[EXECUTION COPY]
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of April 21, 1998, 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 (together with any successor Agent under the Loan
Agreement, 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 20, 1997, as amended by Amendment No. 1, Waiver and Joinder
Agreement dated as of a date on or about the date hereof (as so amended and as
it may be further amended, modified, supplemented, extended or refinanced from
time to time, the "Loan Agreement"), among the Pledgor, the sole Lender and the
Agent.
PRELIMINARY STATEMENT
Pursuant to the Loan Agreement, the Lender has agreed to make certain
financial accommodations to the Pledgor in the form of revolving credit loans
under a $25,000,000 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 Lender 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. Upon the occurrence of an Event Default,
the agent shall have the right, at any time in its discretion and without notice
to the Pledgor, 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,
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(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,
(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 the capital stock the Borrowing Subsidiary.
(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.
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(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.
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 and other distributions made in respect of the Pledged
Collateral; PROVIDED, HOWEVER, that any and all
(A) dividends or distributions of stock of the
Borrowing Subsidiary 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
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(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 indorsement).
(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 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 distributions 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 distributions 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
distributions; and
(ii) all dividends and distributions 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 indorsement).
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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, indorse and collect all instruments made
payable to the Pledgor representing any dividend or other distribution that
constitutes Pledged 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.
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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 and has a Materially Adverse Effect.
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 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.
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(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.
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 Loan Document 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, the Notes or any other Loan Document 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
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(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.
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.
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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.
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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.
PLEDGOR:
XXXXX INDUSTRIES, INC.
[CORPORATE SEAL]
By: /s/ XXXXX XXXXX
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Name: Xxxxx Xxxxx
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Title: Secretary
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Attest:
By: /s/ XXXXX XXXXX
--------------------------
Name: Xxxxx Xxxxx
--------------------------
Title: Assistant Secretary
--------------------------
Agent:
NATIONSBANK, N.A.
By: /s/ XXXXXX X. XXXX
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Name: Xxxxxx X. Xxxx
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Title: Vice-President
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ANNEX A
Pledged Shares
Authorized Issued Certificate
Company Shares Shares No.
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Xxxxxx Products 1000 10 1
Company, Inc.
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