EXHIBIT 10.26
SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as it may be amended, supplemented or
otherwise modified from time to time, this "Agreement") is dated as of February
27, 1998 and entered into by and between RENAL TREATMENT CENTERS, INC. a
Delaware corporation ("Pledgor"), and THE BANK OF NEW YORK, as collateral agent
for and representative of (in such capacity herein called "Collateral Agent")
the REVOLVING LENDERS (as hereinafter defined), the TERM LENDERS (as
hereinafter defined), the REVOLVING AGENT (as hereinafter defined), the TERM
AGENT (as hereinafter defined), the ACKNOWLEDGING INTEREST RATE EXCHANGERS (as
hereinafter defined) and the ACKNOWLEDGING CURRENCY EXCHANGERS (as hereinafter
defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of the shares of Stock described
in Schedule I annexed hereto and issued by the corporations named therein.
B. Total Renal Care Holdings, Inc., a Delaware corporation (the "Borrower"),
has entered into that certain Revolving Credit Agreement dated as of October
24, 1997, with the financial institutions parties thereto (the "Revolving
Lenders"), DLJ Capital Funding Inc., as Syndication Agent, First Union National
Bank, as Documentation Agent, and The Bank of New York, as administrative agent
(the "Revolving Agent") (said Revolving Credit Agreement, as amended and as it
may hereafter be amended, supplemented or otherwise modified from time to time,
being the "Revolving Credit Agreement"), pursuant to which the Revolving
Lenders have made certain commitments, subject to the terms and conditions set
forth in the Revolving Credit Agreement, to extend certain credit facilities to
Borrower.
C. Borrower has entered into that certain Term Loan Agreement dated as of
October 24, 1997, with the financial institutions parties thereto (the "Term
Lenders"), DLJ Capital Funding Inc., as Syndication Agent, and The Bank of New
York, as administrative agent (the "Term Agent") (said Term Loan Agreement, as
amended and as it may hereafter be amended, supplemented or otherwise modified
from time to time, being the "Term Loan Agreement"), pursuant to which Term
Lenders have extended or will extend credit, subject to the terms and
conditions set forth in the Term Loan Agreement, to Borrower.
D. It is contemplated that the Borrower may from time to time enter into one
or more Interest Rate Agreements with one or more Revolving Lenders or Term
Lenders or their respective Affiliates (collectively, the "Interest Rate
Exchangers") and it is desired that the obligations of the Borrower under such
Interest Rate Agreements, including the obligation to make payments in the
event of early termination thereunder, be secured by the collateral described
herein; provided that any Interest Rate Exchanger desiring the benefit of such
security shall deliver to the Collateral Agent an acknowledgement to the
Intercreditor Agreement executed by such Interest Rate Exchanger and the
Borrower, pursuant to which such Interest Rate Exchanger agrees to be bound by
the terms thereof. Each Interest Rate Exchanger that has executed and delivered
to the Collateral Agent an acknowledgement to the Intercreditor Agreement is
referred to herein as an "Acknowledging Interest Rate Exchanger", and each
Interest Rate Agreement with an Acknowledging Interest Rate Exchanger is
referred to herein as a "Secured Interest Rate Agreement".
E. It is contemplated that the Borrower may from time to time enter into one
or more Currency Agreements with one or more Revolving Lenders or Term Lenders
or their respective Affiliates (collectively, the "Currency Exchangers") and it
is desired that the obligations of the Borrower under such Currency Agreements,
including the obligation to make payments in the event of early termination
thereunder be secured by the collateral described herein; provided that any
Currency Exchanger desiring the benefit of such security shall deliver to the
Collateral Agent an acknowledgement to the Intercreditor Agreement executed by
such Currency Exchanger and the Borrower, pursuant to which such Currency
Exchanger agrees to be bound by the
terms thereof. Each Currency Exchanger that has executed and delivered to the
Collateral Agent an acknowledgement to the Intercreditor Agreement is referred
to herein as an "Acknowledging Currency Exchanger" and each Currency Agreement
with an Acknowledging Currency Exchanger is referred to herein as a "Secured
Currency Agreement".
F. A portion of the proceeds of the Revolving Credit Loans and Term Loans may
be advanced to Pledgor and thus the Secured Obligations (as hereinafter
defined) are being incurred for and will inure to the benefit of Pledgor (which
benefits are hereby acknowledged).
G. Collateral Agent has been appointed as collateral agent hereunder pursuant
to the Intercreditor Agreement by the Revolving Agent on behalf of the
Revolving Lenders, the Term Agent on behalf of the Term Lenders, and each
Interest Rate Exchanger and Currency Exchanger signing an acknowledgement to
the Intercreditor Agreement.
H. Borrower has covenanted and agreed under the Revolving Loan Agreement and
the Term Loan Agreement to cause Pledgor to grant the security interests and
undertake the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Revolving Lenders to make and continue their respective loans to, and issue
Letters of Credit (as hereinafter defined) for the account of, the Borrower,
and to induce the Term Lenders to make and continue their respective loans to
the Borrower, Pledgor hereby agrees with Collateral Agent as follows:
SECTION 1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned thereto in the Revolving Credit Agreement and,
if not defined in the Revolving Credit Agreement, the Term Loan Agreement, in
each case as in effect on the date hereof. In addition, as used in this
Agreement, the following terms shall have the following meanings unless the
context otherwise requires:
"Default" means any "Default" as defined in the Term Loan Agreement or the
Revolving Credit Agreement.
"Event of Default" means (i) any of the events specified in Section 9.1 of
the Term Loan Agreement or Section 9.1 of the Revolving Credit Agreement,
provided that any requirement for the giving of notice, the lapse of time, or
any other condition has been satisfied and (ii) following the payment in full
of all obligations under the Revolving Loan Documents and the Term Loan
Documents, any breach or violation of any Secured Interest Rate Agreement or
Secured Currency Agreement.
"Financing Documents" means the Revolving Loan Documents, the Term Loan
Documents, the Secured Interest Rate Agreements, the Secured Currency
Agreements, and all other documents and agreements executed and issued in
connection with the foregoing.
"Intercreditor Agreement" means the Intercreditor Agreement and Collateral
Agency, dated as of October 24, 1997, among the Revolving Agent, the Term Agent
and The Bank of New York, acting in its capacity as Collateral Agent
thereunder, each Acknowledging Interest Rate Exchanger and each Acknowledging
Currency Exchanger and the Loan Parties (as defined therein), as amended,
supplemented or otherwise modified from time to time.
"Requisite Obligees" has the meaning assigned thereto in the Intercreditor
Agreement.
"Revolving Loan Documents" means the "Loan Documents" as defined in the
Revolving Credit Agreement.
"SEC" means the Securities and Exchange Commission or any Governmental
Authority succeeding to the functions thereof.
"Secured Parties" means, collectively, the Collateral Agent, the Revolving
Agent, the Revolving Lenders, the Letter of Credit Issuer, the Term Agent, the
Term Lenders, the Acknowledging Interest Rate Exchangers and Acknowledging
Currency Exchangers.
"Term Loan Documents" means the "Loan Documents" as defined in the Term Loan
Agreement.
"Term Loan Notes" means, collectively, the promissory notes of the Borrower
payable to the order of the Term Lenders, each as indorsed or modified from
time to time.
"Term Loans" means the term loans made by the Term Lenders to the Borrower
under the Term Loan Agreement.
SECTION 2. Pledge of Security. Pledgor hereby pledges and assigns to
Collateral Agent for its benefit and the benefit of the Secured Parties, and
hereby grants to Collateral Agent for its benefit and the benefit of the
Secured Parties, a security interest in, all of Pledgor's right, title and
interest in and to the following, in each case whether now owned or existing or
hereafter arising or acquired, whether tangible or intangible and wherever
located (the "Pledged Collateral"):
(a) all shares of Stock of any Person that is on the date hereof or
hereafter becomes a First-Tier wholly-owned Subsidiary of Pledgor or a
First-Tier Domestic Subsidiary of Pledgor that is a Guarantor (whether or
not wholly-owned by Pledgor) (such shares being the "Pledged Shares"), all
securities convertible into and warrants, options and other rights to
purchase or otherwise acquire, any Pledged Shares, the certificates or
other instruments representing such Pledged Shares, securities, warrants,
options or other rights and any interest of Pledgor in the entries on the
books of any financial intermediary pertaining to such shares, and all
dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Shares,
securities, warrants, options or other rights; provided that Pledgor shall
not be required to pledge more than the Maximum Percentage (as hereinafter
defined) of the shares of Stock of any Foreign Subsidiary;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, Stock
of any issuer of the Pledged Shares from time to time acquired by Pledgor
in any manner (which shares shall be deemed to be part of the Pledged
Shares), the certificates or other instruments representing such additional
shares, securities, warrants, options or other rights and any interest of
Pledgor in the entries on the books of any financial intermediary
pertaining to such additional shares, and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such additional shares, securities, warrants, options or
other rights;
(c) to the extent not covered by clauses (a) through (b) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "proceeds" has the meaning assigned to it under
Article 9 of the New York Uniform Commercial Code and to the extent not
otherwise included, shall include whatever is receivable or received when
Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and
includes, without limitation, proceeds of any indemnity or guaranty payable
to Pledgor or Collateral Agent from time to time with respect to any of the
Pledged Collateral.
SECTION 3. Security for Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities
of every nature of Borrower now or hereafter existing under or arising out of
or in connection with the Financing Documents, whether for principal, interest
(including without limitation interest that, but for the filing of a petition
in bankruptcy with respect to Borrower, would accrue on such obligations),
reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from Collateral
Agent or any Secured Party as a preference, fraudulent transfer or otherwise
(all such obligations and liabilities being the "Underlying Debt"), and all
obligations of every nature of Pledgor now or hereafter existing under this
Agreement (all such obligations of Pledgor, together with the Underlying Debt,
being the "Secured Obligations").
SECTION 4. 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 Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. Collateral Agent shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Collateral Agent or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 8(a). In
addition, Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
Collateral Agent acknowledges that, notwithstanding Pledgor's representation
and warranty in Section 5(b) hereof, Pledgor may deliver to Collateral Agent
stock certificates, together with undated stock powers, representing less than
100% (but no less than 66%) of the outstanding shares of stock of the Foreign
Subsidiaries; all outstanding shares of the Foreign Subsidiaries being referred
to herein as the "Foreign Shares". Because the intent of Pledgor and Collateral
Agent is to grant a security interest in a percentage of the Foreign Shares
equal to 66% or such other percentage as is the maximum percentage of the
Foreign Shares that can be pledged to the Collateral Agent without constituting
an investment of earnings in U.S. property under Section 956 (or any successor
provision) of the Code that would trigger an increase in the gross income of
Pledgor pursuant to Section 951 (or any successor provision) of the Code (such
percentage being the "Maximum Percentage"), Collateral Agent hereby confirms
that the Pledged Shares of the Foreign Subsidiaries shall refer only to, and
the grants of security interests created hereby shall extend only to, the
Maximum Percentage of the Foreign Shares.
If Collateral Agent shall take any action to foreclose on the Foreign Shares,
Collateral Agent hereby agrees to act only with regard to the Maximum
Percentage of the Foreign Shares; provided, however, that nothing herein shall
preclude Collateral Agent from exercising the stock powers with respect to all
outstanding Foreign Shares to take such action as may be necessary to transfer
the Foreign Shares (the "Remaining Shares") to Pledgor or to such other person
or entity as Pledgor designates. The parties hereto agree that Collateral Agent
has no fiduciary or other responsibilities or duties with regard to the
Remaining Shares and that Collateral Agent is serving only as custodian with
respect to the Remaining Shares.
SECTION 5. Representations and Warranties. Pledgor represents and warrants as
follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
Shares have been duly authorized and validly issued and are fully paid and
non-assessable.
(b) Description of Pledged Collateral. The Pledged Shares (other than the
Foreign Shares) constitute 100% of the issued and outstanding shares of
Stock of each issuer thereof, and there are no outstanding warrants,
options or other rights to purchase, or other agreements outstanding with
respect to, or property that is now or hereafter convertible into, or that
requires the issuance or sale of, any Pledged Shares. The Pledged Shares of
each Foreign Subsidiary represent the Maximum Percentage of the issued and
outstanding shares of Stock of such Foreign Subsidiary.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record and
beneficial owner of the Pledged Collateral free and clear of any Lien
except for the security interest created by this Agreement
and as otherwise permitted under the Revolving Credit Agreement or the Term
Loan Agreement, as the case may be.
(d) Governmental Authorizations. Except as may be disclosed on Schedule
5(d) with respect to Pledged Shares of a Foreign Subsidiary (which Schedule
5(d) may be supplemented from time to time in connection with a pledge
hereunder of Pledged Shares of a new Foreign Subsidiary) and provided that
with respect to any matters disclosed on Schedule 5(d) Pledgor shall as
soon as reasonably practicable obtain all such authorizations and
approvals, make all such notifications or filings and take all such other
actions as may be so disclosed and required under the laws governing such
Foreign Subsidiary in connection with the actions described in the
following clauses (i)-(iii), no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the
security interest granted hereby, (ii) the execution, delivery or
performance of this Agreement by Pledgor, or (iii) the exercise by
Collateral Agent of the voting or other rights, or the remedies in respect
of the Pledged Collateral, provided for in this Agreement (except as may be
required in connection with a disposition of Pledged Collateral by laws
affecting the offering and sale of securities generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected and, except as otherwise permitted
under the Revolving Credit Agreement or the Term Loan Agreement, as the
case may be, first priority security interest in the Pledged Collateral,
securing the payment of the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or hereafter
supplied to Collateral Agent by or on behalf of Pledgor with respect to the
Pledged Collateral is accurate and complete in all material respects.
SECTION 6. Transfers and Other Liens; Additional Pledged Collateral;
etc. Pledgor shall:
(a) not, except as expressly permitted by Section 8.7 of the Revolving
Credit Agreement and Section 8.7 of the Term Loan Agreement, (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant
any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement, or (iii)
permit any issuer of Pledged Shares to merge or consolidate unless all the
outstanding capital stock of the surviving or resulting corporation is,
upon such merger or consolidation, pledged hereunder and no cash,
securities or other property is distributed in respect of the outstanding
shares of any other constituent corporation; provided that in the event
Pledgor makes a sale or disposition permitted by the Revolving Credit
Agreement and the Term Loan Agreement and the assets subject to such sale
or disposition are Pledged Shares, Collateral Agent shall release the
Pledged Shares that are the subject of such sale or disposition to Pledgor
free and clear of the lien and security interest under this Agreement
concurrently with the consummation of such sale or disposition; provided,
further that, as a condition precedent to such release, Collateral Agent
shall have received evidence satisfactory to it that arrangements
satisfactory to it have been made for delivery to the Revolving Agent and
the Term Agent of the proceeds of such sale or disposition to the extent
required by the Revolving Credit Agreement and the Term Loan Agreement;
(b)(i) cause each issuer of Pledged Shares not to issue any Stock or
other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to Pledgor, and (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and
all additional shares of Stock or other securities of each issuer of
Pledged Shares, (iii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all shares of Stock of any Person
that, after the date of this Agreement, becomes, as a result of any
occurrence, a First-Tier wholly-owned Domestic Subsidiary of Pledgor, and
(iv) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, the
Maximum Percentage of shares of Stock or any Person that, after the date of
this Agreement, becomes, as a result of any occurrence, a First-Tier
Foreign Subsidiary of Pledgor;
(c) promptly notify Collateral Agent of any event of which Pledgor
becomes aware causing loss of the Pledged Collateral;
(d) promptly deliver to Collateral Agent all written notices received by
it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental charges
or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment entered or
filed against Pledgor or any of the Pledged Collateral as a result of the
failure to make such payment.
SECTION 7. Further Assurances; Pledge Amendments.
(a) Pledgor agrees that from time to time, at the expense of Pledgor, Pledgor
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that Collateral
Agent may request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, Pledgor
will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Collateral Agent may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby and
(ii) at Collateral Agent's request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Collateral Agent's security
interest in all or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional shares
of Stock or other securities required to be pledged hereunder as provided in
Section 6(b), promptly (and in any event within thirty Business Days) deliver
to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II annexed hereto (a "Pledge Amendment"), in
respect of the additional Pledged Shares to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Collateral Agent to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder
be considered Pledged Collateral; provided that the failure of Pledgor to
execute a Pledge Amendment with respect to any additional Pledged Shares
pledged pursuant to this Agreement shall not impair the security interest of
Collateral Agent therein or otherwise adversely affect the rights and remedies
of Collateral Agent hereunder with respect thereto.
SECTION 8. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement, the
Revolving Credit Agreement or the Term Loan Agreement; provided, however,
that Pledgor shall not exercise or refrain from exercising any such right
if Collateral Agent shall have notified Pledgor that, in Collateral Agent's
judgment, such action would have a material adverse effect on the value of
the Pledged Collateral or any part thereof; and provided, further, that
Pledgor shall give Collateral Agent at least five Business Days' prior
written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right. It is understood,
however, that neither (A) the voting by Pledgor of any Pledged Shares for
or Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (B) Pledgor's consent to or approval of any
action otherwise permitted under this Agreement, the Revolving Credit
Agreement and the Term Loan Agreement shall be deemed inconsistent with the
terms of this Agreement, the Revolving Credit Agreement or the Term Loan
Agreement within the
meaning of this Section 8(a)(i), and no notice of any such voting or
consent need be given to Collateral Agent;
(ii) Pledgor shall be entitled to receive and retain, and to utilize free
and clear of the lien of this Agreement, any and all dividends and interest
paid in respect of the Pledged Collateral; provided, however, that any and
all
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Collateral Agent to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust for
the benefit of Collateral Agent, be segregated from the other property or funds
of Pledgor and be forthwith delivered to Collateral Agent as Pledged Collateral
in the same form as so received (with all necessary indorsements); and
(iii) Collateral Agent shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and
other consensual rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest
payments which it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuation of an Event of Default:
(i) upon written notice from Collateral Agent to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 8(a)(i) shall cease,
and all such rights shall thereupon become vested in Collateral Agent which
shall thereupon have the sole right to exercise such voting and other
consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest payments
which it would otherwise be authorized to receive and retain pursuant to
Section 8(a)(ii) shall cease, and all such rights shall thereupon become
vested in Collateral Agent which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are received
by Pledgor contrary to the provisions of paragraph (ii) of this Section
8(b) shall be received in trust for the benefit of Collateral Agent, shall
be segregated from other funds of Pledgor and shall forthwith be paid over
to Collateral Agent as Pledged Collateral in the same form as so received
(with any necessary indorsements).
(c) In order to permit Collateral Agent to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Collateral Agent all such proxies, dividend payment orders and other
instruments as Collateral Agent may from time to time reasonably request and
(ii) without limiting the effect of the immediately preceding clause (i),
Pledgor hereby grants to Collateral Agent an irrevocable proxy to vote the
Pledged Shares and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged Shares would be entitled (including,
without limitation, giving or withholding written consents of shareholders,
calling special meetings of shareholders and voting at such meetings), which
proxy shall be effective, automatically and without the necessity of any action
(including any transfer of any Pledged Shares on the record books of the issuer
thereof) by any other Person (including the issuer of the Pledged Shares or any
officer or agent thereof), upon the occurrence of an Event of Default and which
proxy shall only terminate upon the payment in full of the Secured Obligations.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor,
Collateral Agent or otherwise, from time to time in Collateral Agent's
discretion to take any action and to execute any instrument that Collateral
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) after and during the continuance of an Event of Default, to ask,
demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of
the Pledged Collateral;
(c) after and during the continuance of an Event of Default, to receive,
endorse and collect any instruments made payable to Pledgor representing
any dividend, principal or interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give full
discharge for the same; and
(d) after and during the continuance of an Event of Default, to file any
claims or take any action or institute any proceedings that Collateral
Agent may deem necessary or desirable for the collection of any of the
Pledged Collateral or otherwise to enforce the rights of Collateral Agent
with respect to any of the Pledged Collateral.
SECTION 10. Collateral Agent May Perform. If Pledgor fails to perform any
agreement contained herein after the period in which such performance is
required, Collateral Agent may itself perform, or cause performance of, such
agreement, and the expenses of Collateral Agent incurred in connection
therewith shall be payable by Pledgor under Section 15(b).
SECTION 11. Standard of Care. The powers conferred on Collateral Agent
hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Collateral Agent shall have no duty as to any Pledged Collateral, it being
understood that Collateral Agent shall have no responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral,
whether or not Collateral Agent has or is deemed to have knowledge of such
matters, (b) taking any necessary steps (other than steps taken in accordance
with the standard of care set forth above to maintain possession of the Pledged
Collateral) to preserve rights against any parties with respect to any Pledged
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the Pledged Collateral, or (d) initiating any action to protect the Pledged
Collateral against the possibility of a decline in market value. Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Collateral in its possession if such Pledged Collateral
is accorded treatment substantially equal to that which Collateral Agent
accords its own property consisting of negotiable securities.
SECTION 12. Remedies.
(a) If any Event of Default shall have occurred and be continuing, Collateral
Agent may exercise in respect of the Pledged Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "UCC") (whether
or not the UCC applies to the affected Pledged Collateral), and Collateral
Agent may also in its sole discretion, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange or broker's board or at any of
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged
8
Collateral. Collateral Agent may be the purchaser of any or all of the Pledged
Collateral at any such public sale and, to the extent permitted by law, private
sale, and Collateral Agent, as agent for and representative of Secured Parties
(but not any Secured Party or Secured Parties in its or their respective
individual capacities unless Requisite Obligees shall otherwise agree in
writing), shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Pledged
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Collateral Agent at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on
the part of Pledgor, and Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to Pledgor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Collateral 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. Pledgor hereby waives any claims against Collateral 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 Collateral Agent accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for
the deficiency and the fees of any attorneys employed by Collateral Agent to
collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions contained in
the Securities Act of 1933, as from time to time amended (the "Securities
Act"), and applicable state securities laws, Collateral Agent may be compelled,
with respect to any sale of all or any part of the Pledged Collateral conducted
without prior registration or qualification of such Pledged Collateral under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances and the registration rights granted to
Collateral Agent by Pledgor pursuant to Section 13, Pledgor agrees that the
effect of the foregoing in respect of any such private sale shall not be deemed
per se to cause such private sale to have not been made in a commercially
reasonable manner and that Collateral Agent shall have no obligation to engage
in public sales and no obligation to delay the sale of any Pledged Collateral
for the period of time necessary to permit the issuer thereof to register it
for a form of public sale requiring registration under the Securities Act or
under applicable state securities laws, even if such issuer would, or should,
agree to so register it.
(c) If Collateral Agent determines to exercise its right to sell any or all
of the Pledged Collateral, upon written request, Pledgor shall and shall cause
each issuer of any Pledged Shares to be sold hereunder from time to time to
furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Collateral Agent in
exempt transactions under the Securities Act and the rules and regulations of
the SEC thereunder, as the same are from time to time in effect.
SECTION 13. Registration Rights. If Collateral Agent shall determine to
exercise its right to sell all or any of the Pledged Collateral pursuant to
Section 12, Pledgor agrees that, upon request of Collateral Agent (which
request may be made by Collateral Agent in its sole discretion), Pledgor will,
at its own expense:
(a) execute and deliver, and use its best efforts to cause each issuer of
the Pledged Collateral contemplated to be sold and the directors and
officers thereof to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts and things, as
may be necessary or, in the
9
opinion of Collateral Agent, advisable to file a registration statement
covering such Pledged Collateral under the provisions of the Securities Act
and to use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto;
(b) use its best efforts to qualify the Pledged Collateral under all
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested
by Collateral Agent;
(c) cause each such issuer to make available to its security holders, as
soon as practicable, an earnings statement which will satisfy the
provisions of Section 11(a) of the Securities Act;
(d) use its best efforts to do or cause to be done all such other acts
and things as may be necessary to make such sale of the Pledged Collateral
or any part thereof valid and binding and in compliance with applicable
law; and
(e) bear all costs and expenses, including reasonable attorneys' fees, of
carrying out its obligations under this Section 13.
Pledgor further agrees that a breach of any of the covenants contained in
this Section 13 will cause irreparable injury to Collateral Agent, that
Collateral Agent has no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained in this Section 13
shall be specifically enforceable against Pledgor, and Pledgor hereby waives
and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this Section 13 shall in any way alter the rights
of Collateral Agent under Section 12.
SECTION 14. Application of Proceeds. Except as expressly provided elsewhere
in this Agreement, all proceeds received by Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of Collateral Agent, be held by
Collateral Agent as Pledged Collateral for, and/or then, or at any time
thereafter, applied in full or in part by Collateral Agent against, the Secured
Obligations in the following order of priority:
First: To the payment of all costs and expenses of such sale, collection
or other realization, including reasonable compensation to Collateral Agent
and its agents and counsel, and all other expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith, and
all amounts for which Collateral Agent is entitled to indemnification
hereunder and all advances made by Collateral Agent hereunder for the
account of Pledgor, and to the payment of all costs and expenses paid or
incurred by Collateral Agent in connection with the exercise of any right
or remedy hereunder, all in accordance with Section 15;
Second: To the payment of all other Secured Obligations in the order
described in Section 3 of the Intercreditor Agreement; and
Third: To the payment to or upon the order of Pledgor, or to whosoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
SECTION 15. Indemnity and Expenses.
(a) Pledgor agrees to indemnify Collateral Agent and each other Secured
Party from and against any and all claims, losses and liabilities in any
way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation,
enforcement of this Agreement), except to the extent such claims, losses or
liabilities result solely from Collateral Agent's or such other Secured
Party's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
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(b) Pledgor shall pay to Collateral Agent upon demand the amount of any and
all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that 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 Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Collateral Agent hereunder, or (iv) the failure by Pledgor to perform
or observe any of the provisions hereof.
(c) In the event of any public sale described in Section 13, Pledgor agrees
to indemnify and hold harmless Collateral Agent and each of Collateral Agent's
directors, officers, employees and agents from and against any loss, fee, cost,
expense, damage, liability or claim, joint or several, to which Collateral
Agent or such other persons may become subject or for which any of them may be
liable, under the Securities Act or otherwise, insofar as such losses, fees,
costs, expenses, damages, liabilities or claims (or any litigation commenced or
threatened in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or other such
document published or filed in connection with such public sale, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse Collateral Agent and such other persons for any legal or other
expenses reasonably incurred by Collateral Agent and such other persons in
connection with any litigation, of any nature whatsoever, commenced or
threatened in respect thereof (including without limitation any and all fees,
costs and expenses whatsoever reasonably incurred by Collateral Agent and such
other persons and counsel for Collateral Agent and such other persons in
investigating, preparing for, defending against or providing evidence,
producing documents or taking any other action in respect of, any such
commenced or threatened litigation or any claims asserted). This indemnity
shall be in addition to any liability which Pledgor may otherwise have and
shall extend upon the same terms and conditions to each person, if any, that
controls Collateral Agent or such persons within the meaning of the Securities
Act.
SECTION 16. Suretyship Waivers; Other Limitations.
(a) Pledgor agrees that its obligations hereunder are irrevocable, absolute,
independent and unconditional and shall not be affected by any circumstance
which constitutes a legal or equitable discharge of a guarantor or surety other
than payment in full of the Underlying Debt. In furtherance of the foregoing
and without limiting the generality thereof, Pledgor agrees as follows: (i)
Collateral Agent or any other Secured Party may from time to time, without
notice or demand and without affecting the validity or enforceability of this
Agreement or giving rise to any limitation, impairment or discharge of
Pledgor's liability hereunder, (A) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Underlying Debt, (B)
settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Underlying Debt or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations, (C) request and accept guaranties of the
Underlying Debt and take and hold other security for the payment of the
Underlying Debt, (D) release, exchange, compromise, subordinate or modify, with
or without consideration, any other security for payment of the Underlying
Debt, any guaranties of the Underlying Debt, or any other obligation of any
Person with respect to the Underlying Debt, (E) enforce and apply any other
security now or hereafter held by or for the benefit of Collateral Agent or any
other Secured Party in respect of the Underlying Debt and direct the order or
manner of sale thereof, or exercise any other right or remedy that Collateral
Agent or other Secured Parties, or any of them, may have against any such
security, as Collateral Agent in its discretion may determine consistent with
the Revolving Credit Agreement and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable, and (F) exercise any other rights available to Collateral Agent or
other Secured Parties, or any of them, under the Financing Documents, at law or
in equity; and (ii) this Agreement and the obligations of Pledgor hereunder
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full of the
Underlying Debt), including without limitation the occurrence of any of the
following, whether or not Pledgor shall have had notice or knowledge of any of
them: (A) any failure to assert
11
or enforce or agreement not to assert or enforce, or the stay or enjoining, by
order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy with respect
to the Underlying Debt or any agreement relating thereto, or with respect to
any guaranty of or other security for the payment of the Underlying Debt, (B)
any rescission, waiver, amendment or modification of, or any consent to
departure from, any of the terms or provisions (including without limitation
provisions relating to events of default) of any of the Financing Documents or
any agreement or instrument executed pursuant thereto, or of any guaranty or
other security for the Underlying Debt, in each case whether or not in
accordance with the terms of any Financing Document or any agreement relating
to such guaranty or other security, (C) the Underlying Debt, or any agreement
relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect, (D) the application of payments received from any
source (other than payments received pursuant to the other Financing Documents
or from the proceeds of any security for the Secured Obligations, except to the
extent such security also serves as collateral for indebtedness other than the
Secured Obligations) to the payment of indebtedness other than the Underlying
Debt, even though Collateral Agent or other Secured Parties, or any of them,
might have elected to apply such payment to any part or all of the Underlying
Debt, (E) any Secured Party's consent to the change, reorganization or
termination of the corporate or other structure or existence of Borrower or any
of its Subsidiaries and to any corresponding restructuring of the Secured
Obligations; (F) any failure to perfect or continue perfection of a security
interest in any other collateral which secures any of the Underlying Debt, (G)
any defenses, set-offs or counterclaims which Borrower may allege or assert
against Collateral Agent or any other Secured Party in respect of the
Underlying Debt, including but not limited to failure of consideration, breach
of warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury, and (H) any other act or thing or omission, or delay to
do any other act or thing, which may or might in any manner or to any extent
vary the risk of Pledgor as an obligor in respect of the Underlying Debt.
(b) Pledgor hereby waives, for the benefit of other Secured Parties and
Collateral Agent: (i) any right to require Collateral Agent or other Secured
Parties, as a condition of payment or performance by Pledgor, to (A) proceed
against Borrower, any guarantor of the Underlying Debt or any other Person, (B)
proceed against or exhaust any other security held from Borrower, any guarantor
of the Underlying Debt or any other Person, (C) proceed against or have resort
to any balance of any deposit account or credit on the books of Collateral
Agent or any other Secured Party in favor of Borrower or any other Person, or
(D) pursue any other remedy in the power of Collateral Agent or any other
Secured Party whatsoever; (ii) any defense arising by reason of the incapacity,
lack of authority or any disability or other defense of Borrower including,
without limitation, any defense based on or arising out of the lack of validity
or the unenforceability of the Underlying Debt or any agreement or instrument
relating thereto or by reason of the cessation of the liability of Borrower
from any cause other than payment in full of the Underlying Debt; (iii) any
defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal; (iv) any defense based upon
Collateral Agent's or any other Secured Party's errors or omissions in the
administration of the Underlying Debt, except behavior which amounts to bad
faith; (v) (A) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Agreement and any
legal or equitable discharge of Pledgor's obligations hereunder, (B) the
benefit of any statute of limitations affecting Pledgor's liability hereunder
or the enforcement hereof, (C) any rights to set-offs, recoupments and
counterclaims, and (D) promptness, diligence and any requirement that
Collateral Agent or any other Secured Party protect, secure, perfect or insure
any other security interest or lien or any property subject thereto; (vi)
notices, demands, presentments, protests, notices of protest, notices of
dishonor and notices of any action or inaction, notices of default under the
Revolving Credit Agreement, the Term Loan Agreement or any agreement or
instrument related thereto, notices of any renewal, extension or modification
of the Underlying Debt or any agreement related thereto, notices of any
extension of credit to Borrower and notices of any of the matters referred to
in the preceding paragraph and any right to consent to any thereof; and (vii)
to the fullest extent permitted by law, any defenses or benefits that may be
derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, or which may conflict with the terms of this Agreement.
12
(c) Until the Underlying Debt shall have been paid in full and the
commitments to extend credit under the Financing Documents shall have
terminated and all Letters of Credit shall have expired or been cancelled,
Pledgor shall withhold exercise of (i) any claim, right or remedy, direct or
indirect, that Pledgor now has or may hereafter have against Borrower or any of
its assets in connection with this Agreement or the performance by Pledgor of
its obligations hereunder, in each case whether such claim, right or remedy
arises in equity, under contract, by statute (including without limitation
under California Civil Code Section 2847, 2848 or 2849), under common law or
otherwise and including without limitation (A) any right of subrogation,
reimbursement or indemnification that Pledgor now has or may hereafter have
against Borrower, (B) any right to enforce, or to participate in, any claim,
right or remedy that Collateral Agent or any Secured Party now has or may
hereafter have against Borrower, and (C) any benefit of, and any right to
participate in, any other collateral or security now or hereafter held by
Collateral Agent or any other Secured Party, and (ii) any right of contribution
Pledgor may have against any guarantor of any of the Underlying Debt. Pledgor
further agrees that, to the extent the waiver of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification Pledgor may have
against Borrower or against any other collateral or security, and any rights of
contribution Pledgor may have against any such guarantor, shall be junior and
subordinate to any rights Collateral Agent or other Secured Parties may have
against Borrower, to all right, title and interest Collateral Agent or other
Secured Parties may have in any such other collateral or security, and to any
right Collateral Agent or other Secured Parties may have against any such
guarantor.
(d) Other Secured Parties and Collateral Agent shall have no obligation to
disclose or discuss with Pledgor their assessment, or Pledgor's assessment, of
the financial condition of Borrower. Pledgor has adequate means to obtain
information from Borrower on a continuing basis concerning the financial
condition of Borrower and its ability to perform its obligations under the
Financing Documents, and Pledgor assumes the responsibility for being and
keeping informed of the financial condition of Borrower and of all
circumstances bearing upon the risk of nonpayment of the Underlying Debt.
Pledgor hereby waives and relinquishes any duty on the part of Collateral Agent
or any other Secured Party to disclose any matter, fact or thing relating to
the business, operations or condition of Borrower now known or hereafter known
by Collateral Agent or any other Secured Party.
(e) As used in this subsection 16(f), any reference to "the principal"
includes Borrower, and any reference to "the creditor" includes each Secured
Party. In accordance with Section 2856 of the California Civil Code:
(i) each Pledgor agrees (i) to waive any and all rights of subrogation
and reimbursement against Borrower or against any collateral or security
granted by Borrower for any of the Secured Obligations and (ii) to withhold
the exercise of any and all rights of subrogation, reimbursement and
contribution against Borrower, against any other provider of collateral
support for the Secured Obligations and against any collateral or security
granted by any such other provider of collateral support for the Secured
Obligations until the Secured Obligations shall have been paid in full and
the Revolving Credit Commitments, the Swing Line Commitment and the Term
Loan Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled;
(ii) each Pledgor waives any and all other rights and defenses available
to such Pledgor by reason of Sections 2787 to 2855, inclusive, 2899 and
3433 of the California Civil Code, including without limitation any and all
rights or defenses such Pledgor may have by reason of protection afforded
to the principal with respect to any of the Secured Obligations, or to any
other provider of collateral support for the Secured Obligations or
guarantor of any of the Secured Obligations (including any other Pledgor)
with respect to any of such Person's credit support obligations, in either
case pursuant to the antideficiency or other laws of the State of
California limiting or discharging the principal's indebtedness or such
Person's credit support obligations, including without limitation Section
580a, 580b, 580d, or 726 of the California Code of Civil Procedure; and
13
(iii) each Pledgor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for
any Secured Obligation, has destroyed such Pledgor's rights of subrogation
and reimbursement against the principal by the operation of Section 580d of
the California Code of Civil Procedure or otherwise; and even though that
election of remedies by the creditor, such as nonjudicial foreclosure with
respect to security for an obligation of any other provider of collateral
support for the Secured Obligations or guarantor of any of the Secured
Obligations (including any other Pledgor), has destroyed such Pledgor's
rights of contribution against such other Person.
No other provision of this Agreement shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection
16(f). In accordance with subsection 25 below, this Agreement shall be governed
by, and shall be construed and enforced in accordance with, the internal laws
of the State of New York, without regard to conflicts of laws principles. This
subsection 16(f) is included solely out of an abundance of caution, and shall
not be construed to mean that any of the above-referenced provisions of
California law are in any way applicable to this Agreement or to any of the
Secured Obligations.
(f) Anything contained in this Agreement to the contrary notwithstanding, if
any Fraudulent Transfer Law (as hereinafter defined) is determined by a court
of competent jurisdiction to be applicable to the obligations of any Pledgor
under this Agreement, such obligations of such Pledgor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of such Pledgor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of such Pledgor (x) in respect of intercompany indebtedness to Borrower or
other affiliates of Borrower to the extent that such indebtedness would be
discharged in an amount equal to the value contributed by such Pledgor
hereunder and (y) under any credit support of Subordinated Indebtedness which
credit support contains a limitation as to maximum amount similar to that set
forth in this subsection, pursuant to which the liability of such Pledgor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, reimbursement, indemnification or contribution of such Pledgor
pursuant to applicable law or pursuant to the terms of any agreement.
SECTION 17. Continuing Security Interest; Transfer of Loans. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(a) remain in full force and effect until either (i) the payment in full of all
Secured Obligations, the cancellation or termination of the Revolving Credit
Commitments, the Swing Line Commitment, the Term Loan Commitments and the
cancellation or expiration of all outstanding Letters of Credit or (ii) the
termination of this Agreement pursuant to Section 18, (b) be binding upon
Pledgor, its successors and assigns, and (c) inure, together with the rights
and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of Section 11.7 of the
Revolving Credit Agreement and Section 11.7 of the Term Loan Agreement, any
Secured Party may assign or otherwise transfer any Secured Obligations held by
it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Secured Parties herein or
otherwise. Upon either (i) the payment in full of all Secured Obligations, the
cancellation or termination of the Revolving Credit Commitments, the Swing Line
Commitment, the Term Loan Commitments and the cancellation or expiration of all
outstanding Letters of Credit or (ii) the termination of this Agreement
pursuant to Section 18, the security interest granted hereby shall terminate
and all rights to the Pledged Collateral shall revert to Pledgor. Upon any such
termination Collateral Agent will, at Pledgor's expense, execute and deliver to
Pledgor such documents as Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return, upon its request and
at its expense, against receipt and without recourse to Collateral Agent, of
such of the Pledged Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof.
14
SECTION 18. Termination of Security Interest.
At any time after January 1, 1999, Pledgor may request the release of the
Pledged Collateral and the termination of the Collateral Agent's security
interest therein by delivering an officers' certificate from the Pledgor
certifying that (i) the Leverage Ratio (as such term is defined in the
Revolving Credit Agreement) is less than 3.50:1.00 as calculated at the end of
each fiscal quarter for the immediately preceding four consecutive fiscal
quarters, (ii) no Default or Event of Default exists or would exist immediately
before or after giving effect to such release, and (iii) all representations
and warranties made by the Credit Parties in the Revolving Loan Documents and
the Term Loan Documents are true and correct on the date of such certificate
immediately before or after giving effect thereto as though made on that date,
except to the extent such representations and warranties specifically related
to an earlier date, in which case they were true and correct on such earlier
date. Upon receipt by the Collateral Agent of evidence satisfactory to it that
the foregoing certifications are true, the Collateral Agent will, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence the termination of the security interest granted
hereby and Pledgor shall be entitled to the return, upon its request and at its
expense, against receipt and without recourse to Collateral Agent, of such of
the Pledged Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof. Upon such receipt by Pledgor of such remaining
Pledged Collateral, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to Pledgor.
SECTION 19. Collateral Agent.
(a) Collateral Agent has been appointed to act as Collateral Agent hereunder
pursuant to the Intercreditor Agreement by the Revolving Agent on behalf of the
Revolving Lenders, the Term Agent on behalf of the Term Lenders, each
Acknowledging Interest Rate Exchanger and each Acknowledging Currency
Exchanger, and shall be entitled to the benefits of the Intercreditor
Agreement. Collateral Agent shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action
(including, without limitation, the release or substitution of Pledged
Collateral), solely in accordance with this Agreement, the Intercreditor
Agreement and the Financing Documents.
(b) The Collateral Agent may resign or be removed and a successor Collateral
Agent may be appointed in the manner provided in the Intercreditor Agreement.
Resignation by the Collateral Agent pursuant to subsection 6(g) of the
Intercreditor Agreement shall also constitute notice of resignation as
Collateral Agent under this Agreement; removal of the Collateral Agent pursuant
to subsection 6(g) of the Intercreditor Agreement shall also constitute removal
as Collateral Agent under this Agreement; and appointment of a successor
Collateral Agent pursuant to subsection 6(g) of the Intercreditor Agreement
shall also constitute appointment of a successor Collateral Agent under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 6(g) of the Intercreditor Agreement by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Collateral Agent under this Agreement, and the retiring or removed Collateral
Agent under this Agreement shall promptly (i) transfer to such successor
Collateral Agent all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Collateral Agent under this Agreement, and (ii) execute and deliver to such
successor Collateral Agent such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Collateral Agent of the security interests created
hereunder, whereupon such retiring or removed Collateral Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Collateral Agent's resignation or removal hereunder as
Collateral Agent, the provisions of this Agreement shall inure to its benefit
as to any actions taken or omitted to be taken by it under this Agreement while
it was Collateral Agent hereunder.
SECTION 20. Amendments; Etc. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless
15
the same shall be in writing and signed by Collateral Agent and, in the case of
any such amendment or modification, by Pledgor. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.
SECTION 21. Notices. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it
in the United States mail with postage prepaid and properly addressed. For the
purposes hereof, the address of each party hereto shall be as set forth under
such party's name on the signature pages hereof or, as to either party, such
other address as shall be designated by such party in a written notice
delivered to the other party hereto.
SECTION 22. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of Collateral Agent in the exercise of any power, right or
privilege hereunder shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude any other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 23. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
SECTION 24. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive
effect.
SECTION 25. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.
SECTION 26. Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
Pledgor hereby agrees that service of all process in any such proceeding in any
such court may be made by registered or certified mail, return receipt
requested, to Pledgor at its address as provided in Section 21, such service
being hereby acknowledged by Pledgor to be sufficient for personal jurisdiction
in any action against Pledgor in any such court and to be otherwise effective
and binding service in every respect. Pledgor further designates and appoints
CT Corporation System, and such other
16
Persons as may hereafter be selected by Pledgor irrevocably agreeing in writing
to so serve, as its agent to receive on its behalf service of all process in
any such proceedings in any such court, such service being hereby acknowledged
by Pledgor to be effective and binding service in every respect. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of Collateral Agent to bring proceedings against Pledgor
in the courts of any other jurisdiction.
SECTION 27. Waiver of Jury Trial. PLEDGOR AND COLLATERAL AGENT HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Pledgor and Collateral Agent each acknowledge
that this waiver is a material inducement for Pledgor and Collateral Agent to
enter into a business relationship, that Pledgor and Collateral Agent have
already relied on this waiver in entering into this Agreement and that each
will continue to rely on this waiver in their related future dealings. Pledgor
and Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 28. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.
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IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
RENAL TREATMENT CENTERS, INC.
By: _________________________________
Title:
Notice Address:
Renal Treatment Centers, Inc., c/o
Total Renal Care Holdings, Inc.
21250 Hawthorne Blvd., Ste. 800
Torrance, CA 90503-5517
Attention:John E. King
Vice President, Finance and
Chief Financial Officer
Telephone: (310) 792-2600
Fax:(310) 792-8928
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THE BANK OF NEW YORK, as Collateral
Agent
By: _________________________________
Title:
Notice Address:
The Bank of New York, as Collateral
Agent
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention:Kalyani Bose
Telephone: (212) 635-4693
Fax:(212) 635-6365 or 6366 or 6367
with a copy to:
The Bank of New York, as Collateral
Agent
10990 Wilshire Blvd., Suite 1125
Los Angeles, California 90024
Attention:Rebecca K. Levine
Vice President
Telephone: (310) 996-8659
Fax:(310) 996-8667
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SCHEDULE I
Attached to and forming a part of the Subsidiary Pledge Agreement dated as of
February 27, 1998, between RENAL TREATMENT CENTERS, INC., as Pledgor, and The
Bank of New York, as Collateral Agent.
Stock Class of Stock Par
Issuer Stock Certificate Nos. Value Number of Shares
- ------ -------- ---------------- ----- ----------------
20
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated , , is delivered pursuant to
Section 7(b) of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Subsidiary Pledge
Agreement dated as of February 27, 1998, between the undersigned and The Bank
of New York, as Collateral Agent (the "Subsidiary Pledge Agreement,"
capitalized terms defined therein being used herein as therein defined), and
that the Pledged Shares listed on this Pledge Amendment shall be deemed to be
part of the Pledged Shares and shall become part of the Pledged Collateral and
shall secure all Secured Obligations.
RENAL TREATMENT CENTERS, INC.
By: _________________________________
Title:
Stock Class of Stock Par
Issuer Stock Certificate Nos. Value Number of Shares
- ------ -------- ---------------- ----- ----------------
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