Exhibit 10.4
PLEDGE AGREEMENT dated as of January 25, 2001, among
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ FLOORCOVERINGS, INC., a Delaware
corporation (the "BORROWER"), CAF HOLDINGS, INC., a Virginia
corporation ("HOLDINGS"), each Domestic Subsidiary of the
Borrower listed on Schedule I hereto (each such Subsidiary
individually a "SUBSIDIARY PLEDGOR" and collectively, the
"SUBSIDIARY PLEDGORS"; the Borrower, Holdings and the
Subsidiary Pledgors are referred to collectively herein as
the "PLEDGORS") and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through its
New York branch ("CSFB"), as collateral agent (in such
capacity, the "COLLATERAL AGENT") for the Secured Parties
(as defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of January 25, 2001
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, Holdings, the lenders from time to time party
thereto (the "LENDERS") and CSFB, as administrative agent and Collateral Agent
for the Lenders, (b) the Parent Guarantee Agreement dated as of January 25, 2001
(as amended, supplemented or otherwise modified from time to time, the "PARENT
GUARANTEE AGREEMENT"), between Holdings and the Collateral Agent and (c) the
Subsidiary Guarantee Agreement dated as of January 25, 2001 (as amended,
supplemented or otherwise modified from time to time, the "SUBSIDIARY GUARANTEE
AGREEMENT"; and, collectively with the Parent Guarantee Agreement, the
"GUARANTEE AGREEMENTS"), among the Subsidiary Pledgors and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Holdings and the Subsidiary Guarantors have agreed to guarantee,
among other things, all the obligations of the Borrower under the Credit
Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit are conditioned upon, among other things, the
execution and delivery by the Pledgors of a Pledge Agreement in the form hereof
to secure (a) the due and punctual payment of (i) the principal of and premium,
if any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless
of whether allowed or allowable in such proceeding), of the Loan Parties to the
Secured Parties under this Agreement, the Credit Agreement and the other Loan
Documents, (b) the due and punctual payment and performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all covenants, agreements, obligations and liabilities of
each other Loan Party under or pursuant to the Loan Documents and (d) the due
and punctual payment and performance of all obligations of the Borrower,
monetary or otherwise, under each Hedging Agreement (including, without
limitation, in connection with the early termination thereof) entered into with
a counterparty that was a Lender (or an Affiliate of a Lender) at the time such
Hedging Agreement was entered into (all the monetary and other obligations
referred to in the preceding lettered clauses (a) through (d) being referred to
collectively as the "OBLIGATIONS"). Capitalized terms used herein and not
defined herein shall have meanings assigned to such terms in the Credit
Agreement.
Accordingly, each of the Pledgors and the Collateral Agent, on behalf of
each of themselves and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
SECTION 1. PLEDGE. As security for the payment and performance, as the case
may be, in full of the Obligations, each Pledgor hereby pledges, assigns and
grants unto the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in all of the Pledgor's
right, title and interest in, to and under (a) the Equity Interests owned by it
and listed on Schedule II hereto and any Equity Interests obtained in the future
by the Pledgor and the certificates representing all such Equity Interests (the
"PLEDGED STOCK"); PROVIDED that the Pledged Stock shall not include (i) more
than 65% of the issued and outstanding voting Equity Interests of any Foreign
Subsidiary or (ii) to the extent that applicable law requires that a Subsidiary
of the Pledgor issue directors' qualifying shares, such qualifying shares;
(b)(i) the debt securities listed opposite the name of the Pledgor on
Schedule II hereto, (ii) any debt securities in the future issued to any Pledgor
and (iii) the promissory notes and any other instruments evidencing such debt
securities (the "PLEDGED DEBT SECURITIES"); (c) all other property that may be
delivered to and held by the Collateral Agent pursuant to the terms hereof; (d)
subject to Section 5 hereof, all payments of principal or interest, dividends
(PROVIDED that to the extent such dividends received are in the form of Equity
Interests of any Foreign Subsidiary, the Pledged Stock shall not include more
than 65% of the issued and outstanding voting Equity Interests of any Foreign
Subsidiary), cash, instruments and other property from time to time received,
receivable or otherwise distributed, in respect of, in exchange for or upon the
conversion of the securities referred to in clauses (a) and (b) above; (e)
subject to Section 5 hereof, all rights and privileges of the Pledgor with
respect to the securities and other property referred to in clauses (a), (b),
(c) and (d) above; and (f) all proceeds of any of the foregoing (the items
referred to in clauses (a) through (f) above being collectively referred to as
the "COLLATERAL"). Upon delivery to the Collateral Agent, (a) any stock
certificates, notes or other securities now or hereafter included in the
Collateral (the "PLEDGED SECURITIES") shall be accompanied by stock powers duly
executed in blank or other instruments of transfer satisfactory to the
Collateral Agent and by such other instruments and documents as the Collateral
Agent may reasonably request and (b) all other property comprising part of the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or documents as
the Collateral Agent may reasonably request. Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto as
Schedule II and made a part hereof. Each schedule so delivered shall supersede
any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, SUBJECT, HOWEVER, to the terms, covenants and conditions
hereinafter set forth.
SECTION 2. DELIVERY OF THE COLLATERAL. (a) Each Pledgor agrees promptly to
deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to the
Pledgor by any person to be evidenced by a duly executed promissory note that is
pledged and delivered to the Collateral Agent pursuant to the terms thereof.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) the Pledged Stock represents that percentage as set forth on
Schedule II of the issued and outstanding shares of each class of the
Equity Interests of the issuer with respect thereto;
(b) except for the security interest granted hereunder, the Pledgor
(i) is and will at all times continue to be the direct owner, beneficially
and of record, of the Pledged Securities indicated on Schedule II (subject
to the right of release granted pursuant to Section 14(b)), (ii) holds the
same free and clear of all Liens (other than those expressly permitted by
Section 6.02 of the Credit Agreement), (iii) will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any
security interest in or other Lien on, the Collateral, other than pursuant
hereto, and (iv) subject to Section 5 hereof, will cause any and all
Collateral, whether for value paid by the Pledgor or otherwise, to be
forthwith deposited with the Collateral Agent and pledged or assigned
hereunder;
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement or those Liens expressly permitted
by Section 6.02 of the Credit Agreement), however arising, of all persons
whomsoever;
(d) no consent of any other person (including stockholders or
creditors of any Pledgor) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of
the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Collateral are delivered to the Collateral
Agent in accordance with this Agreement, the Collateral Agent will obtain a
valid and perfected first lien upon and security interest in such Pledged
Securities as security for the payment and performance of the Obligations;
(f) the pledge effected hereby is effective to vest in the Collateral
Agent, on behalf of the Secured Parties, the rights of the Collateral Agent
in the Collateral as set forth herein;
(g) all of the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof; and
(i) the pledge of the Pledged Stock pursuant to this Agreement does
not violate Regulation U or X of the Federal Reserve Board or any successor
thereto as of the date hereof.
SECTION 4. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. Upon the occurrence
and during the continuance of an Event of Default, the Collateral Agent, on
behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion) to hold the Pledged Securities in its own name as pledgee, the name
of its nominee (as pledgee or as sub-agent) or the name of the Pledgors,
endorsed or assigned in blank or in favor of the Collateral Agent, subject to
the rights specified in Section 5(a). Each Pledgor will promptly give to the
Collateral Agent copies of any material notices or other communications received
by it with respect to Pledged Securities registered in the name of such Pledgor.
The Collateral Agent shall at all times have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.
SECTION 5. VOTING RIGHTS; DIVIDENDS AND INTEREST, ETC. (a) Unless and until
an Event of Default shall have occurred and be continuing and upon written
notice to the Pledgor:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of
this Agreement, the Credit Agreement and the other Loan Documents;
PROVIDED, HOWEVER, that such Pledgor will not be entitled to exercise any
such right if the result thereof could materially and adversely affect the
rights and remedies of the Collateral Agent or any of the Secured Parties
under this Agreement or the Credit Agreement or any other Loan Document or
the ability of the Secured Parties to exercise the same.
(ii) Each Pledgor shall be entitled to receive and retain any and all
cash dividends, interest and principal paid on the Pledged Securities to
the extent and only to the extent that such cash dividends, interest and
principal are permitted by, and otherwise paid in accordance with, the
terms and conditions of the Credit Agreement, the other Loan Documents and
applicable laws. All noncash dividends, interest and principal, and all
dividends, interest and principal paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
(other than distributions referred to in the preceding sentence) made on or
in respect of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the Collateral,
and, if received by any Pledgor, shall not be commingled by such Pledgor
with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the
Collateral Agent and shall be forthwith delivered to the Collateral Agent
in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to dividends, interest or principal that such Pledgor
is authorized to receive pursuant to paragraph (a)(ii) above shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal received
by the Pledgor contrary to the provisions of this Section 5 shall be held in
trust for the benefit of the Collateral Agent, shall be segregated from other
property or funds of such Pledgor and shall be forthwith delivered to the
Collateral Agent upon demand in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or received by
the Collateral Agent pursuant to the provisions of this paragraph (b) shall be
retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within five
Business Days after all such Events of Default have been cured or waived, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(ii) above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to exercise
such voting and consensual rights and powers, PROVIDED THAT, unless otherwise
directed by the Required Lenders, the Collateral Agent shall have the right from
time to time following and during the continuance of an Event of Default to
permit the Pledgors to exercise such rights. After all Events of Default have
been cured or waived, such Pledgor will have the right to exercise the voting
and consensual rights and powers that it would otherwise be entitled to exercise
pursuant to the terms of paragraph (a)(i) above.
SECTION 6. REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent may sell the
Collateral, or any part thereof, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Collateral Agent shall deem commercially reasonable. The
Collateral Agent shall be authorized at any such sale (if it deems it advisable
to do so) to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon consummation of any such sale the Collateral Agent shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of any Pledgor, and, to
the extent permitted by applicable law, the Pledgors hereby waive all rights of
redemption, stay, valuation and appraisal any Pledgor now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 Business Days' prior written
notice (which each Pledgor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Pledgor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor 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 (all said rights being also hereby waived and released to the extent
permitted by applicable law or statute), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to it from such Pledgor as a credit against the purchase price,
and it may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to such Pledgor therefor. For
purposes hereof, (a) a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof, (b) the Collateral Agent
shall be free to carry out such sale pursuant to such agreement and (c) such
Pledgor shall not be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose upon the Collateral and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Any sale pursuant to the provisions of this Section 6
shall be deemed to conform to the commercially reasonable standards as provided
in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions.
SECTION 7. APPLICATION OF PROCEEDS OF SALE. The proceeds of any sale of
Collateral pursuant to Section 6 hereof, as well as any Collateral consisting of
cash, shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent and Administrative Agent (in their capacities as such
under any Loan Document (to the extent permitted herein or under the Credit
Agreement)) in connection with such sale or otherwise in connection with
this Agreement, any other Loan Document or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent and Administrative Agent hereunder or under any other Loan
Document on behalf of any Pledgor and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. REIMBURSEMENT OF COLLATERAL AGENT. (a) Each Pledgor agrees to
pay upon written demand to the Collateral Agent the amount of any and all
reasonable out-of-pocket expenses, including the reasonable fees, other charges
and disbursements of not more than one counsel in each relevant jurisdiction
(unless any of the Administrative Agent, Collateral Agent or a Lender asserts in
good faith that the nature of its claim requires it to be represented by
separate counsel) and of any experts or agents, that the Collateral Agent 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 Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent hereunder or (iv) the failure by such
Pledgor to perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all actual losses, claims, damages,
liabilities and related reasonable out-of-pocket
expenses, including the reasonable fees, charges and disbursements of not more
than one counsel in each relevant jurisdiction (unless any Indemnitee asserts in
good faith that the nature of its claim requires it to be represented by
separate counsel), incurred by or asserted against any Indemnitee arising out
of, in any way connected with, or as a result of (i) the execution or delivery
of this Agreement or any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, PROVIDED that such indemnity shall not, as to any
Indemnitee, be available to the extent that such actual losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the bad
faith, gross negligence or willful misconduct of any Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document or any investigation made by or on
behalf of the Collateral Agent or any other Secured Party.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each Pledgor hereby
appoints the Collateral Agent the attorney-in-fact of such Pledgor with the full
authority in the place and stead of such Pledgor and in the name of such
Pledgor, the Collateral Agent or otherwise, from time to time, upon the
occurrence and during the continuance of an Event of Default, for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument that the Collateral Agent may deem, in its reasonable
discretion, necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent's name or in the name of such
Pledgor, to ask for, demand, ▇▇▇ for, collect, receive and give acquittance for
any and all moneys due or to become due under and by virtue of any Collateral;
to endorse checks, drafts, orders and other instruments for the payment of money
payable to the Pledgor representing any interest or dividend or other
distribution payable in respect of the Collateral or any part thereof or on
account thereof and to give full discharge for the same; to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto as the
Collateral Agent deems reasonably necessary for the collection of any Collateral
or to otherwise enforce its rights with respect thereto, and to sell, assign,
endorse, pledge, transfer and to make any agreement respecting, or otherwise
deal with, the same; PROVIDED, HOWEVER, that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment received
by the Collateral Agent, or to present or file any claim or notice, or to take
any action with respect to the Collateral or any part thereof or the moneys due
or to become due in respect thereof or any property covered thereby.
The Collateral Agent and the other Secured Parties shall be accountable only for
amounts actually received as a result of the exercise of the powers granted to
them herein, and neither they nor their officers, directors, employees or agents
shall be responsible to any Pledgor for any act or failure to act hereunder,
except for their own bad faith, gross negligence or willful misconduct.
SECTION 10. WAIVERS; AMENDMENT. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by any
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.08 of the Credit Agreement.
SECTION 11. SECURITIES ACT, ETC. In view of the position of the Pledgors in
relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "FEDERAL SECURITIES LAWS") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion, (a) may proceed to make such a sale whether
or not a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser to
effect such sale. Each Pledgor acknowledges and agrees that any such sale might
result in prices and other terms less favorable to the seller than if such sale
were a public
sale without such restrictions. In the event of any such sale, the Collateral
Agent shall incur no responsibility or liability for selling all or any part of
the Pledged Securities at a price that the Collateral Agent, in its sole and
absolute discretion, may in good ▇▇▇▇▇ ▇▇▇▇ reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached. The provisions of this
Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
SECTION 12. REGISTRATION, ETC. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the written request of the Collateral Agent, use its best efforts to take or to
cause the issuer of such Pledged Securities to take such action and prepare,
distribute and/or file such documents, as are necessary or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the public sale
of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and
hold harmless the Collateral Agent, each other Secured Party, any underwriter
and their respective officers, directors, affiliates and controlling persons
from and against all loss, liability, out-of-pocket expenses, costs of counsel
(including, without limitation, reasonable fees and expenses to the Collateral
Agent of one counsel in each relevant jurisdiction (unless the Collateral Agent
asserts in good faith that the nature of its claim requires it to be represented
by separate counsel)), and claims (including the costs of investigation) that
they may incur insofar as such actual loss, liability, expense or claim arises
out of or is based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or in any
notification or offering circular, or arises out of or is based upon any alleged
omission to state a material fact required to be stated therein or necessary to
make the statements in any thereof not misleading, except insofar as the same
may have been caused by any untrue statement or omission based upon information
furnished in writing to such Pledgor or the issuer of such Pledged Securities by
the Collateral Agent or any other Secured Party expressly for use therein. Each
Pledgor further agrees, upon such written request referred to above, to use its
best efforts to qualify, file or register, or cause the issuer of such Pledged
Securities to qualify, file or register, any of the Pledged Securities under the
Blue Sky or other securities laws of such states as may be requested by the
Collateral Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Each Pledgor will bear all reasonable
costs and expenses of carrying out its obligations under this Section 12. Each
Pledgor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 12 and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 12 may be specifically enforced.
SECTION 13. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change
in the time, manner or place of payment of, or in any other term of, all or any
of the Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument relating to any of the foregoing, (c) any exchange,
release or nonperfection of any other collateral, or any release or amendment or
waiver of or consent to or departure from any guaranty, for all or any of the
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Pledgor in respect of the
Obligations or in respect of this Agreement (other than the payment in full of
all the Obligations).
SECTION 14. TERMINATION OR RELEASE. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations (other than
wholly contingent indemnification obligations not yet due and payable) have been
indefeasibly paid in full and the Lenders have no further commitment to lend
under the Credit Agreement, the L/C Exposure has been reduced to zero (unless
collateralized or backstopped on terms satisfactory to the Issuing Bank) and the
Issuing Bank has no further obligation to issue Letters of Credit under the
Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any person that is not a Pledgor, or,
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b) of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to paragraph (a)
or (b), the Collateral Agent shall execute and deliver to any Pledgor, at such
Pledgor's expense, all documents that such Pledgor shall reasonably request to
evidence such termination or release. Any execution and delivery of documents
pursuant to this Section 14 shall be without recourse to or warranty by the
Collateral Agent.
SECTION 15. NOTICES. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it in care of the Borrower.
SECTION 16. FURTHER ASSURANCES. Each Pledgor agrees to do such further acts
and things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as the Collateral Agent may at any time reasonably
request in order to perfect or protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder (including cause the pledge of 65% of
the Equity Interests of ▇▇▇▇▇▇▇▇ Carpet ▇▇▇▇▇ Limited, a Canadian corporation
and a wholly owned Subsidiary, as soon as practicable after release thereof).
SECTION 17. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of any Pledgor that are
contained in this Agreement shall bind and inure to the benefit
of its successors and assigns. This Agreement shall become effective as to any
Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have
been delivered to the Collateral Agent and a counterpart hereof shall have been
executed on behalf of the Collateral Agent, and thereafter shall be binding upon
such Pledgor and the Collateral Agent and their respective successors and
assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent
and the other Secured Parties, and their respective successors and assigns,
except that no Pledgor shall have the right to assign its rights hereunder or
any interest herein or in the Collateral (and any such attempted assignment
shall be void), except as expressly contemplated by this Agreement or the other
Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or
otherwise disposed of to a person that is not an Affiliate of the Borrower
pursuant to a transaction permitted by Section 6.05 of the Credit Agreement,
such Pledgor shall be released from its obligations under this Agreement without
further action. This Agreement shall be construed as a separate agreement with
respect to each Pledgor and may be amended, modified, supplemented, waived or
released with respect to any Pledgor without the approval of any other Pledgor
and without affecting the obligations of any other Pledgor hereunder
SECTION 18. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement (other than wholly contingent
indemnification obligations not yet due and payable) or any other Loan Document
is outstanding and unpaid or the L/C Exposure does not equal zero (unless
collateralized or backstopped on terms satisfactory to the Issuing Bank) and as
long as the Commitments and the commitments of the Issuing Bank to issue Letters
of Credit have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery
of an executed counterpart of a signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 21. RULES OF INTERPRETATION. The rules of interpretation specified
in Section 1.02 of the Credit Agreement shall be applicable to this Agreement.
Section headings used herein are for convenience of reference only, are not part
of this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting this Agreement.
SECTION 22. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, all claims in respect of
any such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other Loan
Documents against any Pledgor or its properties in the courts of any
jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 15. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. ADDITIONAL PLEDGORS. Pursuant to Section 5.09 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that was not in existence or
not a Domestic Subsidiary on the date of the Credit Agreement is required to
enter in this Agreement as a Subsidiary Pledgor upon becoming a Domestic
Subsidiary if such Domestic Subsidiary owns or possesses property of a type that
would be considered Collateral hereunder. Upon execution and delivery by the
Collateral Agent and a Domestic Subsidiary of an instrument substantially in the
form of Annex 1, such Domestic Subsidiary shall become a Subsidiary Pledgor
hereunder with the same force and effect as if originally named as a Subsidiary
Pledgor herein. The execution and delivery of such instrument shall not require
the consent of any Pledgor hereunder. The rights and obligations of each Pledgor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Subsidiary Pledgor as a party to this Agreement.
SECTION 25. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of
the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions, each Pledgor authorizes the Collateral Agent
to file financing statements with respect to the Collateral owned by it without
the signature of such Pledgor in such form and in such filing offices as the
Collateral Agent reasonably determines appropriate to perfect the security
interests of the Collateral Agent under this Agreement. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CAF HOLDINGS, INC.,
by: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Authorized Signatory
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
FLOORCOVERINGS, INC.,
by: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Authorized Signatory
THE SUBSIDIARY PLEDGORS LISTED ON
SCHEDULE I HERETO,
by: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Authorized Signatory
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by: /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Director
by: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
