PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "AGREEMENT") dated as of
April 24, 1998, is made by 312 CERTIFICATE COMPANY, a Delaware corporation (the
"PLEDGOR"), in favor of THE FIRST NATIONAL BANK OF CHICAGO, as Agent for the
Certificateholders (as such term is defined below). Capitalized terms used
herein which are not otherwise defined herein shall have the meanings assigned
to such terms in the Face Amount Certificate Agreement (as such term is defined
below).
PRELIMINARY STATEMENTS:
A. Pursuant to the Face Amount Certificate Agreement of even date
herewith (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "FACE AMOUNT CERTIFICATE AGREEMENT"), among
the Pledgor, International Securitization Corporation, a Delaware corporation
("ISC"), and the Agent, the Agent has acquired a $500,000,000 Installment
Face Amount Certificate of even date herewith (as amended, substituted or
replaced from time to time, the "FACE AMOUNT CERTIFICATE") issued by the
Pledgor for the benefit of ISC and certain financial institutions from time
to time party to that certain Liquidity Agreement dated as of even date
herewith as "Liquidity Banks", among The First National Bank of Chicago, as
the "Liquidity Agent" thereunder, ISC and such Liquidity Banks (ISC and such
Liquidity Banks being referred to herein collectively as the
"CERTIFICATEHOLDERS").
B. The Agent and the Certificateholders have required that in
connection with the Agent's acquisition of the Face Amount Certificate for the
benefit of the Certificateholders under the Face Amount Certificate Agreement
that the Pledgor shall have made the pledge and granted the security interest
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Certificateholders to cause the Agent to acquire the Face Amount
Certificate, the Pledgor hereby agrees with the Agent as follows:
SECTION 1. PLEDGE, ASSIGNMENT AND GRANT OF SECURITY INTEREST. The
Pledgor hereby assigns, pledges and grants to the Agent, for its benefit and the
benefit of the Certificateholders, all of the Pledgor's right, title and
interest in and to the following, whether now owned or hereafter acquired (the
"PLEDGED COLLATERAL"):
(a) all personal property of the Pledgor, including, without
limitation, all "Securities" (under and as defined in the Investment
Management Agreement), the Swap Agreement and any other investment
property, loans, chattel paper, general intangibles and instruments;
(b) the Custodial Account and all monies held therein and all other
monies, securities, reserves and other property now or at any time in the
possession of the Agent or its bailee, agent or custodian, including,
without limitation, the Custodian, and relating to any of the foregoing;
and
(c) all proceeds, products, rents and profits of the foregoing,
including, without limitation, all interest, dividends, monies,
instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the foregoing.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
payment of all obligations of the Pledgor now or hereafter existing under the
Face Amount Certificate and the Face Amount Certificate Agreement, whether for
principal, interest, fees, expenses or otherwise, and all obligations of the
Pledgor now or hereafter existing under this Agreement (all such obligations of
the Pledgor being the "OBLIGATIONS"). Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Obligations and would be owed by the Pledgor to the Agent or any
Certificateholder under the Face Amount Certificate and the Face Amount
Certificate Agreement but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Pledgor.
SECTION 3. PLEDGOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Pledgor shall remain liable under the contracts and
agreements 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 Agent of any of
the rights hereunder shall not release the Pledgor from any of its duties or
obligations under the contracts and agreements included in the Pledged
Collateral and (c) the Agent shall have no obligation or liability under the
contracts and agreements included in the Pledged Collateral by reason of this
Agreement, nor shall the Agent be obligated to perform any of the obligations or
duties of the Pledgor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.
SECTION 4. DELIVERY; TRANSFER OF PLEDGED COLLATERAL. The Issuer shall
cause, or direct the Portfolio Manager to cause, all instruments, chattel paper
and certificated securities representing or evidencing any Pledged Collateral to
be delivered to, and held by, the Custodian on behalf of the Agent and, in
suitable form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent. Notwithstanding the preceding sentence, the Issuer
shall deliver the Swap Agreement directly to the Agent on the date hereof
Following the occurrence of (i) a Liquidation Event or (ii) the first
anniversary of the start of the Amortization Period, the Agent shall have the
right, at any time in its discretion and without notice to the Pledgor, to
deliver to the Custodian a "Notice of Exclusive Control" (under and as defined
in the Control Agreement of even date herewith among the Agent, the Issuer and
the Custodian, as amended from time to time, the "Control
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Agreement") stating that the Agent is exercising exclusive control over the
Account. Following delivery of such notice, neither the Pledgor nor the
Portfolio Manager (i) shall issue any entitlement orders to the Custodian
withdrawing any financial assets from the Custodial Account or (ii) accept
delivery of any such financial assets including, without limitation, any
instruments, chattel paper or certificated securities or any free credit balance
or other amount owing from the Custodian to the Issuer with respect to the
Custodial Account.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor's chief place of business, chief executive office and
registered agent for service of process within the Commonwealth of Kentucky, and
the office where it keeps its records concerning the Pledged Collateral, are
located at its address specified in SECTION 15.
(b) 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. No effective financing statement or other document similar in
effect covering all or any part of the Pledged Collateral is on file in any
recording office except such as may have been filed in favor of the Agent
relating to this Agreement. The Pledgor's legal name is set forth on the
first page of this Agreement. The Pledgor has no trade names.
(c) This Agreement and the pledge and assignment of the Pledged
Collateral pursuant hereto and the execution and delivery of the Control
Agreement create a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Obligations, and all filings and
other actions necessary or desirable to perfect and protect such security
interest have been duly taken.
(d) No consent of any other person or entity and no authorization,
approval or other action by, and no notice to or filing with, any governmental
agency, division or regulatory body which has not yet been obtained is required
(i) for the pledge and assignment by the Pledgor of the Pledged Collateral
pursuant to this Agreement, for the grant by the Pledgor of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by the Pledgor, (ii) for the perfection or maintenance of the pledge,
assignment and security interest created hereby (including the first priority
nature of such pledge, assignment and security interest) or (iii) for the
exercise by the Agent of the rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Agreement.
(e) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
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(f) The Pledgor has, independently and without reliance upon the Agent
and based on such documents and information as it has deemed appropriate, made
its own decision to enter into this Agreement.
SECTION 6. FURTHER ASSURANCES. (a) The Pledgor agrees that 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 reasonably request, in
order to perfect and protect any pledge, assignment or 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.
Without limiting the generality of the foregoing, the Pledgor will: (i) at the
request of the Agent, ▇▇▇▇ conspicuously each of its records pertaining to the
Pledged Collateral with a legend, in form and substance satisfactory to the
Agent, indicating that such document or Pledged Collateral is subject to the
pledge, assignment and security interest granted hereby; (ii) if any Pledged
Collateral shall be evidenced by an instrument, chattel paper or certificated
security pledged to the Agent hereunder, deliver to the Custodian (if such
instrument, chattel paper or certificated security has not already been
delivered to the Custodian pursuant to SECTION 4) such instrument, chattel paper
or certificated security duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Agent; and (iii) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Agent may request, in order to perfect and
preserve the pledge, assignment and security interest granted or purported to be
granted hereby.
(b) The Pledgor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Pledged Collateral without the signature of the Pledgor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Pledged Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) The Pledgor will furnish to the Agent from time to time statements
and schedules further identifying and describing the Pledged Collateral and such
other reports in connection with the Pledged Collateral as the Agent may
reasonably request, all in reasonable detail.
SECTION 7. PLACE OF PERFECTION: RECORDS. The Pledgor shall keep its
chief place of business, chief executive office, registered agent for service of
process within the Commonwealth of Kentucky and the office where it keeps its
records concerning the Pledged Collateral at the location therefor specified in
SECTION 5(a) or, upon 30 days' prior written notice to the Agent, at any other
locations in a jurisdiction where all actions required by SECTION 6 shall have
been taken with respect to the Pledged Collateral. The Pledgor will hold and
preserve such records and will permit representatives of the Agent at any time
during normal business hours to inspect and make abstracts from such records.
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SECTION 8. COLLECTION OF PLEDGED COLLATERAL; CUSTODIAL ACCOUNT ETC. In
accordance with the terms of the Face Amount Certificate Agreement, the Pledgor
shall establish, and deposit the Sale Proceeds with respect to the Face Amount
Certificate into, the Custodial Account. The Custodial Account shall be
maintained with the Custodian and shall be subject to the terms of the Custodial
Agreement and the Control Agreement. The Pledgor hereby agrees to instruct all
obligors with respect to any Pledged Collateral, including, without limitation,
the Swap Provider, to cause all collections and payments to be delivered
directly to the Custodian for deposit in the Custodial Account and if the
Pledgor or its agent shall receive any such collections or payments, the Pledgor
or its agent shall deposit such collections or payment into the Custodial
Account within one Business Day following receipt thereof. Following delivery of
a Notice of Exclusive Control by the Agent to the Custodian, neither the
Pledgor, nor any person or entity claiming by, through or under the Pledgor
shall have any control over the use of, or any right to withdraw any item or
amount from the Custodial Account. Prior to delivery of such Notice of Exclusive
Control, the Issuer, and the Portfolio Manager on its behalf, are hereby
authorized and empowered (a) to make withdrawals from time to time from the
Custodial Account when specifically permitted pursuant to the terms of the
Investment Management Agreement. The Agent is hereby irrevocably authorized and
empowered, as the Pledgor's attorney-in-fact, to endorse any item deposited in
the Custodial Account or presented for deposit in the Custodial Account
requiring the endorsement of the Pledgor, which authorization is coupled with an
interest.
SECTION 9. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably 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 to take any action and to execute any instrument
which the Agent may deem necessary or appropriate in order to perfect its
interest granted under this Agreement, or following a (i) a Liquidation Event or
(ii) the first anniversary of the start of the Amortization Period, exercise its
remedies hereunder, including, without limitation:
(a) to ask, demand, collect, ▇▇▇ for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Pledged Collateral,
(b) to receive, indorse, and collect any drafts or other instruments,
documents, security certificates and chattel paper, in connection
therewith, and
(c) to file any claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the collection of any
of the Pledged Collateral or otherwise to enforce compliance with the
terms, conditions or rights of the Agent with respect to any of the Pledged
Collateral.
SECTION 10. 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
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reasonable expenses of the Agent incurred in connection therewith shall be
payable by the Pledgor under SECTION 13(b).
SECTION 11. THE AGENT'S DUTIES. The powers conferred on the Agent
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to any
Pledged Collateral, as to ascertaining or taking action with respect to matters
relative to any of the Pledged Collateral, whether or not the Agent has or is
deemed to have knowledge of such matters, 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 Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any Pledged Collateral in its possession
if such Pledged Collateral is accorded treatment substantially equal to that
which the Agent accords its own property.
SECTION 12. REMEDIES. If (i) a Liquidation Event or (ii) the first
anniversary of the start of the Amortization Period, shall have occurred:
(a) The Agent may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it at law or equity, all the rights and remedies of a secured
party on default under the Uniform Commercial Code in effect in the State
of Illinois at that time (the "CODE") (whether or not the Code applies to
the affected Pledged Collateral), and also may (i) require the Pledgor to,
and the Pledgor hereby agrees that it will at its expense and upon request
of the Agent forthwith, assemble all or part of the Pledged Collateral as
directed by the Agent and make it available to the Agent at a place to be
designated by the Agent which is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Pledged Collateral
or any part thereof in one or more parcels at public or private sale, at
any of the Agent's offices or elsewhere, for cash, on credit or for future
delivery, 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 ten (10) days' notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
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 power to effect any sale of any portion of
the Pledged Collateral shall not be exhausted by any one or more sales as
to any portion of such Pledged Collateral remaining unsold, but shall
continue unimpaired until all of the Pledged Collateral shall have been
sold or payment in full of the Obligations and all other amounts payable
under this Agreement.
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(b) Any cash held by the Agent as Pledged Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from,
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 be 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 Obligations in such order as may be
required by the Investment Management Agreement. Any surplus of such cash
or cash proceeds held by the Agent and remaining after payment in full of
all the Obligations shall be paid over to the Pledgor or to whomsoever may
be lawfully entitled to receive such surplus.
(c) The Agent may exercise any and all rights and remedies of the
Pledgor under or in connection with the Pledged Collateral, including,
without limitation, any and all rights of the Pledgor to demand or
otherwise require payment of any amount under, or performance of any
provision of, any of the Pledged Collateral.
(d) All payments received by the Pledgor under or in connection with
any of the Pledged Collateral shall be received in trust for the benefit of
the Agent, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Agent in the same form as so received (with any
necessary indorsement).
SECTION 13. INDEMNITY AND EXPENSES. (a) The Pledgor agrees to
indemnify the Agent and each Certificateholder from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) growing
out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities resulting
from the Agent's or such Certificateholder's gross negligence or willful
misconduct.
(b) The Pledgor will upon demand pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, 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 Agent hereunder or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. AMENDMENTS; ETC. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Pledgor here from,
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 15. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered to it, if to the Pledgor, at its address at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President, Facsimile: 502/582-7903, and if to the
Agent, at its address at One First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Asset-Backed Finance,
Facsimile: 312/732-4487, or, as to either party, at such other address as shall
be designated by such party in a written notice to the other party. All such
notices and other communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback or delivered
to the cable company, respectively.
SECTION 16. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER FACE
AMOUNT CERTIFICATE AGREEMENT. This Agreement shall create a continuing security
interest in the Pledged Collateral and shall (i) remain in full force and effect
until the later of (x) the payment in full of the Obligations and (y) the date
on which the Face Amount Certificate Agreement has terminated in accordance with
the terms hereof, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the Agent, the
Certificateholders and their respective successors, transferees and assigns.
Upon the later of the payment in full of the Obligations and all other amounts
payable under this Agreement and the Termination Date, the security interest
granted hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor. Upon any such termination, the Agent will, at the
Pledgor's expense, execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.
SECTION 17. GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Illinois, except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in respect
of any particular Pledged Collateral are governed by the laws of a jurisdiction
other than the State of Illinois. Unless otherwise defined herein or in the Face
Amount Certificate Agreement, terms used in Article 9 of the Code are used
herein as therein defined.
SECTION 18. SEVERABILITY. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement, or
the application of such terms or provisions to persons or circumstances, other
than those to which it is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
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IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
312 CERTIFICATE COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: President
Acknowledged and accepted
this 24th day of April, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: Authorized Agent
Signature Page to Pledge and Security Agreement