EXHIBIT 10.2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as
of July 11, 2005 among CROWN CRAFTS, INC., a Delaware corporation (the
"Company"), the subsidiaries of the Company identified on the signature pages
hereto and such other subsidiaries of the Company as may from time to time
become party hereto (the "Subsidiary Borrowers") (hereinafter, the Company and
the Subsidiary Borrowers are collectively referred to as the "Pledgors" and,
individually, as a "Pledgor") and THE CIT GROUP/COMMERCIAL SERVICES, INC. (the
"Lender").
RECITALS
WHEREAS, pursuant to that certain Financing Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Financing Agreement"), among the Company, the Subsidiary Borrowers and the
Lender, the Lender has agreed to make Revolving Loans and to cause Letters of
Credit to be issued upon the terms and subject to the conditions set forth
therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Financing
Agreement and the obligations of the Lender to make the Revolving Loans and
cause Letters of Credit to be issued under the Financing Agreement that the
Pledgors shall have executed and delivered this Pledge Agreement in favor of the
Lender.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Financing
Agreement.
2. Pledge and Grant of Security Interest. To secure the prompt payment and
performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Lender, and grants to the Lender, a continuing
security interest in any and all right, title and interest of such Pledgor in
and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Pledged Collateral"):
(a) Pledged Capital Stock. (i) 100% of the issued and outstanding
capital stock of each domestic subsidiary set forth on Schedule 2(a)
attached hereto and (ii) 65% of the issued and outstanding capital stock
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("Voting Equity") and 100% of the issued and outstanding capital stock not
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("Non-Voting Equity") of each foreign subsidiary set forth on Schedule
2(a) attached hereto, in each case together with the certificates (or
other agreements or instruments), if any, representing such capital stock,
and all options and other rights, contractual or otherwise, with respect
thereto (collectively, together with the capital stock described in
Section 2(b) and 2(c) below, the "Pledged Capital Stock"), including, but
not limited to, the following:
(y) subject to the percentage restrictions described above,
all shares, securities, membership interests or other equity
interests representing a dividend on any of the Pledged Capital
Stock, or representing a distribution or return of capital upon or
in respect of the Pledged Capital Stock, or resulting from a stock
split, revision, reclassification or other exchange therefor, and
any subscriptions, warrants, rights or options issued to the holder
of, or otherwise in respect of, the Pledged Capital Stock; and
(z) without affecting the obligations of the Pledgors under
any provision prohibiting such action hereunder or under the
Financing Agreement, in the event of any consolidation or merger
involving the issuer of any Pledged Capital Stock and in which such
issuer is not the surviving entity, all shares (or other interests)
of each class of the capital stock of the successor entity formed by
or resulting from such consolidation or merger.
(b) Additional Interests. (i) 100% (or, if less, the full amount
owned by such Pledgor) of the issued and outstanding capital stock of any
Person which hereafter becomes a domestic subsidiary and (ii) 65% (or, if
less, the full amount owned by such Pledgor) of the Voting Equity and 100%
(or, if less, the full amount owned by such Pledgor) of the Non-Voting
Equity of any Person which hereafter becomes a foreign subsidiary, in each
case together with the certificates (or other agreements or instruments),
if any, representing such capital stock.
(c) Other Equity Interests. Subject to the percentage restrictions
described above, any and all other capital stock owned by any Pledgor in
any domestic subsidiary or any foreign subsidiary.
(d) Proceeds. All proceeds and products of the foregoing, however
and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional shares of stock (or other interests) to the Lender
as collateral security for the Pledgor Obligations. Upon delivery to the Lender,
such additional shares of stock (or other interests) shall be deemed to be part
of the Pledged Collateral of such Pledgor and shall be subject to the terms of
this Pledge Agreement whether or not Schedule 2(a) is amended to refer to such
additional shares (or other interests).
3. Security for Pledgor Obligations. The security interest created hereby
in the Pledged Collateral of each Pledgor constitutes continuing collateral
security for all of the following, whether now existing or hereafter incurred
(the "Pledgor Obligations"):
(a) all Obligations; and
(b) all expenses and charges, legal and otherwise, incurred by the
Lender in collecting or enforcing any of the Obligations or in realizing
on or protecting any security therefor, including without limitation the
security afforded hereunder.
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4. Delivery of the Pledged Collateral; Perfection of Security Interest.
Each Pledgor hereby agrees that:
(a) Delivery of Certificates. Each Pledgor shall deliver to the
Lender (i) simultaneously with or prior to the execution and delivery of
this Pledge Agreement, all certificates representing the Pledged Capital
Stock of such Pledgor and (ii) promptly upon the receipt thereof by or on
behalf of a Pledgor, all other certificates and instruments constituting
Pledged Collateral of a Pledgor. Prior to delivery to the Lender, all such
certificates and instruments constituting Pledged Collateral of a Pledgor
shall be held in trust by such Pledgor for the benefit of the Lender
pursuant hereto. All such certificates shall be delivered in suitable form
for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, substantially in the form
provided in Exhibit 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by virtue
of its being or having been the owner of any Pledged Collateral, any (i)
certificate, including without limitation, any certificate representing a
dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets,
combination of shares or membership or equity interests, stock splits,
spin-off or split-off, promissory notes or other instrument; (ii) option
or right, whether as an addition to, substitution for, or an exchange for,
any Pledged Collateral or otherwise; (iii) dividends payable in
securities; or (iv) distributions of securities or other equity interests
in connection with a partial or total liquidation, dissolution or
reduction of capital, capital surplus or paid-in surplus, then such
Pledgor shall receive such certificate, instrument, option, right or
distribution in trust for the benefit of the Lender, shall segregate it
from such Pledgor's other property and shall deliver it forthwith to the
Lender in the exact form received together with any necessary endorsement
and/or appropriate stock power duly executed in blank, substantially in
the form provided in Exhibit 4(a), to be held by the Lender as Pledged
Collateral and as further collateral security for the Pledgor Obligations.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Lender that so long as any of the Pledgor Obligations remain
outstanding or any Loan Document is in effect or any Letter of Credit shall
remain outstanding:
(a) Authorization of Pledged Capital Stock. The Pledged Capital
Stock is duly authorized and validly issued, fully paid and non assessable
and is not subject to the preemptive rights of any Person. All other
shares of capital stock constituting Pledged Collateral will be duly
authorized and validly issued, fully paid and nonassessable and not
subject to the preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal and
beneficial owner of such Pledged Collateral free and clear of any lien.
There exists no "adverse claim" within the meaning of Section 8-105 of the
Uniform Commercial Code as in effect in the State of North Carolina (the
"UCC") with respect to the Pledged Capital Stock of such Pledgor.
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(c) Exercising of Rights. The exercise by the Lender of its rights
and remedies hereunder will not violate any law or governmental regulation
or any material contractual restriction binding on or affecting a Pledgor
or any of its property.
(d) Pledgor's Authority. No authorization, approval or action by,
and no notice or filing with any Governmental Authority, the issuer of any
Pledged Capital Stock or third party is required either (i) for the pledge
made by a Pledgor or for the granting of the security interest by a
Pledgor pursuant to this Pledge Agreement or (ii) for the exercise by the
Lender of its rights and remedies hereunder (except as may be required by
laws affecting the offering and sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates a
valid security interest in favor of the Lender in the Pledged Collateral.
The taking possession by the Lender of any certificates representing
Pledged Capital Stock and all other certificates and instruments
constituting Pledged Collateral will perfect and establish the first
priority of the Lender's security interest in such Pledged Capital Stock
and such certificates and instruments. Upon obtaining control (as defined
in Section 8-106 of the UCC) of any Pledged Capital Stock consisting of
uncertificated securities or securities entitlements pursuant to a control
agreement between the Lender and the issuer of such uncertificated
securities or the securities intermediary, as applicable, or upon filing
financing statements in the appropriate jurisdictions, the Lender will
acquire a first priority, perfected security interest in such Pledged
Capital Stock. Except as set forth in this Section 5(e), no action is
necessary to perfect or otherwise protect such security interest.
(f) No Other Capital Stock. Except as set forth on Schedule 2(a)
attached hereto, no Pledgor owns any capital stock of the Company or any
of its Subsidiaries as of the date hereof.
(g) Partnership and Limited Liability Company Interests. Except as
previously disclosed to the Lender, none of the Pledged Capital Stock
consisting of partnership or limited liability company interests (i) is
dealt in or traded on a securities exchange or in a securities market,
(ii) by its terms expressly provides that it is a security governed by
Article 8 of the UCC, (iii) is an investment company security, (iv) is
held in a securities account or (v) constitutes a "security" or a
"financial asset" as such terms are defined in Article 8 of the UCC.
6. Covenants. Each Pledgor hereby covenants that so long as any of the
Pledgor Obligations remain outstanding or any Loan Document is in effect or any
Letter of Credit shall remain outstanding, such Pledgor shall:
(a) Books and Records. Xxxx its books and records (and shall cause
the issuer of the Pledged Capital Stock owned by such Pledgor to xxxx its
books and records) to reflect the security interest granted to the Lender
pursuant to this Pledge Agreement.
(b) Defense of Title. Warrant and defend title to and ownership of
the Pledged Collateral of such Pledgor at its own expense against the
claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all
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liens, and not sell, exchange, transfer, assign, lease or otherwise
dispose of Pledged Collateral of such Pledgor or any interest therein,
except as permitted under the Financing Agreement and the other Loan
Documents.
(c) Further Assurances. Promptly execute and deliver at its expense
all further instruments and documents and take all further action that may
be reasonably necessary and desirable or that the Lender may reasonably
request in order to (i) perfect and protect the security interest created
hereby in the Pledged Collateral of such Pledgor (including, without
limitation, the filing of UCC financing statements and any and all action
necessary to satisfy the Lender that the Lender has obtained a first
priority perfected security interest in all Pledged Capital Stock); (ii)
enable the Lender to exercise and enforce its rights and remedies
hereunder in respect of the Pledged Collateral of such Pledgor; and (iii)
otherwise effect the purposes of this Pledge Agreement, including, without
limitation and if requested by the Lender, delivering to the Lender
irrevocable proxies in respect of the Pledged Collateral of such Pledgor.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any restriction
with respect to any of the Pledged Collateral of such Pledgor other than
pursuant hereto or as may be permitted under the Financing Agreement.
(e) Compliance with Securities Laws. File all reports and other
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
(f) Issuance or Acquisition of Capital Stock. Not without executing
and delivering, or causing to be executed and delivered, to the Lender
such agreements, documents and instruments as the Lender may reasonably
require, issue or acquire any capital stock consisting of an interest in a
partnership or a limited liability company that (i) is dealt in or traded
on a securities exchange or in a securities market, (ii) by its terms
expressly provides that it is a security governed by Article 8 of the UCC,
(iii) is an investment company security, (iv) is held in a securities
account or (v) constitutes a "security" or a "financial asset" as such
terms are defined in Article 8 of the UCC.
7. Performance of Obligations; Advances by Lender. On failure of any
Pledgor to perform any of the covenants and agreements contained herein, the
Lender may, at its sole option and in its sole discretion, perform or cause to
be performed the same and in so doing may expend such sums as the Lender may
deem advisable in the performance thereof, including, without limitation, the
payment of any insurance premiums, the payment of any taxes, a payment to obtain
a release of a lien or potential lien, expenditures made in defending against
any adverse claim and all other expenditures which the Lender may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Pledgors
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Pledgor Obligations and shall bear
interest from the date said amounts are expended at the Default Rate specified
in Section 4.2 of the Financing Agreement. No such performance of any covenant
or agreement by the Lender on
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behalf of any Pledgor, and no such advance or expenditure therefor, shall
relieve the Pledgors of any default under the terms of this Pledge Agreement or
the other Loan Documents. The Lender may make any payment hereby authorized in
accordance with any xxxx, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such xxxx, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by a Pledgor in appropriate proceedings
and against which adequate reserves are being maintained in accordance with
GAAP.
8. Events of Default. The occurrence of an event which under the Financing
Agreement would constitute an Event of Default (as defined in the Financing
Agreement) shall be an event of default hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Lender shall have, in respect of the
Pledged Collateral of any Pledgor, in addition to the rights and remedies
provided herein, in the Loan Documents or by law, the rights and remedies
of a secured party under the UCC or any other applicable law.
(b) Sale of Pledged Collateral. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the
generality of this Section and without notice, the Lender may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged
Collateral, or any part thereof, in one or more parcels, at public or
private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Lender may deem
commercially reasonable, for cash, credit or for future delivery or
otherwise in accordance with applicable law. To the extent permitted by
law, any Lender may in such event, bid for the purchase of such
securities. Each Pledgor agrees that, to the extent notice of sale shall
be required by law and has not been waived by such Pledgor, any
requirement of reasonable notice shall be met if notice, specifying the
place of any public sale or the time after which any private sale is to be
made, is personally served on or mailed, postage prepaid, to such Pledgor,
in accordance with the notice provisions of Section 12.6 of the Financing
Agreement at least ten (10) days before the time of such sale. The Lender
shall not be obligated to make any sale of Pledged Collateral of such
Pledgor regardless of notice of sale having been given. The Lender 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.
(c) Private Sale. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the Lender
may deem it impracticable to effect a public sale of all or any part of
the Pledged Collateral and that the Lender may, therefore, determine to
make one or more private sales of any such Pledged Collateral to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such Pledged Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges that any such private sale may be at prices and on
terms less favorable to the seller than the prices and other
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terms which might have been obtained at a public sale and, notwithstanding
the foregoing, agrees that such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Lender shall have no
obligation to delay sale of any such Pledged Collateral for the period of
time necessary to permit the issuer of such Pledged Collateral to register
such Pledged Collateral for public sale under the Securities Act of 1933,
as amended. Each Pledgor further acknowledges and agrees that any offer to
sell such Pledged Collateral which has been (i) publicly advertised on a
bona fide basis in a newspaper or other publication of general circulation
in the financial community of New York, New York (to the extent that such
offer may be advertised without prior registration under the Securities
Act of 1933, as amended), or (ii) made privately in the manner described
above shall be deemed to involve a "public sale" under the UCC,
notwithstanding that such sale may not constitute a "public offering"
under the Securities Act of 1933, as amended, and the Lender may, in such
event, bid for the purchase of such Pledged Collateral.
(d) Retention of Pledged Collateral. In addition to the rights and
remedies hereunder, upon the occurrence of an Event of Default and during
the continuation thereof, the Lender may, after providing the notices
required by Section 9-621 of the UCC or otherwise complying with the
requirements of applicable law of the relevant jurisdiction, retain all or
any portion of the Pledged Collateral in satisfaction of the Pledgor
Obligations. Unless and until the Lender shall have provided such notices,
however, the Lender shall not be deemed to have retained any Pledged
Collateral in satisfaction of any Pledgor Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Lender is legally entitled, the Pledgors shall be jointly and severally
liable for the deficiency, together with interest thereon at the Default
Rate specified in the Financing Agreement, together with the costs of
collection and the reasonable fees of any attorneys employed by the Lender
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Pledgor Obligations shall be returned to the
Pledgors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
10. Rights of the Lender.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Lender
and each of its designees or agents as attorney-in-fact of such Pledgor,
irrevocably and with power of substitution, with authority to take any or
all of the following actions upon the occurrence and during the
continuation of an Event of Default:
(i) to demand, collect or settle, compromise, adjust and give
discharges and releases concerning the Pledged Collateral of such
Pledgor, all as the Lender may reasonably determine;
(ii) to commence and prosecute any actions at any court for
the purposes of collecting any of the Pledged Collateral of such
Pledgor and enforcing any other right in respect thereof;
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(iii) to defend, settle, adjust or compromise any action, suit
or proceeding brought and, in connection therewith, give such
discharge or release as the Lender may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment under any of
the Pledged Collateral to make payment of any and all monies due and
to become due thereunder directly to the Lender or as the Lender
shall direct;
(vi) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in
respect of or arising out of any Pledged Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments, proxies,
stock powers, verifications, notices and other documents relating to
the Pledged Collateral of such Pledgor;
(viii) to execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
pledge agreements, affidavits, notices and other agreements,
instruments and documents that the Lender may determine necessary in
order to perfect and maintain the security interests and liens
granted in this Pledge Agreement and in order to fully consummate
all of the transactions contemplated herein;
(ix) to exchange any of the Pledged Collateral of such Pledgor
or other property upon any merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Pledged Collateral of such
Pledgor with any committee, depository, transfer agent, registrar or
other designated agency upon such terms as the Lender may determine;
(x) to vote for a shareholder, partner or member resolution,
or to sign an instrument in writing, sanctioning the transfer of any
or all of the Pledged Capital Stock of such Pledgor into the name of
the Lender or into the name of any transferee to whom the Pledged
Capital Stock of such Pledgor or any part thereof may be sold
pursuant to Section 10 hereof; and
(xi) to do and perform all such other acts and things as the
Lender may reasonably deem to be necessary, proper or convenient in
connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Pledgor Obligations remain
outstanding or any Loan Document is in effect or any Letter of Credit
shall remain outstanding. The Lender shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
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options expressly or implicitly granted to the Lender in this Pledge
Agreement, and shall not be liable for any failure to do so or any delay
in doing so. The Lender shall not be liable for any act or omission or for
any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions
resulting from its gross negligence or willful misconduct. This power of
attorney is conferred on the Lender solely to protect, preserve and
realize upon its security interest in the Pledged Collateral.
(b) Assignment by the Lender. Subject to the terms of the Financing
Agreement, the Lendermay from time to time assign the Pledgor Obligations
or any portion thereof and/or the Pledged Collateral or any portion
thereof, and the assignee shall be entitled to all of the rights and
remedies of the Lender under this Pledge Agreement in relation thereto.
(c) The Lender's Duty of Care. Other than the exercise of reasonable
care to ensure the safe custody of the Pledged Collateral while being held
by the Lender hereunder, the Lender shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that
the Pledgors shall be responsible for preservation of all rights in the
Pledged Collateral of such Pledgor, and the Lender shall be relieved of
all responsibility for Pledged Collateral upon surrendering it or
tendering the surrender of it to the Pledgors. The Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if such Pledged Collateral is
accorded treatment substantially equal to that which the Lender accords
its own property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Lender shall not have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Pledged Collateral, whether or not the
Lender 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.
(d) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and be
continuing, to the extent permitted by law, each Pledgor may
exercise any and all voting and other consensual rights pertaining
to the Pledged Collateral of such Pledgor or any part thereof for
any purpose not inconsistent with the terms of this Pledge Agreement
or the Financing Agreement; and
(ii) Upon the occurrence and during the continuance of an
Event of Default, all rights of a Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (i) of this subsection (d) shall
cease and all such rights shall thereupon become vested in the
Lender which shall then have the sole right to exercise such voting
and other consensual rights.
(e) Dividend and Distribution Rights in Respect of the Pledged
Collateral.
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(i) So long as no Event of Default shall have occurred and be
continuing and subject to Section 4(b) hereof, each Pledgor may
receive and retain any and all dividends (other than stock or
ownership interest dividends and other dividends constituting
Pledged Collateral which are addressed hereinabove), distributions
or interest paid in respect of the Pledged Collateral to the extent
they are allowed under the Financing Agreement.
(ii) Upon the occurrence and during the continuation of an
Event of Default:
(A) all rights of a Pledgor to receive the dividends,
distributions and interest payments which it would otherwise
be authorized to receive and retain pursuant to paragraph (i)
of this subsection (e) shall cease and all such rights shall
thereupon be vested in the Lender which shall then have the
sole right to receive and hold as Pledged Collateral such
dividends, distributions and interest payments; and
(B) all dividends, distributions and interest payments
which are received by a Pledgor contrary to the provisions of
paragraph (A) of this clause (ii) shall be received in trust
for the benefit of the Lender, shall be segregated from other
property or funds of such Pledgor, and shall be forthwith paid
over to the Lender as Pledged Collateral in the exact form
received, to be held by the Lender as Pledged Collateral and
as further collateral security for the Pledgor Obligations.
(g) Release of Pledged Collateral. The Lender may release any of the
Pledged Collateral from this Pledge Agreement or may substitute any of the
Pledged Collateral for other Pledged Collateral without altering, varying
or diminishing in any way the force, effect, lien, pledge or security
interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall
continue as a first priority lien on all Pledged Collateral not expressly
released or substituted.
11. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Lender in cash or its equivalent, will be applied as follows: first, to all
costs and expenses of the Lender (including, without limitation, reasonable
attorneys' fees and expenses) incurred in connection with the implementation
and/or enforcement of this Pledge Agreement and/or any of the other Loan
Documents; second, to all costs and expenses of the Lender (including, without
limitation, reasonable attorneys' fees and expenses) incurred in connection with
the implementation and/or enforcement of this Pledge Agreement and/or any of the
other Loan Documents; third, to the principal amount of the Pledgor Obligations;
fourth, to such of the Pledgor Obligations consisting of accrued but unpaid
interest and fees; fifth, to all other amounts payable with respect to the
Pledgor Obligations; and sixth, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus. The Pledgors shall
remain liable to the Lender for any deficiency.
12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Lender employs counsel to prepare
or consider amendments, waivers
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or consents with respect to this Pledge Agreement, or to take action or make a
response in or with respect to any legal or arbitral proceeding relating to this
Pledge Agreement or relating to the Pledged Collateral, or to protect the
Pledged Collateral or exercise any rights or remedies under this Pledge
Agreement or with respect to the Pledged Collateral, then the Pledgors agree to
promptly pay upon demand any and all such reasonable costs and expenses of the
Lender, all of which costs and expenses shall constitute Pledgor Obligations
hereunder.
13. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Pledgor Obligations remain outstanding or any Loan Document is in effect
or any Letter of Credit shall remain outstanding. Upon such payment and
termination, this Pledge Agreement shall be automatically terminated and
the Lender shall, upon the request and at the expense of the Pledgors,
forthwith release all of the liens and security interests hereunder and
shall execute and deliver all UCC termination statements and/or other
documents reasonably requested by the Pledgors evidencing such
termination. Notwithstanding the foregoing all releases and indemnities
provided hereunder shall survive termination of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Pledgor Obligations is rescinded or must
otherwise be restored or returned by the Lender as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or
similar law, all as though such payment had not been made; provided that
in the event payment of all or any part of the Pledgor Obligations is
rescinded or must be restored or returned, all reasonable costs and
expenses (including without limitation any reasonable legal fees and
disbursements) incurred by the Lender in defending and enforcing such
reinstatement shall be deemed to be included as a part of the Pledgor
Obligations.
14. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 12.2 of the Financing Agreement.
15. Consent and Waiver. Each Pledgor hereby consents to the pledge by each
other Pledgor of such other Pledgor's interests in each issuer of Pledged
Capital Stock (each an "Issuer"). Each Pledgor agrees that, without the prior
written consent of the Lender, no Pledgor shall take any action that would
operate to dilute the interest of any Pledgor in any Issuer other than as
permitted by this Pledge Agreement and the Financing Agreement. Each Pledgor
further agrees that, upon the written request of the Lender after an Event of
Default has occurred and is continuing, any Pledgor may be removed as a member
of any Issuer which is a limited liability company and replaced with the
assignee designated in such request. If the Lender so requests after an Event of
Default has occurred and is continuing, each Pledgor covenants and agrees to
execute an amendment to the operating agreement of the relevant Issuer to
reflect any such assignee's substitution in place of such Pledgor as a member of
such Issuer, provided that such assignee shall adopt such operating agreement,
and agrees to be bound by the terms and provisions thereof. In the event that
any such assignee is admitted as a member of any Issuer in substitution of a
Pledgor, each Pledgor agrees that such assignee shall not be liable for the
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obligations of such Pledgor with respect to such Issuer arising before such
assignee's admission to such Issuer, except to the extent required by law. Each
Pledgor agrees that neither the execution and delivery of this Pledge Agreement,
the enforcement by the Lender of any of its rights thereunder, or the transfer
(or agreement to transfer) by the Lender of any of its rights in any Issuer
shall constitute a default under any operating agreement of any Issuer, and each
Pledgor expressly waives any rights it may have under any operating agreement of
any Issuer as a result of the foregoing. Each Pledgor hereby waives any and all
rights under any operating agreement of any Issuer which, whether exercised by
such Pledgor or not, would prevent, inhibit or interfere with the granting of a
security interest in the Collateral to the Lender, the foreclosure of such
security interest in the Collateral by the Lender or the full realization by the
Lender of any of its other rights under this Pledge Agreement or the other Loan
Documents.
16. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Pledged Collateral and shall be binding upon
each Pledgor, its successors and assigns and shall inure, together with the
rights and remedies of the Lender hereunder, to the benefit of the Lender and
its and permitted assigns; provided, however, that none of the Pledgors may
assign its rights or delegate its duties hereunder without the prior written
consent of the Lender. To the fullest extent permitted by law, each Pledgor
hereby releases the Lender, and its successors and permitted assigns, from any
liability for any act or omission relating to this Pledge Agreement or the
Pledged Collateral, except for any liability arising from the gross negligence
or willful misconduct of the Lender, or its officers, employees or agents.
18. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 12.6 of the Financing
Agreement.
19. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
20. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
21. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Venue. THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NORTH CAROLINA. THE PROVISIONS OF THE FINANCING
AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, WAIVER OF JURY TRIAL AND VENUE
ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS.
22. Severability. If any provision of this Pledge Agreement is determined
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
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23. Entirety. This Pledge Agreement and the other Loan Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to this Pledge Agreement or the other Loan
Documents or the transactions contemplated herein and therein.
24. Survival. All representations and warranties of the Pledgors hereunder
shall survive the execution and delivery of this Pledge Agreement and the other
Loan Documents, the making of the Revolving Credit Loans and the issuance of the
Letters of Credit under the Financing Agreement.
25. Other Security. To the extent that any of the Pledgor Obligations are
now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Lender shall have the right to proceed against such other property,
guarantee or endorsement upon the occurrence and during the continuance of any
Event of Default, and the Lender have the right, in its sole discretion, to
determine which rights, security, liens, security interests or remedies the
Lender shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of the Lender's
rights or the Pledgor Obligations under this Pledge Agreement or under any other
of the Loan Documents.
26. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided
by the Lender under the Financing Agreement, for the mutual benefit,
directly and indirectly, of each of the Pledgors and in consideration of
the undertakings of each of the Pledgors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Pledgors jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Pledgors with
respect to the payment and performance of all of the Pledgor Obligations
arising under this Pledge Agreement and the other Loan Documents, it being
the intention of the parties hereto that all the Pledgor Obligations shall
be the joint and several obligations of each of the Pledgors without
preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein
or in any other of the Loan Documents, to the extent the obligations of a
Pledgor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal
law relating to fraudulent conveyances or transfers) then the obligations
of each Pledgor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including,
without limitation, the Bankruptcy Code).
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Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
PLEDGORS:
CROWN CRAFTS, INC.
By: /s/ E. Xxxxxxx Xxxxxxxx
---------------------------------
E. Xxxxxxx Xxxxxxxx
President and CEO
CROWN CRAFTS INFANT PRODUCTS, INC.
By: /s/ E. Xxxxxxx Xxxxxxxx
---------------------------------
E. Xxxxxxx Xxxxxxxx
Vice President
XXXXXXXXX WEAVERS, INC.
By: /s/ E. Xxxxxxx Xxxxxxxx
---------------------------------
E. Xxxxxxx Xxxxxxxx
Vice President
HAMCO, INC.
By: /s/ E. Xxxxxxx Xxxxxxxx
----------------------------------
E. Xxxxxxx Xxxxxxxx
President and CEO
Accepted and agreed to as of the date first above written.
LENDER:
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
----------------------------------
Xxxxxxx Xxxxxxxxxx
Senior Vice President
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