the part of
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 Pledged
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 Secured
Obligations until such amount actually is received by the Secured Party, and
any Pledged 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 incur no liability in case any such purchaser or purchasers shall
fail to pay for the Pledged Collateral so sold, and, in the case of any such
failure, the Pledged Collateral may be sold again upon like notice.
11.5 Disposition of Proceeds of Sale. The cash proceeds resulting
from the collection, liquidation, sale or other disposition of the Pledged
Collateral shall be deposited in the Cash Collateral Account and be applied,
first, to the costs and expenses (including attorneys' fees) of retaking,
holding, storing, processing and preparing for sale, selling, collecting and
liquidating the Pledged Collateral, and the like; second, to the satisfaction
of all Secured Obligations, with application as to any particular Secured
Obligations to be in the order set forth in the Indenture or as determined by
the Trustee; and third, any surplus remaining after the satisfaction of all
Secured Obligations, to be paid over to the Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
12. Release of the Grantor. This Agreement and the Secured Party's
security interest in the Pledged Collateral then subject to this Agreement
shall be released when all Secured Obligations have been paid in full in cash
or otherwise performed in full, subject however, to the provisions of Section
11 and other related provisions of this Agreement. Upon such release of the
Grantor's Pledged Collateral hereunder, the Secured Party shall return all
Certificates representing the Pledged Collateral then subject to this Agreement
to the Grantor and shall prepare, endorse, execute, deliver, record and file
all instruments and documents, which shall be prepared by the Grantor and do
all other acts and things, reasonably required for the return of the Pledged
Collateral to the Grantor and to evidence or
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document the release of the Secured Party's interests arising under this
Agreement, all as requested by, and at the expense of, the Grantor. In addition
to the foregoing, the Grantor shall have the release rights set forth in
Section 2.3. Any such action taken by the Secured Party shall be without
warranty by or recourse to the Secured Party, except as to the absence of any
prior assignments by the Secured Party of its interest in the Pledged
Collateral, and shall be at the expense of the Grantor. The Secured Party may
conclusively rely on any certificate delivered to it by the Grantor stating
that the execution of such documents and release of the Pledged Collateral is
in accordance with and permitted by the terms of this Agreement and the
Indenture.
13. Covenant Not to Issue Uncertificated Securities. The Grantor
represents and warrants to the Secured Party that all of the Capital Stock
issued by its Restricted Subsidiaries is in certificated form and covenants to
the Secured Party that it will not cause or permit any Restricted Subsidiary to
issue any Capital Stock in uncertificated form or seek to convert all or any
part of its existing common stock into uncertificated form.
14. Covenant Not to Dilute Interests of the Secured Party in Pledged
Securities. The Grantor represents, warrants and covenants to the Secured Party
that it will not at any time cause or permit any of its Restricted Subsidiaries
to issue any additional Capital Stock or any warrants, options or other rights
to acquire any additional Capital Stock, if the effect thereof would be to
dilute in any way the interests of the Secured Party in any Pledged Securities.
15. Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Grantor
from any provision of this Agreement shall be effective only if made or given
in compliance with all of the terms and provisions of the Indenture and neither
the Secured Party nor any Securityholder shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. Failure of the Secured Party to
exercise, or delay in exercising, any right, power or privilege hereunder shall
not operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Secured Party or any Securityholder of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the
Secured Party or such Securityholder would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
16. General Provisions.
a. Notices. All notices, approvals, consents or other communications
required or desired to be given hereunder shall be in the form and manner
provided in and delivered to the Grantor at the address set forth in the
Indenture.
b. No Adverse Interpretation of Other Agreements. This Agreement may
not be used to interpret another pledge, security or debt agreement of the
Grantor or any subsidiary of the Grantor. No such pledge, security or debt
agreement may be used to interpret this Agreement.
11
c. Severability. The provisions of this Agreement are severable, and
if any clause or provision shall be held invalid, illegal or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect in that jurisdiction only such clause or provision, or part
thereof, and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
d. Headings. The headings in this Agreement have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms or provisions hereof.
e. Counterpart Originals. This Agreement may be signed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same agreement.
f. Benefits of Agreement; Successors and Assigns. Nothing in this
Agreement, express or implied, shall give to any person, other than the Secured
Party, the Securityholders and their respective successors, transferees and
assignees hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be binding upon the Grantor,
its successors and assigns, and inure, together with the rights and remedies of
the Secured Party hereunder, to the benefit of the Secured Party, the
Securityholders and their respective successors, transferees and assigns. The
Grantor shall not, without the prior written consent of the Secured Party,
assign any rights, duties or obligations under this Agreement.
g. Reinstatement. This Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time any amount received by the
Secured Party or any Securityholder in respect of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Secured Party or any
Securityholder upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Grantor or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Grantor or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
h. Survival of Provisions. All representations, warranties and
covenants of the Grantor contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance of the Secured Obligations.
i. Waivers. The Grantor waives presentment and demand for payment of
any of the Secured Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices to which the
Grantor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
j. Authority of the Secured Party. (i) The Secured Party shall have
and be entitled to exercise all powers hereunder that are specifically granted
to the Secured Party by the terms hereof, together with such powers as are
reasonably incident thereto. The Secured Party may perform any of its duties
hereunder or in connection with the Pledged Collateral by or through agents or
employees and shall be entitled to retain counsel and to act in reliance upon
the advice of counsel concerning all such matters. Neither the Secured Party,
any director, officer, employee, attorney or agent of the Secured Party nor the
Securityholders shall be liable to the Grantor for any action taken or omitted
to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct,
12
nor shall the Secured Party be responsible for the validity, effectiveness or
sufficiency hereof or of any document or security furnished pursuant hereto.
The Secured Party and its directors, officers, employees, attorneys and agents
shall be entitled to rely on any communication, instrument or document believed
by it or them to be genuine and correct and to have been signed or sent by the
proper person or persons.
(ii) The Grantor acknowledges that the rights and
responsibilities of the Secured Party under this Agreement with respect to any
action taken by the Secured Party or the exercise or non-exercise by the
Secured Party of any option, right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Secured Party and the Securityholders, be governed by the Indenture
and by such other agreements with respect thereto as may exist from time to
time among them, but, as between the Secured Party and the Grantor, the Secured
Party shall be conclusively presumed to be acting as agent for the
Securityholders with full and valid authority so to act or refrain from acting,
and the Grantor shall not be obligated or entitled to make any inquiry
respecting such authority.
k. No Duty. The powers conferred on the Secured Party and the
Securityholders hereunder are solely to protect their interests in the Pledged
Collateral and shall not impose any duty upon them to exercise any such powers.
Except for the safe custody of any Pledged Collateral that may come into its
possession and the accounting for moneys actually received by it hereunder, the
Secured Party shall have no duty as to any Pledged Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Pledged Collateral. The Secured Party shall be
deemed to exercise reasonable care in the custody and preservation of the
Pledged Collateral if such Pledged Collateral is accorded treatment
substantially equal to that which the Secured Party accords similar property in
similar situations, it being understood that the Secured Party shall have no
responsibility or liability for the collection of any proceeds of any Pledged
Collateral or by reason of any invalidity, lack of value or uncollectibility of
any of the payments received by it from obligors or otherwise.
l. Payment of Fees and Expenses. The Grantor will upon demand pay to
the Secured Party, or advance if requested, without duplication, the amount of
any and all expenses with interest thereon at the Default Rate from the date
incurred, including, without limitation, the fees and disbursements of its
counsel and of any experts and agents, that the Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of the Secured Party hereunder or (iv) the failure by the Grantor to
perform or observe any of the provisions hereof.
m. Final Expression. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a
final expression of this Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
n. Grantor Remains Liable; Obligations Absolute. (i) Anything herein
to the contrary notwithstanding: (a) the Grantor shall remain liable under any
Intercompany Notes (and any documents related thereto) included in the Pledged
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Secured Party of any of the rights hereunder
shall not release the Grantor from any of its duties or obligations under the
Intercompany Notes (and any documents related thereto) included in the Pledged
Collateral, and (c) the Secured Party shall not have any obligation or
liability
13
under any Intercompany Notes (and any documents related thereto) included in
the Pledged Collateral by reason of this Agreement, nor shall the Secured Party
be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
(ii) All obligations of the Grantor hereunder shall be absolute and
unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Grantor or any
Restricted Subsidiary;
(b) any lack of validity or enforceability of the Indenture or any
other Collateral Document, or any other agreement or instrument relating
thereto;
(c) 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 Indenture or any other
Collateral Document, or any other agreement or instrument relating thereto;
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement or any other
Collateral Document except as specifically set forth in a waiver granted
pursuant to the provisions of Section 15 hereof or the provisions of such other
Collateral Document; or
(f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Grantor.
o. Rights of Securityholders. No Securityholder shall have any
independent rights hereunder other than those rights granted to individual
Securityholders pursuant to the Indenture; provided that nothing in this
subsection (o) shall limit any rights granted to the Secured Party under the
Senior Secured Discount Notes, the Indenture or the Collateral Documents.
p. Liens; Setoff. The Grantor hereby grants to the Secured Party a
continuing Lien for all of the Secured Obligations upon any and all monies,
securities, and other property of the Grantor, now or hereafter held or
received by or in transit to, the Secured Party, from or for the Grantor.
Without implying any limitation on any other rights the Secured Party may have
under the Collateral Documents or applicable Laws, during the continuance of an
Event of Default, the Secured Party is hereby authorized by the Grantor at any
time and from time to time, without notice to the Grantor, to offset and apply
to all or any part of the Secured Obligations then outstanding (whether or not
then due) all moneys, credits and other property of any nature whatsoever of
the Grantor now or at any time hereafter in the possession of, in transit to or
from, under the control or custody of, or on deposit with, the Secured Party or
any Affiliate of the Secured Party, all in such order and manner as shall be
determined by the Secured Party in its sole and absolute discretion.
14
17. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Waiver of Damages.
(I) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE GRANTOR
AND THE SECURED PARTY ON BEHALF OF THE SECURITYHOLDERS IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF
LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(II) THE GRANTOR AGREES THAT THE SECURED PARTY SHALL, IN ITS
CAPACITY AS THE SECURED PARTY OR IN THE NAME AND ON BEHALF OF ANY
SECURITYHOLDER(S), HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TO PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION
REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE SECURED PARTY TO REALIZE ON
SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR
OF THE SECURED PARTY. THE GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE
SECURED PARTY TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF THE SECURED PARTY. THE GRANTOR WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE SECURED PARTY HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS.
(III) THE GRANTOR AND THE SECURED PARTY EACH WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING DISPUTES, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
(IV) THE GRANTOR AGREES THAT NEITHER THE SECURED PARTY NOR ANY
SECURITYHOLDER SHALL HAVE ANY LIABILITY TO THE GRANTOR (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE GRANTOR IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE SECURED PARTY OR SUCH
SECURITYHOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE SECURED PARTY OR SUCH SECURITYHOLDER, AS THE CASE
MAY BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(V) THE GRANTOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE SECURED PARTY OR ANY SECURITYHOLDER OF ITS RIGHTS
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE PLEDGED
COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE PLEDGED
COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS. THE GRANTOR WAIVES
THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE SECURED PARTY OR ANY
SECURITYHOLDER IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN
POSSESSION OF, REPLEVY, ATTACH
15
OR LEVY UPON PLEDGED COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS,
TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE SECURED
PARTY OR ANY SECURITYHOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT AMONG THE GRANTOR ON THE ONE HAND AND THE SECURED
PARTY AND/OR THE SECURITYHOLDERS ON THE OTHER HAND.
[Signature Page Follows]
16
IN WITNESS WHEREOF, the Grantor has caused this Agreement to
be duly executed and delivered as of the date first above written.
"Grantor"
SF HOLDINGS GROUP, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxxx
------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
"Secured Party"
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
THE BANK OF NEW YORK,
as Trustee
By: /s/ Xxxx Xxxx Xxxxxxxxx
------------------------------
Name: Xxxx Xxxx Xxxxxxxxx
Title: Vice President
SCHEDULE "A"
------------
Pledged Securities: Stock of Restricted Subsidiaries
----------------------------------------------------
Number of Shares of Number of Shares of
Restricted Each Class of Issued & Each Class of Capital
Subsidiary Outstanding Capital Stock Stock Held by Grantor
---------- ------------------------- ---------------------
The Xxxxx 100 shares of Common 100 shares of Common
Group, Inc. Stock, par value $.001 Stock, par value $.001
Sweetheart 1,046,000 shares of 502,080 shares of
Holdings Inc. Sweetheart Class A Sweetheart Class A
Common Stock Common Stock
Sweetheart 4,393,200 shares of 4,393,200 shares of
Holdings Inc. Sweetheart Class B Sweetheart Class B
Common Stock Common Stock
A-1
SCHEDULE "B"
------------
Intercompany Notes of Restricted Subsidiaries
---------------------------------------------
Amount of Each
Restricted Subsidiary Issued and Outstanding Intercompany Note
--------------------- ----------------------------------------
The Xxxxx Group, Inc. None.
Sweetheart Holdings Inc. None.
B-1
