EXHIBIT XXIV
[FORM OF HOLDINGS PLEDGE AGREEMENT]
HOLDINGS PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of April 21, 1998
and entered into by and between DIAMOND BRANDS INCORPORATED, a Minnesota
corporation ("PLEDGOR"), and ▇▇▇▇▇ FARGO BANK, N.A., as administrative agent for
and representative of (in such capacity herein called "SECURED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock or other equity Securities (the "PLEDGED SHARES") described in Part A of
Schedule I annexed hereto and issued by the companies named therein and (ii) the
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indebtedness (the "PLEDGED DEBT") described in Part B of said Schedule I and
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issued by the obligors named therein.
B. Secured Party and Lenders have entered into a Credit Agreement
dated as of April 21, 1998 (said Credit Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Diamond Brands Operating Corp., a Delaware
corporation ("COMPANY"), pursuant to which Lenders have made certain
commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with one or more Lenders (in such capacity,
collectively, "INTEREST RATE EXCHANGERS").
D. Pledgor has executed and delivered that certain Guaranty dated as
of April 21, 1998 (said Guaranty, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "GUARANTY") in favor of
Secured Party for the benefit of Lenders and any Interest Rate Exchangers,
pursuant to which Pledgor has guarantied the prompt payment and performance when
due of all obligations of Company under the Credit Agreement and all obligations
of Company under the Lender Interest Rate Agreements, including the obligation
of Company to make payments thereunder in the event of early termination
thereof.
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E. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into Lender Interest
Rate Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
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Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged Debt,
and all interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; provided, however, that,
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Pledgor shall not be required to pledge more than 66.6% of any class of capital
stock of any direct or indirect Subsidiary of Pledgor which is incorporated in a
jurisdiction other than the states of the United States and the District of
Columbia ("Foreign Subsidiary") hereunder;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
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(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, securities, warrants,
options or other rights; provided, however, that Pledgor shall not be required
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to pledge more than 66.6% of any class of capital stock of any Foreign
Subsidiary hereunder;
(f) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct or indirect Subsidiary of Pledgor, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness;
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes
proceeds of any indemnity or guaranty payable to Pledgor or Secured Party from
time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
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Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Guaranty and all extensions or renewals
thereof, whether for principal, interest (including interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgor now or hereafter
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existing under this Agreement (all such obligations of Pledgor being the
"SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
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instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Upon the occurrence and during the continuation of an Event of
Default (as defined in the Credit Agreement) or the occurrence of an Early
Termination Date (as defined in a Master Agreement or an Interest Rate Swap
Agreement or Interest Rate and Currency Exchange Agreement in the form prepared
by the International Swap and Derivatives Association Inc. or a similar event
under any similar swap agreement) under any Lender Interest Rate Agreement
(either such occurrence being an "EVENT OF DEFAULT" for purposes of this
Agreement), Secured Party shall have the right, without notice to Pledgor, to
transfer to or to register in the name of Secured Party or any of its nominees
any or all of the Pledged Collateral, subject only to the revocable rights
specified in Section 7(a). In addition, after the occurrence and during the
continuance of an Event of Default, Secured Party shall have the right at any
time to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
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warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
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Shares have been duly authorized and validly issued and are fully paid and non-
assessable. All of the Pledged Debt has been duly authorized, authenticated or
issued, and delivered and is the legal, valid and binding obligation of the
issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
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(i) all of the issued and outstanding shares of stock or other equity Securities
of each of the Subsidiaries of Pledgor which are incorporated in a state of the
United States or in the District of Columbia, and (ii) 66.6% of the issued and
outstanding shares of stock or other equity Securities of each Foreign
Subsidiary of Pledgor, and there are no outstanding warrants, options or other
rights to purchase, or other agreements outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the issuance or sale
of, any Pledged Shares. The Pledged Debt constitutes all of the issued and
outstanding intercompany indebtedness evidenced by a promissory note of the
respective issuers thereof owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
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beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement.
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(d) Governmental Authorizations. No authorization, approval or other
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action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, or (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to this
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Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Secured Obligations; provided
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that Secured Party retains physical possession of such Pledged Collateral.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
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to this Agreement does not violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or
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hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Pledged Collateral is accurate and complete in all material respects.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
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ETC. Pledgor shall:
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(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement and Permitted
Encumbrances, or (iii) permit any issuer of Pledged Shares to merge or
consolidate unless all the outstanding capital stock or other equity Security of
the surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation; provided
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that Pledgor shall not be required to pledge more than 66.6% of any class of
capital stock of any Foreign Subsidiary; provided, further, that in the event
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Pledgor makes an Asset Sale permitted by the Credit Agreement and the assets
subject to such Asset Sale are Pledged Shares, Secured Party shall release the
Pledged Shares that are the subject of such Asset Sale to Pledgor free and clear
of the lien and security interest under this Agreement concurrently with the
consummation of such Asset Sale; provided, further that, as a condition
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precedent to such release, Secured Party shall have received evidence
satisfactory to it that arrangements satisfactory to it have been made for
delivery to Secured Party of the Net Asset Sale Proceeds of such Asset Sale if
required under the Credit Agreement;
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(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to Pledgor, (ii) pledge hereunder, within 5 days of its
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of Pledged Shares, and (iii) pledge
hereunder, within 5 days of its acquisition (directly or indirectly) thereof,
any and all shares of stock of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of
Pledgor;
(c) (i) pledge hereunder, within 5 days of their issuance, any and
all instruments or other evidences of additional indebtedness from time to time
owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge hereunder,
within 5 days of their issuance, any and all instruments or other evidences of
indebtedness from time to time owed to Pledgor by any Person that after the date
of this Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor;
(d) promptly notify Secured Party of any event of which Pledgor
becomes aware causing material loss or depreciation in the value of the Pledged
Collateral;
(e) promptly deliver to Secured Party all material written notices
received by it with respect to the Pledged Collateral; and
(f) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent permitted by the terms of the Credit Agreement.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
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(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may reasonably be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Pledged Collateral. Without limiting the generality of the foregoing,
Pledgor will: (i) 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 Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby
and (ii) at Secured Party's reasonable request, appear in and defend any action
or proceeding that may affect Pledgor's title to or Secured Party's security
interest in all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured
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Party a Pledge Amendment, duly executed by Pledgor, in substantially the form of
Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in respect of the additional
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Pledged Shares or Pledged Debt to be pledged pursuant to this Agreement. Pledgor
hereby authorizes Secured Party to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares or Pledged Debt listed on any
Pledge Amendment delivered to Secured Party shall for all purposes hereunder be
considered Pledged Collateral; provided that the failure of Pledgor to execute a
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Pledge Amendment with respect to any additional Pledged Shares or Pledged Debt
pledged pursuant to this Agreement shall not impair the security interest of
Secured Party therein or otherwise adversely affect the rights and remedies of
Secured Party hereunder with respect thereto.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
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(a) So long as no Event of Default shall have occurred and be
continuing:
(i) 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 Credit Agreement and as long as such action would not have a
material adverse effect on the value of the Pledged Collateral. It is
understood, however, that neither (A) the voting by Pledgor of any Pledged
Shares for or Pledgor's consent to the election of directors at a regularly
scheduled annual or other meeting of stockholders or members or with
respect to incidental matters at any such meeting nor (B) Pledgor's consent
to or approval of any action otherwise permitted under this Agreement and
the Credit Agreement shall be deemed inconsistent with the terms of this
Agreement or the Credit Agreement within the meaning of this Section
7(a)(i), and no notice of any such voting or consent need be given to
Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however, that
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any and all
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of, or in exchange for, any
Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of
XXIV-7
Secured Party, be segregated from the other property or funds of Pledgor
and be forthwith delivered to Secured Party as Pledged Collateral in the
same form as so received (with all necessary indorsements); provided,
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however, that to the extent that property distributed to Pledgor in respect
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of the Pledged Collateral continues or becomes, after such distribution, to
be otherwise subject to a Lien in favor of Secured Party under the Loan
Documents, such property shall not be otherwise required to be forthwith
delivered to Secured Party pursuant to clause (ii); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and
other consensual rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest
payments which it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall
cease, and all such rights shall thereupon become vested in Secured Party
who shall thereupon have the sole right to exercise such voting and other
consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgor and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary indorsements).
(c) In order to permit Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request, including without
limitation to the extent necessary so that the pledge of any shares of stock of
any Foreign Subsidiary is registered (if not already so registered) on the
appropriate books and records of the issuer of the applicable Pledged Shares if
such
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registration is required under applicable law in order to permit Secured Party
to exercise such rights or to receive such dividends and other distributions,
and (ii) without limiting the effect of the immediately preceding clause (i),
Pledgor hereby grants to Secured Party an irrevocable proxy to vote the Pledged
Shares and to exercise all other rights, powers, privileges and remedies to
which a holder of the Pledged Shares would be entitled (including giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the written notice of an Event of Default from Secured Party
delivered at any time, including at a member or shareholder meeting, and which
proxy shall only terminate upon cure of the circumstances which gave rise to the
Event of Default.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
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irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time during the continuation of an Event of
Default in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, ▇▇▇ for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any
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agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 13(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
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hereunder are solely to protect its interest in the Pledged Collateral and shall
not
XXIV-9
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Pledged Collateral in its possession and
the accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Pledged Collateral, it being understood that Secured
Party shall have no responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not Secured Party has or is
deemed to have knowledge of such matters, (b) taking any necessary steps (other
than steps taken in accordance with the standard of care set forth above to
maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
SECTION 11. REMEDIES.
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(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Pledged Collateral), or any other
applicable laws whether of the United States or any state thereof or any other
foreign jurisdiction, and Secured Party may also in its sole discretion, 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 exchange or
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral. Secured Party or any Lender or Interest Rate Exchanger may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of Lenders and Interest Rate Exchangers
(but not any Lender or Lenders or Interest Rate Exchanger or Interest Rate
Exchangers in its or their respective individual capacities unless Requisite
Lenders or Requisite Obligees (as defined in Section 15(a)) shall otherwise
agree in writing), shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice
XXIV-10
to 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. Secured
Party shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. Secured Party 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. Pledgor hereby waives any claims against
Secured Party arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Pledged Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Pledged
Collateral are insufficient to pay all the Secured Obligations, Pledgor shall be
liable for the deficiency and the fees of any attorneys employed by Secured
Party to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, Pledgor agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
SECTION 12. APPLICATION OF PROCEEDS. All proceeds received by Secured
-----------------------
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Pledged Collateral shall be applied as provided in subsection
2.4D of the Credit Agreement.
XXIV-11
SECTION 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Lender from
and against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result from
Secured Party's or such Lender's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all reasonable out-of-pocket costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation 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 Secured Party hereunder, or (iv) the failure
by Pledgor to perform or observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Pledged Collateral shall revert to Pledgor. Upon
any such termination Secured Party will, at Pledgor's expense, execute and
deliver to Pledgor such documents as Pledgor shall reasonably request to
evidence such termination and Pledgor shall be entitled to the return, upon its
request and at its expense, against receipt and without recourse to Secured
Party, of such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
SECTION 15. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement and the Credit Agreement; provided that Secured Party
--------
XXIV-12
shall exercise, or refrain from exercising, any remedies provided for in Section
11 in accordance with the instructions of (i) Requisite Lenders or (ii) after
payment in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this Section 15(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Pledged Collateral hereunder, it being understood and agreed by such
Interest Rate Exchanger that all rights and remedies hereunder may be exercised
solely by Secured Party for the benefit of Lenders and Interest Rate Exchangers
in accordance with the terms of this Section 15(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
XXIV-13
SECTION 17. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be given as provided in the Credit
Agreement. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 18. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 19. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 20. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 21. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS
-------------------------------------------
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE 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 NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in the
State of New York are used herein as therein defined. The rules of construction
set forth in subsection 1.3 of the Credit Agreement shall be applicable to this
Agreement mutatis mutandis.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
(A) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇. BY EXECUTING AND DELIVERING THIS
XXIV-14
AGREEMENT, PLEDGOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
17;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER PLEDGOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 22 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
(b) Without limiting the generality of the last sentence of Section
22(a), any judicial proceedings brought against Pledgor arising out of or
relating to the pledge of shares of capital stock of any Foreign Subsidiary
hereunder may be brought in any court of competent jurisdiction in the
jurisdiction in which such Foreign Subsidiary is organized, and by execution and
delivery of this Agreement, Pledgor accepts for itself and in connection with
its properties (including without limitation the applicable Pledged Shares),
generally and unconditionally, the nonexclusive jurisdiction of any such court
and waives any defense of forum non conveniens (or any similar defense under the
laws of such jurisdiction) and irrevocably agrees to be bound by any judgement
rendered thereby in connection with such pledge or the enforcement thereof.
SECTION 23. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to
XXIV-15
the subject matter of this transaction, including contract claims, tort claims,
breach of duty claims, and all other common law and statutory claims. Pledgor
and Secured Party each acknowledge that this waiver is a material inducement for
Pledgor and Secured Party to enter into a business relationship, that Pledgor
and Secured Party have already relied on this waiver in entering into this
Agreement and that each will continue to rely on this waiver in their related
future dealings. Pledgor and Secured Party further warrant and represent that
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 23 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
SECTION 24. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
XXIV-16
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DIAMOND BRANDS INCORPORATED,
as Pledgor
By: _____________________________
Name: __________________________
Title: __________________________
Notice Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ FARGO BANK, N.A., as
Administrative Agent
By: _____________________________
Name: __________________________
Title: __________________________
Notice Address:
Attention:
S-1
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of
April 21, 1998 between Diamond Brands Incorporated, as Pledgor, and ▇▇▇▇▇ Fargo
Bank, N.A., as Secured Party.
Part A
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
------------ ----- ------------ ----- ---------
Part B
Debt Issuer Amount of Indebtedness
----------- ----------------------
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, _____, is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Subsidiary Pledge Amendment may be attached
to the Subsidiary Pledge Agreement dated April 21, 1998, between the undersigned
and ▇▇▇▇▇ Fargo Bank, N.A., as Secured Party (the "PLEDGE AGREEMENT,"
capitalized terms defined therein being used herein as therein defined), and
that the [Pledged Shares] [Pledged Debt] listed on this Pledge Amendment shall
be deemed to be part of the [Pledged Shares] [Pledged Debt] and shall become
part of the Pledged Collateral and shall secure all Secured Obligations.
DIAMOND BRANDS INCORPORATED
By: ___________________________
Title:
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
------------ ----- ------------ ----- ---------
Debt Issuer Amount of Indebtedness
----------- ----------------------
HOLDINGS PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of April 21, 1998
and entered into by and between DIAMOND BRANDS INCORPORATED, a Minnesota
corporation ("PLEDGOR"), and ▇▇▇▇▇ FARGO BANK, N.A., as administrative agent for
and representative of (in such capacity herein called "SECURED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock or other equity Securities (the "PLEDGED SHARES") described in Part A of
Schedule I annexed hereto and issued by the companies named therein and (ii) the
----------
indebtedness (the "PLEDGED DEBT") described in Part B of said Schedule I and
----------
issued by the obligors named therein.
B. Secured Party and Lenders have entered into a Credit Agreement
dated as of April 21, 1998 (said Credit Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Diamond Brands Operating Corp., a Delaware
corporation ("COMPANY"), pursuant to which Lenders have made certain
commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with one or more Lenders (in such capacity,
collectively, "INTEREST RATE EXCHANGERS").
D. Pledgor has executed and delivered that certain Guaranty dated as
of April 21, 1998 (said Guaranty, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "GUARANTY") in favor of
Secured Party for the benefit of Lenders and any Interest Rate Exchangers,
pursuant to which Pledgor has guarantied the prompt payment and performance when
due of all obligations of Company under the Credit Agreement and all obligations
of Company under the Lender Interest Rate Agreements, including the obligation
of Company to make payments thereunder in the event of early termination
thereof.
E. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
1
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into Lender Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
------------------
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged Debt,
and all interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; provided, however, that,
-------- -------
Pledgor shall not be required to pledge more than 66.6% of any class of capital
stock of any direct or indirect Subsidiary of Pledgor which is incorporated in a
jurisdiction other than the states of the United States and the District of
Columbia ("Foreign Subsidiary") hereunder;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any
2
interest of Pledgor in the entries on the books of any financial intermediary
pertaining to such shares, and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares, securities, warrants, options or other rights; provided,
however, that Pledgor shall not be required to pledge more than 66.6% of any
class of capital stock of any Foreign Subsidiary hereunder;
(f) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct or indirect Subsidiary of Pledgor, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness;
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or received
when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes
proceeds of any indemnity or guaranty payable to Pledgor or Secured Party from
time to time with respect to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Guaranty and all extensions or renewals
thereof, whether for principal, interest (including interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement,
3
where necessary, or duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to Secured Party. Upon the
occurrence and during the continuation of an Event of Default (as defined in the
Credit Agreement) or the occurrence of an Early Termination Date (as defined in
a Master Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International Swap and
Derivatives Association Inc. or a similar event under any similar swap
agreement) under any Lender Interest Rate Agreement (either such occurrence
being an "EVENT OF DEFAULT" for purposes of this Agreement), Secured Party shall
have the right, without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, after the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right at any time to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
---------------------------------------------
Shares have been duly authorized and validly issued and are fully paid and non-
assessable. All of the Pledged Debt has been duly authorized, authenticated or
issued, and delivered and is the legal, valid and binding obligation of the
issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
---------------------------------
(i) all of the issued and outstanding shares of stock or other equity Securities
of each of the Subsidiaries of Pledgor which are incorporated in a state of the
United States or in the District of Columbia, and (ii) 66.6% of the issued and
outstanding shares of stock or other equity Securities of each Foreign
Subsidiary of Pledgor, and there are no outstanding warrants, options or other
rights to purchase, or other agreements outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the issuance or sale
of, any Pledged Shares. The Pledged Debt consti tutes all of the issued and
outstanding intercompany indebtedness evidenced by a promissory note of the
respective issuers thereof owing to Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
-------------------------------
beneficial owner of the Pledged Collateral free and clear of any Lien except for
the security interest created by this Agreement.
(d) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, or (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with
4
a disposition of Pledged Collateral by laws affecting the offering and sale of
securities generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to this
----------
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Secured Obligations; provided
--------
that Secured Party retains physical possession of such Pledged Collateral.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or hereafter
-----------------
supplied to Secured Party by or on behalf of Pledgor with respect to the Pledged
Collateral is accurate and complete in all material respects.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC. Pledgor shall:
----
(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement and Permitted
Encumbrances, or (iii) permit any issuer of Pledged Shares to merge or
consolidate unless all the outstanding capital stock or other equity Security of
the surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation; provided
--------
that Pledgor shall not be required to pledge more than 66.6% of any class of
capital stock of any Foreign Subsidiary; provided, further, that in the event
-------- --------
Pledgor makes an Asset Sale permitted by the Credit Agreement and the assets
subject to such Asset Sale are Pledged Shares, Secured Party shall release the
Pledged Shares that are the subject of such Asset Sale to Pledgor free and clear
of the lien and security interest under this Agreement concurrently with the
consummation of such Asset Sale; provided, further that, as a condition
-------- -------
precedent to such release, Secured Party shall have received evidence
satisfactory to it that arrangements satisfactory to it have been made for
delivery to Secured Party of the Net Asset Sale Proceeds of such Asset Sale if
required under the Credit Agreement;
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to Pledgor, (ii) pledge hereunder, within 5 days of its
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of Pledged Shares, and (iii) pledge
hereunder, within 5 days of its acquisition (directly or indirectly) thereof,
any and all shares of stock of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of
Pledgor;
5
(c) (i) pledge hereunder, within 5 days of their issuance, any and all
instruments or other evidences of additional indebtedness from time to time owed
to Pledgor by any obligor on the Pledged Debt, and (ii) pledge hereunder, within
5 days of their issuance, any and all instruments or other evidences of
indebtedness from time to time owed to Pledgor by any Person that after the date
of this Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor;
(d) promptly notify Secured Party of any event of which Pledgor
becomes aware causing material loss or depreciation in the value of the Pledged
Collateral;
(e) promptly deliver to Secured Party all material written notices
received by it with respect to the Pledged Collateral; and
(f) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent permitted by the terms of the Credit Agreement.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may reasonably be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Pledged Collateral. Without limiting the generality of the foregoing,
Pledgor will: (i) 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 Secured Party may reasonably request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby and (ii) at Secured Party's reasonable request, appear in and defend any
action or proceeding that may affect Pledgor's title to or Secured Party's
security interest in all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) or (c), promptly (and in any event within five Business Days)
deliver to Secured Party a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in
-----------
respect of the additional Pledged Shares or Pledged Debt to be pledged pursuant
to this Agreement. Pledgor hereby authorizes Secured Party to attach each
Pledge Amendment to this Agreement and agrees that all Pledged Shares or Pledged
Debt listed on any Pledge Amendment delivered to Secured Party shall for all
purposes hereunder be considered Pledged Collateral; provided that the failure
--------
of Pledgor to execute a Pledge Amendment with respect to any additional Pledged
Shares or Pledged Debt pledged pursuant to this Agreement shall not
6
impair the security interest of Secured Party therein or otherwise adversely
affect the rights and remedies of Secured Party hereunder with respect thereto.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) 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 Credit Agreement and as long as such action would not have a material
adverse effect on the value of the Pledged Collateral. It is understood,
however, that neither (A) the voting by Pledgor of any Pledged Shares for or
Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or members or with respect to
incidental matters at any such meeting nor (B) Pledgor's consent to or
approval of any action otherwise permitted under this Agreement and the
Credit Agreement shall be deemed inconsistent with the terms of this
Agreement or the Credit Agreement within the meaning of this Section
7(a)(i), and no notice of any such voting or consent need be given to
Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however, that
-------- -------
any and all
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); provided, however, that to the extent that property
-------- -------
distributed to Pledgor in respect of the Pledged Collateral continues or
becomes, after such distribution, to be otherwise subject to a Lien in favor
of Secured Party under the Loan Documents, such property shall not be
otherwise required to be forthwith delivered to Secured Party pursuant to
clause (ii); and
7
(iii) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies, dividend payment orders
and other instruments as Pledgor may from time to time reasonably request
for the purpose of enabling Pledgor to exercise the voting and other
consensual rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends, principal or interest payments which it
is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease,
and all such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are received
by Pledgor contrary to the provisions of paragraph (ii) of this Section 7(b)
shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Pledgor and shall forthwith be paid over to
Secured Party as Pledged Collateral in the same form as so received (with
any necessary indorsements).
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request, including without
limitation to the extent necessary so that the pledge of any shares of stock of
any Foreign Subsidiary is registered (if not already so registered) on the
appropriate books and records of the issuer of the applicable Pledged Shares if
such registration is required under applicable law in order to permit Secured
Party to exercise such rights or to receive such dividends and other
distributions, and (ii) without limiting the effect of the immediately preceding
clause (i), Pledgor hereby grants to Secured Party an irrevocable proxy to vote
the Pledged Shares and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged Shares would be entitled (including
giving or withholding written consents of shareholders, calling special meetings
of shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any
8
Pledged Shares on the record books of the issuer thereof) by any other Person
(including the issuer of the Pledged Shares or any officer or agent thereof),
upon the written notice of an Event of Default from Secured Party delivered at
any time, including at a member or shareholder meeting, and which proxy shall
only terminate upon cure of the circumstances which gave rise to the Event of
Default.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time during the continuation of an Event of
Default in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, ▇▇▇ for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any
-------------------------
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 13(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
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
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged Collateral, it being
understood that Secured Party shall have no responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Pledged Collateral, whether or not
Secured Party has or is deemed to have knowledge of such matters, (b) taking any
necessary steps (other than steps taken in accordance with the standard of care
set forth
9
above to maintain possession of the Pledged Collateral) to preserve rights
against any parties with respect to any Pledged Collateral, (c) taking any
necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Pledged Collateral, or
(d) initiating any action to protect the Pledged Collateral against the
possibility of a decline in market value. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equal to that which Secured Party accords its own property consisting of
negotiable securities.
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Pledged Collateral), or any other
applicable laws whether of the United States or any state thereof or any other
foreign jurisdiction, and Secured Party may also in its sole discretion, 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 exchange or
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral. Secured Party or any Lender or Interest Rate Exchanger may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of Lenders and Interest Rate Exchangers
(but not any Lender or Lenders or Interest Rate Exchanger or Interest Rate
Exchangers in its or their respective individual capacities unless Requisite
Lenders or Requisite Obligees (as defined in Section 15(a)) shall otherwise
agree in writing), shall be enti tled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to 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. Secured Party shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been
given. Secured Party 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.
Pledgor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Pledged Collateral may have been sold at such a
private sale was less than the
10
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Pledged Collateral to
more than one offeree. If the proceeds of any sale or other disposition of the
Pledged Collateral are insufficient to pay all the Secured Obligations, Pledgor
shall be liable for the deficiency and the fees of any attorneys employed by
Secured Party to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, Pledgor agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
SECTION 12. APPLICATION OF PROCEEDS. All proceeds received by Secured
-----------------------
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Pledged Collateral shall be applied as provided in subsection
2.4D of the Credit Agreement.
SECTION 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Lender from
and against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result from
Secured Party's or such Lender's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
11
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all reasonable out-of-pocket costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation 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 Secured Party hereunder, or (iv) the failure
by Pledgor to perform or observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Pledged Collateral shall revert to Pledgor.
Upon any such termination Secured Party will, at Pledgor's expense, execute and
deliver to Pledgor such documents as Pledgor shall reasonably request to
evidence such termination and Pledgor shall be entitled to the return, upon its
request and at its expense, against receipt and without recourse to Secured
Party, of such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
SECTION 15. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement and the Credit Agreement; provided that Secured Party shall
--------
exercise, or refrain from exercising, any remedies provided for in Section 11 in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
12
this Section 15(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Pledged Collateral hereunder, it being understood and agreed by such
Interest Rate Exchanger that all rights and remedies hereunder may be exercised
solely by Secured Party for the benefit of Lenders and Interest Rate Exchangers
in accordance with the terms of this Section 15(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be given as provided in the Credit
Agreement. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 18. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any
13
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 19. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 20. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 21. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS
-------------------------------------------
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE 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 NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in the
State of New York are used herein as therein defined. The rules of construction
set forth in subsection 1.3 of the Credit Agreement shall be applicable to this
Agreement mutatis mutandis.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
(A) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇. BY EXECUTING AND DELIVERING THIS AGREEMENT, PLEDGOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
14
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 17;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER PLEDGOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST PLEDGOR IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 22 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
(b) Without limiting the generality of the last sentence of Section
22(a), any judicial proceedings brought against Pledgor arising out of or
relating to the pledge of shares of capital stock of any Foreign Subsidiary
hereunder may be brought in any court of competent jurisdiction in the
jurisdiction in which such Foreign Subsidiary is organized, and by execution and
delivery of this Agreement, Pledgor accepts for itself and in connection with
its properties (including without limitation the applicable Pledged Shares),
generally and unconditionally, the nonexclusive jurisdiction of any such court
and waives any defense of forum non conveniens (or any similar defense under the
laws of such jurisdiction) and irrevocably agrees to be bound by any judgement
rendered thereby in connection with such pledge or the enforcement thereof.
SECTION 23. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Pledgor and Secured Party each acknowledge that this
waiver is a material inducement for Pledgor and Secured Party to enter into a
business relationship, that Pledgor and Secured Party have already relied on
this waiver in entering into this Agreement and that each will continue to rely
on this waiver in their related future dealings. Pledgor and Secured Party
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal
15
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 23 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
SECTION 24. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
DIAMOND BRANDS INCORPORATED,
as Pledgor
By: _____________________________
Name: ___________________________
Title: __________________________
Notice Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ FARGO BANK, N.A.,
as Administrative Agent
By: _____________________________
Name: ___________________________
Title: __________________________
Notice Address:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
S-1
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of
April 21, 1998 between Diamond Brands Incorporated, as Pledgor, and ▇▇▇▇▇ Fargo
Bank, N.A., as Secured Party.
Part A
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
------------ -------- ------------ ----- ---------
Part B
Debt Issuer Amount of Indebtedness
----------- ----------------------
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, _____, is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Subsidiary Pledge Amendment may be attached
to the Subsidiary Pledge Agreement dated April 21, 1998, between the undersigned
and ▇▇▇▇▇ Fargo Bank, N.A., as Secured Party (the "PLEDGE AGREEMENT,"
capitalized terms defined therein being used herein as therein defined), and
that the [Pledged Shares] [Pledged Debt] listed on this Pledge Amendment shall
be deemed to be part of the [Pledged Shares] [Pledged Debt] and shall become
part of the Pledged Collateral and shall secure all Secured Obligations.
DIAMOND BRANDS INCORPORATED
By: ___________________________
Title:
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
------------ -------- ------------- ----- ---------
Debt Issuer Amount of Indebtedness
----------- ----------------------