1
Exhibit 10(b)(ii)
EXECUTION COPY
BORROWER PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated December 30, 1997, made by THE
▇▇▇▇▇-▇▇▇▇▇▇▇ STORES CORP., an Ohio corporation (the "Borrower"), to Citibank,
N.A., as agent for the financial institutions party to the Credit Agreement
referred to below (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has entered into a Credit Agreement,
dated as of December 30, 1997, with the financial institutions party thereto
(the "Lenders") and the Agent (said Agreement, as it may be amended or otherwise
modified from time to time, being the "Credit Agreement" and capitalized terms
not defined herein but defined therein being used herein as therein defined);
and
WHEREAS, the Borrower is the legal and beneficial owner of the
shares of capital stock described in Schedule I hereto and issued by the issuers
named therein (the "Pledged Shares") and the Indebtedness described in said
Schedule and issued by The El-Bee Receivables Corp. to The El-Bee Chargit Corp.
("Chargit") and assigned by Chargit to the Borrower (the "Pledged Debt"); and
WHEREAS, it is a condition precedent under the Credit
Agreement to the making of the Loans and the issuance of Letters of Credit that
the Borrower shall have made the pledge contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Lenders to make the Loans and the Issuer to issue Letters of Credit, the
Borrower hereby agrees with the Agent on behalf and for the ratable benefit of
the Secured Parties as follows:
SECTION 1. PLEDGE. The Borrower hereby pledges to the Agent on
behalf and for the ratable benefit of the Secured Parties, and grants to the
Agent on behalf and for the ratable benefit of the Secured Parties a security
inter est in, the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of
any issuer of the Pledged Shares
2
from time to time acquired by the Borrower in any manner and
all shares of stock or other securities of any Person who,
after the date of this Agreement, becomes, as a result of any
occurrence, a Subsidiary of the Borrower (any such shares
being "Additional Shares");
(iii) the certificates representing the shares referred to
in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all notes or other instruments evidencing the
Indebtedness referred to in clause (iv) above; and
(vi) all dividends, cash, interest, 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 foregoing.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures
and the Pledged Collateral is security for the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of, and the
performance of, the Obligations, whether now or hereafter existing and whether
for principal, interest, fees, expenses or other wise.
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 the Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent. The Agent shall have the right, at any time in its
discretion and without notice to the Borrower, to transfer to or to register in
its name or in the name of any of its nominees any or all of the Pledged
Collateral. In addition, the Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing any of the Pledged
Collateral for certificates or instruments of smaller or larger denominations.
2
3
SECTION 4. REPRESENTATIONS AND WARRANTIES. The
Borrower makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and
validly issued; (ii) are fully paid and non-assessable; and (iii) constitute
100% of the issued and outstanding shares of stock of the respective issuers
thereof. 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) The Borrower is the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien, except for the Lien created by
this Agreement.
(c) The pledge of the Pledged Shares and Pledged Debt pursuant
to this Agreement creates a valid and perfected first priority security
interest in the Pledged Collateral, in favor of the Agent on behalf and for the
ratable benefit of the Secured Parties securing the payment of all of the
Obligations.
(d) No consent, authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority is required either
(i) for the pledge by the Borrower of the Pledged Collateral pursuant to this
Agreement or for the due execution, delivery or performance of this Agreement
by the Borrower, or (ii) for the exercise by the Agent of the voting or other
rights provided for in this Agreement or of the remedies in respect of the
Pledged Col lateral pursuant to this Agreement, except as may be required in
connection with the disposition of the Pledged Collateral by laws affecting the
offering and sale of securities generally.
(e) The issuers listed on Schedule I are the only direct
Subsidiaries of the Borrower.
SECTION 5. FURTHER ASSURANCES, ETC. (a) The Borrower agrees
that at any time and from time to time, at the cost and expense of the Borrower,
the Borrower will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that the Agent may request, in order to perfect and protect the Lien granted or
purported to be granted hereby or to enable the Agent to exercise and
3
4
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
(b) The Borrower agrees to defend the title to the Pledged
Collateral and the Lien thereon of the Agent against the claim of any other
Person and to maintain and preserve such Lien until indefeasible payment in full
of all of the Secured Obligations.
SECTION 6. VOTING RIGHTS; DIVIDENDS; ETC.
(a) As long as no Event of Default shall have occurred and be
continuing (or, in the case of subsection (a)(i) of this Section 6, as long as
no notice thereof shall have been given by the Agent to the Borrower):
(i) The Borrower 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 any other
Loan Document.
(ii) The Borrower shall be entitled to receive and
retain any and all dividends and interest paid in respect of
the Pledged Collateral, other than 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 Shares
or Additional Pledged Shares 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 redemption of, or in exchange for, any
Pledged Collateral,
4
5
all of which shall be forthwith delivered to the Agent to hold
as Pledged Collateral and shall, if received by the Borrower,
be received in trust for the benefit of the Agent, be
segregated from the other property or funds of the Borrower,
and be forthwith delivered to the Agent as Pledged Collateral
in the same form as so received (with any necessary
indorsement).
(iii) The Agent shall execute and deliver (or cause to be
executed and delivered) to the Borrower all such proxies and
other instruments as the Borrower may reasonably request for
the pur pose of enabling the Borrower to exercise the voting
and other rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends or interest
payments which it is authorized to receive and retain pursuant
to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) Upon notice by the Agent to the Borrower, all
rights of the Borrower to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) above shall cease, and
all such rights shall thereupon become vested in the Agent who
shall thereupon have the sole right to exercise such voting
and other consensual rights.
(ii) All rights of the Borrower to receive the dividends
and interest payments which it would otherwise be authorized
to receive and retain pursuant to Section 6(a)(ii) above shall
cease, and all such rights shall thereupon become vested in
the Agent who shall thereupon have the sole right to receive
and hold as Pledged Collateral such dividends and interest
payments.
(iii) All dividends and interest payments which are
received by the Borrower contrary to the provisions of
paragraph (ii) of this Section 6(b) shall be received in trust
for the benefit of the Agent, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the
5
6
Agent as Pledged Collateral in the same form as so received
(with any necessary indorsement).
(iv) The Borrower shall, if necessary to permit the Agent
to exercise the voting and other rights which it may be
entitled to exercise pursuant to Section 6(b)(i) above and to
receive all dividends and distributions which it may be
entitled to receive under Section 6(b)(ii) above, execute and
deliver to the Agent, from time to time and upon written
notice of the Agent, appropriate proxies, dividend payment
orders and other instruments as the Agent may reasonably
request. The foregoing shall not in any way limit the Agent's
power and authority granted pursuant to Section 8 hereof.
SECTION 7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES AND
ADDITIONAL DEBT. (a) The Borrower agrees that it will not (i) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the Pledged
Collateral, or (ii) create or permit to exist any Lien upon or with respect to
any of the Pledged Collateral, except for the Lien created pursuant to this
Agreement.
(b) The Borrower agrees that it will (i) cause each issuer of
the Pledged Shares not to issue any shares of stock or other securities in
addition to or in substitution for the Pledged Shares, except, with the written
consent of the Majority Lenders, to the Borrower, (ii) pledge here under,
immediately upon its acquisition (directly or indirectly) thereof, any and all
Additional Shares and any and all Additional Debt and (iii) promptly (and in any
event within three Business Days) deliver to the Agent a Pledge Amendment, duly
executed by the Borrower, in substantially the form of Schedule II hereto (a
"Pledge Amendment"), in respect of the Additional Shares or Additional Debt,
together with all certificates, notes or other instruments representing or
evidencing the same. The Borrower hereby (i) authorizes the Agent to attach each
Pledge Amendment to this Pledge Agreement, (ii) agrees that all Additional
Shares and Additional Debt listed on any Pledge Amendment delivered to the Agent
shall for all purposes hereunder constitute Pledged Shares and Pledged Debt,
respectively and (iii) is deemed to have made, upon such delivery, the
representations and warranties contained in Section 4 hereof with respect to
such Pledged Collateral.
6
7
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT AND PROXY. The
Borrower hereby irrevocably constitutes and appoints the Agent and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable power and authority in the
place and stead of the Borrower and in the name of the Borrower or in its own
name, from time to time in the Agent's discretion, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which the Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, indorse and collect all instruments
made payable to the Borrower representing any dividend, interest payment or
other distribution or payment in respect of the Pledged Collateral or any part
thereof, to give full discharge for the same, and to vote or grant any consent
in respect of the Pledged Shares authorized by Section 6(b) hereof. The Borrower
hereby ratifies, to the extent permitted by law, all that any said attorney
shall lawfully do or cause to be done by virtue hereof. This power, being
coupled with an interest, is irrevocable until the Secured Obligations are paid
in full.
SECTION 9. AGENT MAY PERFORM. If the Borrower fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Borrower under Section 12 hereof
and constitute Secured Obligations secured hereby.
SECTION 10. REASONABLE CARE. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that neither the Agent nor any other Secured Party shall have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, ex changes, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Agent or any other Secured Party has or
is deemed to have knowledge of any such matter, or (ii) taking any necessary
steps to preserve rights against any Person with respect to any Pledged
Collateral.
7
8
SECTION 11. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party after
default under the Uniform Commercial Code (the "Code") in effect in the State of
New York at that time, and the Agent may also, 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, broker's board or at any
office of the Agent or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Agent may deem commercially reasonable. The
Borrower agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Borrower hereby waives any
claims against the Agent 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 the Agent
accepts the first offer received and does not offer such Pledged Collateral to
more than one offeree.
(b) The Borrower recognizes that the Agent may be compelled,
with respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to those who will agree, among other things, to acquire such
securities for their own account, for investment, and not with a view to the
distribution or resale thereof. The Borrower acknowledges and agrees that any
such sale may result in prices and other terms less favorable to the seller than
if such sale were a public sale without such restrictions and, notwithstanding
such circumstances, agrees that any such sale shall be deemed to have been made
in a commercially reasonable manner. The Agent shall be under no obligation to
delay the sale of any of the Pledged Collateral for the period of time necessary
to permit the Borrower to register
8
9
such securities for public sale under the Securities Act of 1933, or under
applicable state securities laws, even if the Borrower would agree to do so.
(c) If the Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, the Borrower shall, from
time to time, furnish to the Agent all such information as the Agent may request
in order to determine the number of shares and other instruments included in
the Pledged Collateral which may be sold by the Agent as exempt transactions
under the Act and rules of the SEC thereunder, as the same are from time to time
in effect.
(d) Any cash held by the Agent as Pledged Collateral and all
cash proceeds received by the Agent in respect of any sale of, collection from,
or other realization upon all or any part of the Pledged Collateral shall be
applied by the Agent:
First, to the payment of the costs and expenses of such sale,
including, without limitation, reasonable expenses of the Agent and its agents
including the fees and expenses of its counsel, and all expenses, liabilities
and advances made or incurred by the Agent in connection therewith or pursuant
to Section 9 hereof;
Next, to the Secured Parties, PRO RATA, for the
payment in full of the Secured Obligations; and
Finally, after payment in full of all of the Secured
Obligations, to the payment to the Borrower, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same as a court of competent
jurisdiction may direct.
SECTION 12. EXPENSES. The Borrower will upon demand pay to the
Agent the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees and expenses of the Agent's counsel and of any
experts and agents, which the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, sale of,
collection from, or other realization upon, any of the Pledged Collateral, (iii)
the exercise or enforcement of any of the rights and remedies hereunder of the
Agent and the Secured Parties, or (iv) the failure by
9
10
the Borrower to perform or observe any of the provisions hereof.
SECTION 13. SECURITY INTEREST ABSOLUTE. All rights of the
Agent and security interests hereunder, and all obligations of the Borrower
hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any
provision of the Credit Agreement, the Notes or any other Loan
Document or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, or any increase in the amount of,
all or any of the Secured Obligations, or any other amendment
or waiver of any term of, or any consent to any departure from
any requirement of, the Credit Agreement, the Notes or any
other Loan Document;
(iii) any exchange, release or non-perfection of any Lien
on any other collateral, or any release or amendment or waiver
of any term of any guaranty of, or consent to departure from
any requirement of any guaranty of, all or any of the Secured
Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, a
borrower or a pledgor.
SECTION 14. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower
herefrom shall in any event be effective unless the same shall be in writing,
approved by the Majority Lenders and signed by the Agent, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 15. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand, if to the Borrower any Secured
Party, addressed to the Borrower or such Secured Party, as the case may be, at
its address specified in the Credit
10
11
Agreement, or, as to each party, at such other address as shall be designated by
such party in a written notice to each other party complying as to delivery with
the terms of this Section. All such notices and other communications shall, when
mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective when
deposited in the mails, delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation of receipt, delivered to the cable
company or delivered by hand to the addressee or its agent, respectively.
SECTION 16. CONTINUING SECURITY INTEREST; TRANS FER OF NOTES
OR OBLIGATIONS. This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall (i) remain in full force and
effect until payment in full of the Obligations, (ii) be binding upon the
Borrower, its successors and assigns, and (iii) inure, together with the rights
and remedies of the Agent hereunder, to the benefit of and be enforceable by the
Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), any Lender may
assign or otherwise transfer any Note held by it or Obligation owing to it to
any other Person, and such other Person shall thereupon become vested with all
the rights in respect thereof granted to such Lender herein or otherwise with
respect to such of the Notes or Obligations so transferred or assigned, subject,
however, to compliance with the provisions of Section 10.7 of the Credit
Agreement in respect of assignments. Upon the payment in full (after the
Termination Date) of the Obligations, the Borrower shall be entitled to the
return, upon its request and at its expense, of such of the Pledged Collateral
as shall not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 17. GOVERNING LAW; SEVERABILITY; TERMS. This Agreement
shall be governed by, and be construed and interpreted in accordance with, the
law of the State of New York. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity and without invalidating the remaining
provisions of this Agreement. Unless otherwise defined herein or in the Credit
Agreement, terms defined in Article 9 of the Uniform Commercial Code as in
11
12
effect in the State of New York are used herein as therein defined.
SECTION 18. WAIVER OF JURY TRIAL. The Borrower waives any
right it may have to a trial by jury in respect of any litigation based on, or
arising out of, under or in connection with, this Agreement or any other loan
document, or any course of conduct, course of dealing, verbal or written
statement or other action of any loan party or any secured party.
SECTION 19. SECTION TITLES. The Section titles
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not part of this Agreement.
12
13
IN WITNESS WHEREOF, the Borrower has caused this Agreement to
be duly executed and delivered by its duly authorized officer on the date first
above written.
THE ▇▇▇▇▇-▇▇▇▇▇▇▇ STORES CORP.
By:
--------------------------------------
Title:
Accepted and Acknowledged:
CITIBANK, N.A., as Agent
By:
------------------------
Title:
13
14
SCHEDULE I TO BORROWER PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December 30, 1997, by The ▇▇▇▇▇-▇▇▇▇▇▇▇ Stores Corp. to
Citibank, N.A., as Agent.
Class Stock Certificate Par Number
Stock Issuer of Stock No(s). Value Of Shares
------------- -------- ----------------- ----- ----------
1. The El-Bee Chargit Corp. common 5 none 6,000
2. The Bee-Gee Shoe Corp. common 1 none 100
Original
Description Final Principal
Debt Issuer of Debt Maturity Amount
----------- ----------- -------- ------
The El-Bee Subordinated Note No. 1 12/30/17
Receivables Corp.
14
15
SCHEDULE II TO BORROWER PLEDGE AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated , 1997, is
delivered pursuant to Section 7 of the Pledge Agreement referred to
below. The undersigned hereby agrees that this Pledge Amendment may be
attached to the Pledge Agreement, dated December 30, 1997, between the
undersigned and Citibank, N.A., as Agent on behalf of and for the
ratable benefit of the Secured Parties referred to therein and that the
Additional Shares listed on this Pledge Amendment shall be and become
part of the Pledged Collateral referred to in the Pledge Agreement and
shall secure all Secured Obligations of the undersigned. The terms
defined in the Pledge Agreement or Credit Agreement are being used
herein as therein defined.
THE ▇▇▇▇▇-▇▇▇▇▇▇▇ STORES CORP.
By:
-----------------------------
Title:
Class Stock Certificate Par Number
Stock Issuer of Stock No(s). Value of Shares
------------ -------- ----------------- ----- ----------
Original
Description Final Principal
Issuer of Debt Maturity Amount
------ ----------- --------- ---------
15