NOTE PLEDGE AGREEMENT
THIS NOTE PLEDGE AGREEMENT (as hereinafter amended from time to time,
this "PLEDGE AGREEMENT") is executed as of May 5, 1998, by NCI Building
Systems, Inc., a Delaware corporation ("PLEDGOR") for the benefit of
NationsBank, N.A. (successor by merger with NationsBank of Texas, N.A.,
"AGENT"), as Administrative Agent for itself and for the Lenders
(collectively, "LENDERS") now or hereafter party to the Credit Agreement (as
defined below).
RECITALS
A. Pledgor (as Borrower therein), Agent and Lenders and other parties
named therein have executed a Credit Agreement dated March 25, 1998 (as
amended by that certain First Amendment dated as of May 1, 1998 and by that
certain Second Amendment of even date herewith, and as hereinafter amended,
supplemented or restated, the "CREDIT AGREEMENT"), together with certain
other Loan Documents.
B. Pledgor is the sole owner and holder of that certain Pledged Note
(as hereinafter defined).
C. It is expressly understood among Pledgor, Agent and Lenders that
the execution and delivery of this Pledge Agreement is a condition precedent
to Lenders' obligations to extend Loans under the Credit Agreement and
Agent's obligation to issue LCs under the Credit Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. UNLESS OTHERWISE DEFINED IN THIS PLEDGE
AGREEMENT, ANY CAPITALIZED TERM USED IN THIS PLEDGE AGREEMENT HAS THE MEANING
GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition
given a term in the Credit Agreement conflicts with the definition given that
term in the UCC, the Credit Agreement definition shall control to the extent
allowed by Law. If the definition given a term in Chapter 9 of the UCC
conflicts with the definition given that term in any other chapter of the
UCC, the Chapter 9 definition shall control. As used in this Pledge
Agreement:
"COLLATERAL" means Pledgor's right, title and interest in and to
the Pledged Note, including all present and future contract rights, chattel
paper, documents, instruments, cash and noncash proceeds, substitutes and
replacements for, and other rights arising from or by virtue of, or
collections with respect to, or claims against any other Person with respect
to the Pledged Note.
"CREDIT AGREEMENT" is defined in the Recitals.
"DEFAULT" means a "Default" under and as defined in the Credit
Agreement.
"OBLIGATION" means the "Obligation" under and as defined in the
Credit Agreement.
"PLEDGE AGREEMENT" means this Pledge Agreement together with all
exhibits attached to this Pledge Agreement, and all amendments and
modifications to this Agreement and the exhibits.
"PLEDGED NOTE" means that certain promissory note of even date
herewith in the principal amount of US$550,000,000, a copy of which is
attached as EXHIBIT "A", made by NCI Holding Corp., a Delaware corporation
and a wholly owned subsidiary of Pledgor, in favor of Pledgor.
"PLEDGOR" includes, without limitation, Pledgor as a
debtor-in-possession, and any receiver, trustee, liquidator, conservator,
custodian, or similar party hereafter appointed for Pledgor or all or
substantially all of Pledgor's assets pursuant to any liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar Law from time to time in effect
affecting the rights of creditors generally.
"SECURITY INTEREST" means the security interests granted and the
transfers, pledges and collateral assignments made under SECTION 3 of this
Pledge Agreement.
"UCC" means (a) generally, and with respect to the definitions
above, the Uniform Commercial Code, as adopted in Texas, as amended from time
to time, and (b) with respect to rights in states other than Texas, the
Uniform Commercial Code as enacted in the applicable state, as amended from
time to time.
2. CREDIT AGREEMENT. This Pledge Agreement is being executed and
delivered pursuant to the terms and conditions of the Credit Agreement. Each
Security Interest is a "Lien" referred to in the Credit Agreement.
3. SECURITY INTEREST. In order to secure the full and complete
payment and performance of the Obligation when due, Pledgor hereby grants to
Agent a security interest in, and pledges and assigns the Collateral to Agent
for the ratable benefit of the Lenders. Such security interest is granted,
and such pledge and assignment are made, as security only and shall not
subject Lenders to, or transfer or in any way affect or modify, any
obligation of Pledgor with respect to any of the Collateral or any
transaction involving or giving rise thereto.
4. NO ASSUMPTION OR MODIFICATION. The Security Interest is given to
secure the prompt, unconditional and complete payment and performance of the
Obligation when due, and is given as security only. Agent does not assume
and shall not be liable for any of Pledgor's liabilities, duties, or
obligations under or in connection with the Collateral. Agent's acceptance
of this Pledge Agreement, or its taking any action in carrying out this
Pledge Agreement, does not constitute Agent's approval of the Collateral or
Agent's assumption of any obligation under or in connection with the
Collateral. This Pledge Agreement does not affect or modify Pledgor's
obligations with respect to the Collateral.
5. FRAUDULENT CONVEYANCE. Notwithstanding anything contained in this
Pledge Agreement to the contrary, Pledgor agrees that if, but for the
application of this SECTION 5, the Obligation or any Security Interest would
constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent
conveyance under 11 U.S.C. Section 548 (or any successor section) or a
fraudulent conveyance or transfer under any state fraudulent conveyance or
fraudulent transfer Law or similar Law in effect from time to time (each a
"FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security
Interest will be enforceable against Pledgor to the maximum extent possible
without causing the Obligation or any Security Interest to be a Fraudulent
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Conveyance, and shall be deemed to have been automatically amended to carry
out the intent of this SECTION 5.
6. REPRESENTATIONS AND WARRANTIES. Pledgor hereby confirms and
restates each of the representations and warranties in the Credit Agreement
and further represents and warrants to Agent and Lenders as follows:
(a) Pledgor is the legal owner and holder of the Collateral with
full right, power and authority to assign the Collateral to Agent;
(b) the unpaid principal balance of the Pledged Note is
US$550,000,000;
(c) no default exists under the Pledged Note;
(d) Pledgor has not previously assigned the Pledged Note and the
Collateral is free and clear of all Liens:
(e) there are no modifications or amendments to the Pledged Note;
(f) the maker of the Pledged Note does not have any defenses,
offsets or counterclaims in respect of the Collateral; and
(g) the pledge of the Collateral to Agent will not constitute a
default under the Pledged Note.
7. COVENANTS. Pledgor shall:
(a) Promptly notify Agent of any change in any fact or
circumstances represented or warranted by Pledgor with respect to any of the
Collateral.
(b) Promptly notify Agent of any default under the Pledged Note.
(c) Promptly notify Agent of any claim, action or proceeding
affecting the security interest granted and the pledge and assignment made
under SECTION 3 hereof or title to all or any of the Collateral and, at the
request of Lender, appear in and defend, at Pledgor's expense, any such
action or proceeding.
(d) Except as permitted under the Credit Agreement, not sell,
assign or otherwise dispose of any Collateral.
(e) Not create, incur or suffer to exist any other Lien upon any
of the Collateral.
(f) At Pledgor's expense and Agent's request, file or cause to be
filed such applications and take such other actions as Agent may request to
obtain the consent or approval of any Tribunal to Agent's rights hereunder,
including, without limitation, the right to sell all the Collateral upon a
Default without additional consent or approval from such Tribunal (and,
because Pledgor agrees that Agent's remedies at law for failure of Pledgor to
comply with this provision would be inadequate and that such
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failure would not be adequately compensable in damages, Pledgor agrees that
its covenants in this provision may be specifically enforced).
(g) From time to time promptly execute and deliver to Agent all
such other pledges, assignments, certificates, supplemental documents, and
financing statements (if appropriate), and do all other acts or things as
Agent may reasonably request in order to more fully create, evidence,
perfect, continue and preserve the priority of the Security Interest.
8. DEFAULT; REMEDIES. Should a Default occur and be continuing, Agent
may, at its election, exercise any and all rights available to a secured
party under the UCC, in addition to any and all other rights afforded by the
Loan Documents, at law, in equity, or otherwise, including, without
limitation (i) collecting amounts due under the Collateral from the maker
until the Obligation is paid in full; and (ii) applying by appropriate
judicial proceedings for appointment of a receiver for all or part of the
Collateral (and Pledgor hereby consents to any such appointment).
(a) NOTICE. Reasonable notification of the time and place of any
public sale of the Collateral, or reasonable notification of the time after
which any private sale or other intended disposition of the Collateral is to
be made, shall be sent to Pledgor and to any other person entitled to notice
under the UCC; provided that if any of the Collateral threatens to decline
speedily in value or is of the type customarily sold on a recognized market,
Agent may sell or otherwise dispose of the Collateral without notification,
advertisement, or other notice of any kind, and no sale so made in good faith
by Lender shall be deemed not to be "commercially reasonable" because so
made. It is agreed that notice sent or given not less than five Business
Days prior to the taking of the action to which the notice relates is
reasonable for the purposes of this subparagraph.
(b) APPLICATION OF PROCEEDS. Agent shall apply the proceeds of
any sale or other disposition of the Collateral under this SECTION 8 in the
following order: FIRST, to the payment of all its expenses incurred in
retaking, holding and preparing any of the Collateral for sale(s) or other
disposition, in arranging for such sale(s) or other disposition, and in
actually selling or disposing of the same (all of which are part of the
Obligation); SECOND, toward repayment of amounts expended by Agent under this
SECTION 8; THIRD, toward payment of the balance of the Obligation in
accordance with the Credit Agreement. Any surplus remaining shall be
delivered to Pledgor or as a court of competent jurisdiction may direct. If
the proceeds are insufficient to pay the Obligation in full, Pledgor shall
remain liable for any deficiency.
9. OTHER RIGHTS OF AGENT AND LENDERS.
(a) PERFORMANCE. In the event Pledgor shall fail to perform any
of its obligations hereunder with respect to the Collateral, then Agent may,
at its option, but without being required to do so, take such action which
Pledgor is required, but has failed or refused, to take. Any sum which may
be expended or paid by Agent under this subparagraph (including, without
limitation, court costs and attorneys' fees) shall bear interest from the
dates of expenditure or payment at the Maximum Rate (as defined in the Credit
Agreement) until paid and, together with such interest, shall be payable by
Pledgor upon demand and shall be part of the Obligation.
(b) COLLECTION. Upon notice from Agent, the maker or each person
or entity obligated with respect to any of the Collateral, whether as a
maker, co-maker, endorser, accommodation party or otherwise (an "OBLIGOR") is
hereby authorized and directed by Pledgor to make payments on any of the
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Collateral (including, without limitation, principal and interest payments(
directly to Agent, regardless of whether Pledgor was previously making
collections thereon. Subject to SECTION 9(C) hereof, until such notice is
given, Pledgor is authorized to retain and expend all payments made on
Collateral. Agent shall have the right in its own name or in the name of
Pledgor to compromise or extend time of payment with respect to all or any
portion of the Collateral for such amounts and upon such terms as Agent may
determine; to demand, collect, receive, receipt for, ▇▇▇ for, compound and
give acquittances for any and all amounts due or to become due with respect
to Collateral; to take control of cash and other proceeds of any Collateral;
to endorse the name of Pledgor substantially in the form of EXHIBIT "B"
hereto on the Pledged Note, on any other notes, acceptances, checks, drafts,
money orders or other evidences of payment on Collateral that may come into
the possession of Agent; to send requests for verification of obligations to
any Obligor; and to do all other acts and things necessary to carry out the
intent of this agreement. If any Obligor fails or refuses to make payment on
any Collateral when due, Agent is authorized, in its sole discretion, either
in its own name or in the name of Pledgor, to take such action as Agent shall
deem appropriate for the collection of any such amounts. Regardless of any
other provision hereof, however, Agent shall never be liable for its failure
to collect, or for its failure to exercise diligence in the collection of,
any amounts owed with respect to Collateral, nor shall it be under any duty
whatever to anyone except Pledgor to account for funds that it shall actually
receive hereunder. Without limiting the generality of the foregoing, Agent
shall have no responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders or similar matters relating to any
Collateral, or for informing Pledgor with respect to any of such matters
(irrespective of whether Agent actually has, or may be deemed to have,
knowledge thereof). The receipt of Agent to any Obligor shall be a release,
discharge and acquittance to such Obligor, to the extent of any amount so
paid to Lender. The rights granted Agent under this subparagraph may be
exercised at any time, whether or not a Default has occurred and is
continuing.
(c) CERTAIN PROCEEDS. Any cash proceeds of Collateral which come
into the possession of Agent may, at Agent's option, be applied in whole or
in part to the Obligation (to the extent then due), be released in whole or
in part to or on the written instructions of Pledgor for any general or
specific purpose, or be retained in whole or in part by Lender as additional
Collateral.
10. MISCELLANEOUS.
(a) REFERENCE TO MISCELLANEOUS PROVISIONS. This Pledge Agreement
is one of the "Loan Documents" referred to in the Credit Agreement, and
therefore, this Pledge Agreement is subject to the applicable provisions of
SECTION 14 of the Credit Agreement, all of which are incorporated in this
Pledge Agreement by reference the same as if set forth in this Pledge
Agreement verbatim.
(b) TERM. Upon full and final payment of the Obligation and final
termination of the Lenders' commitment to lend under the Credit Agreement
without Agent having exercised its rights under this Pledge Agreement, this
Pledge Agreement shall terminate, PROVIDED THAT no Obligor on any of the
Collateral shall be obligated to inquire as to the termination of this Pledge
Agreement, but shall be fully protected in making payment directly to Agent,
which payment shall be promptly paid over to Pledgor after termination of
this Pledge Agreement.
(c) NOTICE. Any notice or communication required or permitted
under this Pledge Agreement must be given as prescribed in the Credit
Agreement.
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(d) GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED--
AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW.
(e) CREDIT AGREEMENT. In the event of any conflict or
inconsistency between the terms hereof and the Credit Agreement, the terms of
the Credit Agreement shall be controlling.
EXECUTED as of the date set forth in the preamble.
NCI BUILDING SYSTEMS, INC.,
AS PLEDGOR
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President and Chief Financial Officer
NATIONSBANK, N.A. (SUCCESSOR BY
MERGER WITH NATIONSBANK OF TEXAS, N.A),
AS ADMINISTRATIVE AGENT AND A LENDER
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Vice President
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