EXHIBIT 10.4
PLEDGE AGREEMENT
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THIS PLEDGE AGREEMENT (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Agreement") dated as
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of November 24, 1999, is made by each of the persons named in Schedule I hereto
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(such persons being referred to collectively as "Pledgors" and each individually
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as a "Pledgor"), in favor of UNION BANK OF CALIFORNIA, N.A. ("Bank").
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RECITALS
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A. Pursuant to that certain Loan and Security Agreement of even date
herewith by and among Overhill Farms, Inc. ("Borrower"), Overhill L.C. Ventures,
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Inc. ("Overhill Ventures"), and Bank (including all annexes, exhibits and
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schedules thereto, as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement"), Bank has agreed to
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make Loans to and incur Letter of Credit Obligations (each as defined in the
Loan Agreement) for the direct or indirect benefit of Borrower.
B. Each Pledgor is the record and beneficial owner of the shares of
Stock listed as owned by it in Part A of Schedule I hereto and the owner of the
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promissory notes and other Instruments and the beneficiary of the letters of
credit listed as held by it in Part B of Schedule I hereto.
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C. Each Pledgor is either a direct or indirect beneficiary of the
credit facilities made available to Borrower under the Loan Agreement.
D. In order to induce Bank to make the Loans and to incur the Letter
of Credit Obligations as provided for in the Loan Agreement, each Pledgor has
agreed to pledge the Pledged Collateral to Bank in accordance herewith. These
recitals shall be construed as part of this Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Bank to make Loans and to incur Letter
of Credit Obligations under the Loan Agreement, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms or matters
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of construction defined or established in Schedule A to the Loan Agreement
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shall be applied herein as defined or established therein, and the
following terms shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Bankruptcy Code" means title 11, United States Code, as amended
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from time to time, and any successor statute thereto.
"Pledged Collateral" shall have the meaning assigned to it in
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Section 2.
"Pledged Entity" shall mean an issuer of Pledged Stock or Pledged
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Indebtedness.
"Pledged Indebtedness" shall mean the Indebtedness evidenced by
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the promissory notes, instruments and letters of credit listed on Part B of
Schedule I.
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"Pledged Stock" shall mean those shares listed in Part A of
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Schedule I.
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"Secured Obligations" shall have the meaning assigned to it in
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Section 3.
2. Pledge. Each Pledgor hereby pledges to Bank a first priority Lien
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on all of the following (collectively, the "Pledged Collateral"):
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(a) the Pledged Stock owned by it and the certificates
representing such Pledged Stock, and all dividends,
distributions, cash, instruments and other property or
Proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for
any or all of such Pledged Stock;
(b) any additional shares of Stock of a Pledged Entity
from time to time acquired by such Pledgor in any
manner (which shares shall be deemed to be part of the
Pledged Stock owned by such Pledgor), and the
certificates representing such additional shares, and
all dividends, distributions, cash, instruments and
other property or Proceeds from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such Stock;
(c) the Pledged Indebtedness held by it and the
promissory notes, instruments and letters of credit
evidencing such Pledged Indebtedness, and all interest,
cash, instruments and other property and assets from
time to time received, receivable or otherwise
distributed in respect of such Pledged Indebtedness;
and
(d) all additional Indebtedness arising after the date
hereof and owing to such Pledgor (other than Polyphase)
and evidenced by promissory notes, instruments or
letters of credit, together with such promissory notes,
instruments and letters of credit, and all interest,
cash, Instruments and other property and assets from
time to time received, receivable or otherwise
distributed in respect of such Pledged Indebtedness.
3. Security for Obligations. This Agreement secures, and the Pledged
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Collateral is security for, the prompt payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise, of all
Obligations of any kind under or in connection with the Loan Agreement, the
Guaranty, and the other Loan Documents and all obligations of each Pledgor
now or hereafter existing under this Agreement, the Guaranty, or any other
Loan Document to which such Pledgor is a party, including all reasonable
fees, costs and expenses incurred in connection with collection actions
hereunder or thereunder (collectively, the "Secured Obligations").
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4. Delivery of Pledged Collateral. All certificates and all promissory
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notes, Instruments and letters of credit evidencing the Pledged Collateral
shall be delivered to and held by or on behalf of Bank pursuant hereto. All
Pledged Stock shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to Bank and
all promissory notes or other instruments evidencing the Pledged
Indebtedness shall be endorsed by the Pledgor pledging such Pledged
Indebtedness.
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5. Representations and Warranties. Each Pledgor represents and warrants
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to Bank that:
(a) (i) Such Pledgor is, and at the time of delivery
of the Pledged Stock owned by it to Bank will be, the
sole holder of record and the sole beneficial owner of
such Pledged Collateral pledged by it free and clear of
any Lien thereon or affecting the title thereto, except
for any Lien created by this Agreement and the other
Loan Documents or the Subordinated Debt Documents, and
(ii) such Pledgor is, and at the time of delivery of
the Pledged Indebtedness held by it to Bank will be,
the sole owner and holder of such Pledged Collateral
free and clear of any Lien thereon or affecting title
thereto, except for (A) any Lien created by this
Agreement or the other Loan Documents and (B) Liens
granted pursuant to the Subordinated Debt Documents.
(b) (i) All of the Pledged Stock owned by such Pledgor
have been duly authorized, validly issued and are fully
paid and nonassessable, and (ii) the Pledged
Indebtedness held by such Pledgor has been duly
authorized, authenticated or issued and delivered by,
and constitutes the legal, valid and binding obligation
of, each Pledged Entity issuing same, and no such
Pledged Entity is in default thereunder.
(c) Such Pledgor has the right and requisite authority
to pledge, assign, transfer, deliver, deposit and set
over the Pledged Collateral pledged by such Pledgor to
Bank as provided herein.
(d) None of the Pledged Stock or Pledged Indebtedness
owned or held by such Pledgor has been issued or
transferred in violation of the securities
registration, securities disclosure or similar laws of
any jurisdiction to which such issuance or transfer may
be subject.
(e) Such Pledgor is the sole owner of the Pledged
Stock pledged by it hereunder and such Pledged Stock is
presently represented by the certificates listed in
Part A of Schedule I. As of the date hereof, there are
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no existing options, warrants, calls or commitments of
any character whatsoever relating to the Pledged Stock
pledged by such Pledgor hereunder other than those set
forth on Schedule III, and upon exercise of any such
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option, warrant, call or commitment set forth on
Schedule III, Bank agrees to deliver the Pledged Stock
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to such Pledgor and release its Lien on such Pledged
Stock to effectuate such exercise.
(f) No consent, approval, authorization or other order
or other action by, and no notice to or filing with,
any Governmental Authority or any other Person that has
not been obtained prior to the Closing Date is required
(i) for the pledge by such Pledgor of the Pledged
Collateral owned or held by it pursuant to this
Agreement or for the execution, delivery or performance
of this Agreement by such Pledgor, or (ii) for the
exercise by Bank of the
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voting or other rights provided for in this Agreement
or the remedies in respect of such Pledged Collateral
pursuant to this Agreement, except as may be required
in connection with such disposition by laws affecting
the offering and sale of securities generally.
(g) The pledge, assignment and delivery of the Pledged
Collateral owned or held by it pursuant to this
Agreement will create a valid first priority Lien in
favor of Bank upon such Pledged Collateral and the
Proceeds thereof, securing the payment of the Secured
Obligations, subject to no other Lien other than Liens
granted pursuant to the Subordinated Debt Documents.
(h) This Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding obligation
of such Pledgor enforceable against such Pledgor in accordance with its terms.
(i) The Pledged Stock constitutes that percentage of the issued
and outstanding shares of Stock of each Pledged Entity set forth on Schedule I,
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which Stock is subject to the existing options, warrants, calls or commitments
set forth on Schedule III.
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(j) Except as disclosed in Part B of Schedule I, none of the
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Pledged Indebtedness held by such Pledgor is subordinated in right of payment to
other Indebtedness (except for the Secured Obligations) or subject to the terms
of an indenture.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
6. Covenants. Each Pledgor covenants and agrees that until the
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Termination Date:
(a) Without the prior written consent of Bank, such
Pledgor will not sell, assign, transfer, pledge, or
otherwise encumber any of its rights in or to any
Pledged Collateral owned or held by it, or any unpaid
dividends, interest or other distributions or payments
with respect to such Pledged Collateral, or grant a
Lien on such Pledged Collateral, except (i) that
Overhill Ventures may issue to Kings Hawaiian up to 10%
of the shares of its common Stock on a fully diluted
basis pursuant to the proposal being negotiated with
Kings Hawaiian as of the Closing Date and (ii) as
otherwise expressly permitted by the Loan Agreement or
this Agreement.
(b) Such Pledgor will, at its expense, promptly
execute, acknowledge and deliver all such instruments
and deliver letters of credit and take all such actions
as Bank from time to time may request in order to
ensure to Bank the benefits of the Liens upon the
Pledged Collateral owned or held by it intended to be
created by this Agreement, including the filing of any
necessary UCC financing statements, that may be filed
by Bank with or (to the extent permitted by law)
without the signature of such Pledgor, and will
cooperate with Bank, at such Pledgor's expense, in
obtaining all necessary approvals and making all
necessary filings
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under federal, state, local or foreign law in
connection with such Liens or any sale or transfer of
such Pledged Collateral.
(c) Such Pledgor has and will defend the title to the
Pledged Collateral owned or held by it and the Liens of
Bank on such Pledged Collateral against the claim of
any Person and will maintain and preserve such Liens.
(d) Such Pledgor will, upon obtaining ownership of any
additional Stock, promissory notes or other instruments of a Pledged Entity, or
Stock, promissory notes or other instruments otherwise required to be pledged to
Bank pursuant to any of the Loan Documents that does not already constitute
Pledged Collateral hereunder, promptly (and in any event within three Business
Days after it acquires any such additional Stock, notes or other instruments)
deliver to Bank a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Schedule II (each, a "Pledge Amendment"), in respect
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of any such additional Stock, notes or other instruments, pursuant to which such
Pledgor shall pledge to Bank all of such additional Stock, notes and other
Instruments. Such Pledgor hereby authorizes Lender to attach each such Pledge
Amendment to this Agreement and agrees that all Pledged Stock and Pledged
Indebtedness listed in any such Pledge Amendment delivered to Bank shall for all
purposes hereunder be considered Pledged Collateral.
7. Pledgor's Rights. So long as no Default or Event of Default shall
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have occurred and be continuing and until written notice shall be given to
any Pledgor in accordance with Section 8(a):
(a) Each Pledgor shall have the right to vote and give
consents with respect to the Pledged Collateral pledged
by it hereunder or any part thereof for all purposes
not inconsistent with the provisions of this Agreement,
the Loan Agreement or any other Loan Document;
provided, that no vote shall be cast, and no consent
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shall be given or action taken, that would have the
effect of impairing the position or interest of Bank in
respect of the Pledged Collateral or that would
authorize, effect or consent to (unless and to the
extent expressly permitted by the Loan Agreement or
consented to by Bank):
(i) the dissolution or liquidation, in whole or
in part, of a Pledged Entity;
(ii) the consolidation or merger of a Pledged
Entity with any other Person;
(iii) the sale, disposition or encumbrance of all
or substantially all of the assets of a Pledged
Entity, except for Liens in favor of Bank;
(iv) any change in the authorized number of
shares, the stated capital or the authorized
share capital of a Pledged Entity or the issuance
of any additional shares of its Stock; or
(v) the alteration of the voting rights with
respect to the Stock of a Pledged Entity.
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(b) Each Pledgor shall be entitled, from time to time,
to collect and receive for its own use all cash
dividends and interest paid in respect of the Pledged
Stock and Pledged Indebtedness pledged by it hereunder
to the extent not in violation of the Loan Agreement,
except for any and all: (i) dividends and interest paid
or payable other than in cash in respect of any such
Pledged Collateral, instruments and other property
received, receivable or otherwise distributed in
respect of, or in exchange for, any such Pledged
Collateral; (ii) dividends and other distributions paid
or payable in cash in respect of any such Pledged Stock
in connection with a partial or total liquidation or
dissolution or in connection with a reduction of
capital, capital surplus or paid-in capital of a
Pledged Entity; and (iii) cash paid, payable or
otherwise distributed in respect of principal of, or in
redemption of, or in exchange for, any such Pledged
Collateral; provided, that until actually paid all
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rights to such distributions shall remain subject to
the Lien in favor of Bank created by this Agreement and
the other Loan Documents.
(c) All dividends and interest (other than such cash
dividends and interest as are permitted to be paid to
each Pledgor in accordance with Section 7(b) above) and
all other distributions in respect of any of the
Pledged Stock or Pledged Indebtedness, whenever paid or
made, shall be delivered to Bank to hold as Pledged
Collateral and shall, if received by such Pledgor, be
received in trust for the benefit of Bank, be
segregated from the other property or funds of such
Pledgor, and be forthwith delivered to Bank as Pledged
Collateral in the same form as so received (with any
necessary indorsements).
8. Defaults and Remedies; Proxy.
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(a) Upon the occurrence and during the continuation of
any Event of Default, Bank (personally or through an
agent) is hereby authorized and empowered to transfer
and register in its name or in the name of its nominee
the whole or any part of the Pledged Collateral pledged
by such Pledgor hereunder, to exchange certificates or
instruments representing or evidencing such Pledged
Collateral for certificates or instruments of smaller
or larger denominations, to exercise the voting and all
other rights as a holder with respect thereto, to
collect and receive all cash dividends, interest,
principal and other distributions made thereon, to sell
in one or more sales after five days' notice of the
time and place of any public sale or of the time at
which a private sale is to take place (which notice
such Pledgor agrees is commercially reasonable) the
whole or any part of such Pledged Collateral and to
otherwise act with respect to such Pledged Collateral
as though Bank were the outright owner thereof. Any
sale shall be made at a public or private sale at
Bank's place of business, or at any place in Los
Angeles County, California to be named in the notice
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of sale, either for cash or upon credit or for future
delivery at such price as Bank may deem fair, and Bank
may be the purchaser of the whole or any part of such
Pledged Collateral so sold and hold the same thereafter
in its own right free from any claim of any Pledgor or
any right of redemption. Each sale shall be made to the
highest bidder, but Bank reserves the right to reject
any and all bids at such sale that, in its discretion,
it shall deem inadequate. Demands of performance,
except as otherwise herein specifically provided for,
notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale
hereunder may be conducted by an auctioneer or any
officer or agent of Bank. UPON THE OCCURRENCE AND
DURING THE CONTINUATION OF AN EVENT OF DEFAULT, EACH
PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS
BANK AS THE PROXY AND ATTORNEY-IN-FACT OF SUCH PLEDGOR
WITH RESPECT TO THE PLEDGED COLLATERAL PLEDGED BY SUCH
PLEDGOR HEREUNDER, INCLUDING THE RIGHT TO VOTE THE
PLEDGED STOCK OF SUCH PLEDGOR, WITH FULL POWER OF
SUBSTITUTION TO DO SO. THE APPOINTMENT OF BANK AS PROXY
AND ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE UNTIL THE TERMINATION DATE. IN
ADDITION TO THE RIGHT TO VOTE THE PLEDGED STOCK OF SUCH
PLEDGOR, THE APPOINTMENT OF BANK AS PROXY AND ATTORNEY-
IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER
RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A
HOLDER OF SUCH PLEDGED STOCK WOULD BE ENTITLED
(INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF
SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS
AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE
EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF
ANY ACTION (INCLUDING ANY TRANSFER OF SUCH PLEDGED
STOCK ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY
PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED STOCK OR
ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND
DURING THE CONTINUATION OF AN EVENT OF DEFAULT.
NOTWITHSTANDING THE FOREGOING, BANK SHALL NOT HAVE ANY
DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME
AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR
ANY DELAY IN DOING SO.
(b) If, at the original time or times appointed for
the sale of the whole or any part of the Pledged
Collateral pledged by any Pledgor hereunder, (i) the
highest bid, if there is but one sale, shall be
inadequate to discharge in full all the Secured
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Obligations, or (ii) such Pledged Collateral is offered
for sale in lots, the highest bid for the lot offered
for sale at any of such sales would indicate to Bank,
in its discretion, that the proceeds of the sales of
the whole of such Pledged Collateral would be unlikely
to be sufficient to discharge all the Secured
Obligations, then Bank may, on one or more occasions
and in its discretion, postpone any of said sales by
public announcement at the time of sale or the time of
previous postponement of sale, and no other notice of
such postponement or postponements of sale need be
given, any other notice being hereby waived; provided,
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that any sale or sales made after such postponement
shall be after ten days' notice to such Pledgor.
(c) If, following the occurrence and during the
continuance of an Event of Default, Bank in its sole
discretion determines that, in connection with any
actual or contemplated exercise of its rights (when
permitted under this Section 8) to sell the whole or
any part of the Pledged Collateral hereunder, it is
necessary or advisable to effect a public registration
of all or part of the Pledged Collateral pursuant to
the Securities Act of 1933 (or any similar statute then
in effect, the "Act"), then each Pledgor shall, in an
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expeditious manner, cause the Pledged Entity that
issued Pledged Collateral owned or held by it to:
(i) Prepare and file with the Securities and
Exchange Commission (the "Commission") a
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registration statement with respect to the
Pledged Stock owned by it and in good faith use
commercially reasonable efforts to cause such
registration statement to become and remain
effective;
(ii) Prepare and file with the Commission such
amendments and supplements to such registration
statement and the prospectus used in connection
therewith as may be necessary to keep such
registration statement effective and to comply
with the provisions of the Act with respect to
the sale or other disposition of the Pledged
Stock covered by such registration statement
whenever Bank shall desire to sell or otherwise
dispose of such Pledged Stock;
(iii) Furnish to Bank such numbers of copies of a
prospectus and a preliminary prospectus, in
conformity with the requirements of the Act, and
such other documents as Bank may request in order
to facilitate the public sale or other
disposition by Bank of the Pledged Stock owned by
it;
(iv) Use commercially reasonable efforts to
register or qualify the Pledged Stock covered by
such registration statement under such other
securities or blue sky laws of such jurisdictions
within the United States and Puerto
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Rico as Bank shall request, and do such other
reasonable acts and things as may be required of
it to enable Bank to consummate the public sale or
other disposition by Bank in such jurisdictions of
such Pledged Stock by Bank;
(v) Furnish, at the request of Bank, on the date
that Pledged Stock owned or held by it are
delivered to the underwriters for sale pursuant to
such registration or, if the security is not being
sold through underwriters, on the date that the
registration statement with respect to such
Pledged Stock becomes effective, (A) an opinion,
dated such date, of the independent counsel
representing such registrant for the purposes of
such registration, addressed to the underwriters,
if any, and in the event such Pledged Stock is not
being sold through underwriters, then to Bank, in
customary form and covering matters of the type
customarily covered in such legal opinions; and
(B) a comfort letter, dated such date, from the
independent certified public accountants of such
registrant, addressed to the underwriters, if any,
and in the event such Pledged Stock is not being
sold through underwriters, then to Bank, in a
customary form and covering matters of the type
customarily covered by such comfort letters and as
the underwriters or Bank shall reasonably request.
The opinion of counsel referred to above shall
additionally cover such other legal matters with
respect to the registration in respect of which
such opinion is being given as Bank may reasonably
request. The comfort letter referred to above from
the independent certified public accountants shall
additionally cover such other financial matters
(including information as to the period ending not
more than five Business Days prior to the date of
such letter) with respect to the registration in
respect of which such letter is being given as
Bank may reasonably request; and
(vi) Otherwise use commercially reasonable efforts
to comply with all applicable rules and
regulations of the Commission, and make available
to its security holders, as soon as reasonably
practicable but not later than 18 months after the
effective date of such registration statement, an
earnings statement covering the period of at least
12 months beginning with the first full month
after the effective date of such registration
statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Act.
(d) All expenses incurred in complying with Section
8(c), including all registration and filing fees
(including all expenses incident to filing with the
National Association of Securities Dealers, Inc.),
printing expenses, fees and disbursements of
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counsel for the registrant, the fees and expenses of
counsel for Bank, expenses of the independent certified
public accountants (including any special audits
incident to or required by any such registration) and
expenses of complying with the securities or blue sky
laws of any jurisdictions, shall be paid by Pledgors.
(e) If, at any time when Bank shall determine to
exercise its right to sell the whole or any part of the
Pledged Collateral hereunder, such Pledged Collateral
or the part thereof to be sold shall not, for any
reason whatsoever, be effectively registered under the
Act (or any similar statute), then Bank may, in its
discretion (subject only to applicable requirements of
law), sell such Pledged Collateral or part thereof by
private sale in such manner and under such
circumstances as Bank may deem necessary or advisable,
but subject to the other requirements of this Section
8, and shall not be required to effect such
registration or to cause the same to be effected.
Without limiting the generality of the foregoing, in
any such event, Bank in its discretion may (i) in
accordance with applicable securities laws proceed to
make such private sale notwithstanding that a
registration statement for the purpose of registering
such Pledged Collateral or part thereof could be or
shall have been filed under the Act (or similar
statute), (ii) approach and negotiate with a single
possible purchaser to effect such sale, and (iii)
restrict such sale to a purchaser who is an accredited
investor under the Act and who will represent and agree
that such purchaser is purchasing for its own account,
for investment and not with a view to the distribution
or sale of such Pledged Collateral or any part thereof.
In addition to a private sale as provided above in this
Section 8, if any of the Pledged Collateral shall not
be freely distributable to the public without
registration under the Act (or similar statute) at the
time of any proposed sale pursuant to this Section 8,
then Bank shall not be required to effect such
registration or cause the same to be effected but, in
its discretion (subject only to applicable requirements
of law), may require that any sale hereunder (including
a sale at auction) be conducted subject to
restrictions:
(i) as to the financial sophistication and
ability of any Person permitted to bid or
purchase at any such sale;
(ii) as to the content of legends to be placed
upon any certificates representing the Pledged
Collateral sold in such sale, including
restrictions on future transfer thereof;
(iii) as to the representations required to be made
by each Person bidding or purchasing at such sale
relating to such Person's access to financial
information about such Pledgor and such Person's
intentions as to the holding of the Pledged
Collateral so sold for investment for its own
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account and not with a view to the distribution
thereof; and
(iv) as to such other matters as Bank may, in its
discretion, deem necessary or appropriate in
order that such sale (notwithstanding any failure
so to register) may be effected in compliance
with the Bankruptcy Code and other laws affecting
the enforcement of creditors' rights and the Act
and all applicable state securities laws.
(f) Each Pledgor recognizes that Bank may be unable to
effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or
more private sales thereof in accordance with Section
8(e) above. Each Pledgor also acknowledges that any
such private sale may result in prices and other terms
less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances,
agrees that any such private sale shall not be deemed
to have been made in a commercially unreasonable manner
solely by virtue of such sale being private. Bank shall
be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to
permit the applicable Pledged Entity to register such
securities for public sale under the Act, or under
applicable state securities laws, even if the Pledgor
owning or holding such Pledged Collateral and the
Pledged Entity would agree to do so.
(g) Each Pledgor agrees to the maximum extent
permitted by applicable law that following the
occurrence and during the continuance of an Event of
Default it will not at any time plead, claim or take
the benefit of any appraisal, valuation, stay,
extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of
the whole or any part of the Pledged Collateral or the
possession thereof by any purchaser at any sale
hereunder, and each Pledgor waives the benefit of all
such laws to the extent it lawfully may do so. Each
Pledgor agrees that it will not interfere with any
right, power or remedy of Bank provided for in this
Agreement or now or hereafter existing at law or in
equity or by statute or otherwise, or the exercise or
beginning of the exercise by Bank of any one or more of
such rights, powers or remedies. No failure or delay on
the part of Bank to exercise any such right, power or
remedy and no notice or demand that may be given to or
made upon any Pledgor by Bank with respect to any such
remedies shall operate as a waiver thereof, or limit or
impair Bank's right to take any action or to exercise
any power or remedy hereunder, without notice or
demand, or prejudice its rights as against any Pledgor
in any respect.
(h) Each Pledgor further agrees that a breach of any
of the covenants contained in this Section 8 will cause
irreparable injury
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to Bank, that Bank shall have no adequate remedy at law
in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this Section
8 shall be specifically enforceable against such
Pledgor, and each Pledgor hereby waives and agrees not
to assert any defenses against an action for specific
performance of such covenants except for a defense
that: (i) no Event of Default has occurred under the
Loan Agreement and (ii) Bank is in breach of its
obligations under this Agreement or the other Loan
Documents.
(i) Until the occurrence of an Event of Default,
Bank may not (i) repledge the Pledged Collateral to any
other party, (ii) sell, assign, transfer, exchange or
otherwise dispose of, or grant any option with respect
to, the Pledged Collateral, or (iii) create, incur or
permit the existence of any Lien or option with respect
to the Pledged Collateral (except as contemplated by
this Agreement).
9. Waiver. No delay on Bank's part in exercising any power of sale, Lien,
------
option or other right hereunder, and no notice or demand that may be given
to or made upon any Pledgor by Bank with respect to any power of sale,
Lien, option or other right hereunder, shall constitute a waiver thereof,
or limit or impair Bank's right to take any action or to exercise any
power of sale, Lien, option, or any other right hereunder, without notice
or demand, or prejudice Bank's rights as against any Pledgor in any
respect.
10. Assignment. Bank may assign, indorse or transfer any instrument
----------
evidencing all or any part of the Secured Obligations as provided in, and
in accordance with, the Loan Agreement, and the holder of such instrument
shall be bound by and entitled to the benefits of this Agreement.
11. Termination. Immediately following the Termination Date, Bank shall
-----------
deliver to each Pledgor (as the case may be) the Pledged Collateral pledged
by such Pledgor at the time subject to this Agreement and all instruments
of assignment executed in connection therewith, free and clear of the Liens
created in favor of Bank under this Agreement and the other Loan Documents
and, except as otherwise provided herein, all of such Pledgor's obligations
hereunder shall at such time terminate. Upon payment in full in cash of
any Indebtedness evidenced by a promissory note or other instrument, Bank
will return such instrument to the Pledgor that is the obligee under such
instrument.
12. Lien Absolute. All rights of Bank hereunder, and all obligations of
-------------
each Pledgor hereunder, shall be absolute and unconditional irrespective
of:
(a) any lack of validity or enforceability of the Loan
Agreement, any other Loan Document or any other
agreement or instrument governing or evidencing any
Secured Obligations;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any part of the
Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Loan
Agreement, any other Loan Document or any other
agreement or instrument governing or evidencing any
Secured Obligations;
12
(c) any exchange, release or non-perfection of any
other Collateral or any release or amendment or waiver
of, or consent to departure from any guaranty for, all
or any of the Secured Obligations;
(d) the insolvency of Borrower or any Guarantor or any
other guarantor of the obligations; or
(e) any other circumstance that might otherwise
constitute a defense available to, or a discharge of,
such Pledgor.
13. Release. Each Pledgor (other than Borrower) consents and agrees that
-------
Bank may at any time, or from time to time, in its discretion:
(a) renew, extend or change the time of payment of, or
the manner, place or terms of payment of, all or any
part of the Secured Obligations; and
(b) exchange, release or surrender all or any of the
Collateral (including the Pledged Collateral), or any
part thereof, by whomsoever deposited, that is now or
may hereafter be held by or on behalf of Bank in
connection with all or any of the Secured Obligations;
all in such manner and upon such terms as Bank may deem
proper, and without notice to or further assent from
such Pledgor, it being hereby agreed that such Pledgor
shall be and remain bound by this Agreement
irrespective of the value or condition of any of the
Collateral and notwithstanding any such change,
exchange, settlement, compromise, surrender, release,
renewal or extension, and notwithstanding also that the
Secured Obligations may, at any time, exceed the
aggregate principal amount thereof set forth in the
Loan Agreement or any other agreement governing any
Secured Obligations. Each Pledgor hereby waives notice
of acceptance of this Agreement, presentment, demand,
protest and notice of dishonor of any and all of the
Secured Obligations, and any delay by Bank in
commencing suit against any party hereto or Person
liable hereon, and in giving any notice to or of making
any claim or demand hereunder upon such Pledgor. No
act or omission of any kind on Bank's part (other than
an act or omission that is finally determined by a
referee or a court of competent jurisdiction to have
resulted solely from Bank's gross negligence or willful
misconduct) shall in any event affect or impair this
Agreement.
14. Reinstatement. This Agreement shall remain in full force and effect
-------------
and continue to be effective should any petition be filed by or against any
Pledgor or any Pledged Entity for liquidation or reorganization, should any
Pledgor or any Pledged Entity become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for
all or any significant part of any Pledgor's or Pledged Entity's assets,
and shall continue to be effective or be reinstated, as the case may be, if
at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable
13
preference," "fraudulent transfer," or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid
and not so rescinded, reduced, restored or returned.
15. Miscellaneous.
-------------
(a) Bank may execute any of its duties hereunder by or
through agents or employees and shall be entitled to
advice of counsel concerning all matters pertaining to
its duties hereunder.
(b) Each Pledgor agrees to promptly reimburse Bank for
actual out-of-pocket expenses, including reasonable
attorneys' fees, incurred by Bank in connection with
the enforcement of its rights and remedies under this
Agreement.
(c) Neither Bank nor any of its officers, directors,
employees, agents or counsel shall be liable for any
action lawfully taken or omitted to be taken by it or
them hereunder or in connection herewith, except for
its or their own gross negligence or willful misconduct
as finally determined by a referee or a court of
competent jurisdiction.
(d) THIS AGREEMENT SHALL BE BINDING UPON EACH PLEDGOR
AND ITS SUCCESSORS AND ASSIGNS (INCLUDING A TRUSTEE OR
DEBTOR-IN-POSSESSION ON BEHALF OF SUCH PLEDGOR), AND
SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY
AND BINDING UPON, BANK AND ITS SUCCESSORS AND ASSIGNS,
AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE, AND NONE OF THE TERMS OR PROVISIONS OF THIS
AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED
EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF BANK
AND EACH PLEDGOR.
16. Severability. If for any reason any provision or provisions hereof are
------------
determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of
this Agreement that are valid.
17. Notices. Except as otherwise provided herein, whenever it is provided
-------
herein that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give
or serve upon any other party any communication with respect to this
Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given
in the manner, and deemed received, as provided for in the Loan Agreement.
14
18. 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 a part of the agreement between the parties hereto.
19. Counterparts. This Agreement may be executed in any number of
------------
counterparts, which shall, collectively and separately, constitute one
agreement.
15
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the date first written above.
"Pledgors" "Bank"
OVERHILL FARMS, INC. UNION BANK OF CALIFORNIA, N.A.
By:______________________________________ By:_______________________________
James Rudis
President and Chief Executive Title:____________________________
Officer
By:______________________________________
Richard A. Horvath
Vice President and Chief Financial
Officer
POLYPHASE CORPORATION
By:______________________________________
James Rudis
President and Chief Executive
Officer
By:______________________________________
William E. Shatley
Senior Vice President and
Chief Financial Officer
OVERHILL L.C. VENTURES, INC.
By:______________________________________
James Rudis
President and Chief Executive
Officer
By:______________________________________
Richard A. Horvath
Vice President and Chief Financial
Officer
16
SCHEDULE I
----------
PART A
------
Pledged Stock
-------------
- -------------------------------------------------------------------------------------------------
Class Certificate Number Percentage of
Name of Pledgor of Stock Number(s) of Shares Outstanding Shares
---------------------- -------------------------- -------------- --------- -------------------
---------------------- -------------------------- -------------- --------- -------------------
Overhill Farms Common Stock of Overhill
L.C. Ventures 1000 100%
- ----------------------- -------------------------- -------------- -------- -------------------
- ----------------------- -------------------------- -------------- -------- -------------------
Polyphase Corporation Common Stock of Overhill
Farms 775 100%
- ----------------------- -------------------------- -------------- -------- -------------------
- ----------------------- -------------------------- -------------- -------- -------------------
- ----------------------- -------------------------- -------------- -------- -------------------
- ---------------------------------------------------------------------------------------------------
PART B
------
Pledged Indebtedness
--------------------
- -------------------------------------------------------------------------------------------------
Initial
Pledged Entity Principal Amount Issue Date Maturity Date Interest Rate
- ------------------------ ---------------- ------------------ ------------------ --------------
Overhill Farms
- ------------------------ ---------------- ------------------ ------------------ --------------
- ------------------------ ---------------- ------------------ ------------------ --------------
Overhill L.C. Ventures $14,000 October 22, 1999 October 1, 2000 10%
- ------------------------ ---------------- ------------------ ------------------ -------------
- ------------------------------------------------------------------------------------------------
17
SCHEDULE II
-----------
PLEDGE AMENDMENT
This Pledge Amendment, dated as of __________ ___, ___ is delivered
pursuant to Section 6(d) of the Pledge Agreement referred to below. All defined
terms herein shall have the meanings assigned thereto or incorporated by
reference in the Pledge Agreement. The undersigned hereby certifies that the
representations and warranties in Section 5 of the Pledge Agreement are and
continue to be true and correct, both as to the promissory notes, other
Instruments and shares pledged prior to this Pledge Amendment and as to the
promissory notes, other Instruments and shares pledged pursuant to this Pledge
Amendment. The undersigned further agrees that this Pledge Amendment may be
attached to that certain Pledge Agreement dated as of November 24, 1999 (the
"Pledge Agreement"), by and among the "Pledgors" named therein and Union Bank of
- -----------------
California, N.A. and that the Pledged Stock and Pledged Indebtedness listed in
this Pledge Amendment shall be and become a part of the Pledged Collateral
referred to in the Pledge Agreement and shall secure all Secured Obligations
referred to in the Pledge Agreement. The undersigned acknowledges that any
promissory notes, other Instruments or shares not included in the Pledged
Collateral at the discretion of Bank may not otherwise be pledged by Pledgor to
any other Person or otherwise be used as security for any obligations other than
the Secured Obligations.
"Pledgor"
_________________________________
By:______________________________
Name:____________________________
Title:___________________________
Pledged Stock
-------------
- -------------------------------------------------------------------------
Name and Class Certificate Number
Address of Pledgor Pledged Entity of Stock Number(s) of Shares
- -------------------- -------------- -------- -------------- ---------
- -------------------- -------------- -------- -------------- ---------
- -------------------- -------------- -------- -------------- ---------
- -------------------------------------------------------------------------
Pledged Indebtedness
--------------------
- -------------------------------------------------------------------------------
Interest
Pledged Entity Initial Principal Amount Issue Date Maturity Date Rate
- ---------------- ------------------------ ---------- -------------- --------
- ---------------- ------------------------ ---------- -------------- --------
- -------------------------------------------------------------------------------
18
SCHEDULE III
------------
OUTSTANDING OPTIONS, WARRANTS, CALLS AND COMMITMENTS
19