EXECUTION COPY
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") dated as of April 1,
1998 among SPARTAN HOLDINGS, INC., a New York corporation (the "Pledgor"), who
owns all of the outstanding capital stock in I. M. Special, Inc., a Delaware
corporation (the "Pledged Entity"), FINANCIAL SECURITY ASSURANCE INC., a New
York stock insurance company ("Financial Security"), and THE BANK OF NEW YORK,
as collateral agent (the "Collateral Agent"), on behalf of Financial Security.
Capitalized terms used herein and not otherwise defined have the meanings
assigned to them in the Insurance Agreement (as defined below).
INTRODUCTORY STATEMENTS
The Pledgor is the sole shareholder of the Pledged Entity. Pursuant to an
Assignment and Assumption Agreement, dated May l, 1998, the Pledged Entity has
assumed all obligations and responsibilities of Quincy's Realty, Inc.
("Quincy's") and has been substituted as the "Borrower" under:
(i) the Loan Agreement, dated as of November 1, 1990, between
Quincy's Realty, Inc. and Secured Restaurants Trust (the "Issuer"),
as amended by a First Amendment to Loan Agreement, dated as of
November l, 1991, and as further amended by a Second Amendment to
Loan Agreement, dated as of April 1, 1998, and the related Mortgage
Notes (collectively, the "Quincy's Loan Agreement"); and
(ii) the Loan Agreement, dated as of November 1, 1990, between
Spardee's Realty, Inc. ("Spardee's") and the Issuer, as amended by a
First Amendment to Loan Agreement, dated as of November 1, 1991, and
as further amended by a Second Amendment to Loan Agreement, dated as
of April 1, 1998 and the related Mortgage Notes, each, as assumed by
Quincy's pursuant to an Assignment and Assumption Agreement, made as
of April 1, 1998, by and between Quincy's and Spardee's
(collectively, the "Spardee's Loan Agreement").
(Each of the Quincy's Loan Agreement and the Spardee's Loan Agreement are
referred to as a "Loan Agreement" and together, as the "Loan Agreements").
Pursuant to the Insurance and Indemnity Agreement, dated as of November 1,
1990, between Financial Security and the Issuer (the "Insurance Agreement"),
Financial Security has issued its Financial Guaranty Insurance Policy #50137A-N
with respect to the Issuer's $225,000,000 initial aggregate principal amount of
10 1/4% Guaranteed Secured Bonds Due 2000. The Collateral Agent has succeeded
The Citizens and Southern National Bank of South Carolina (the "Previous
Collateral Agent") as collateral agent under the Collateral Assignment
Agreement, dated as of November 1, 1990, among the Issuer, Financial Security
and the Previous Collateral Agent, as amended by the First Amendment to
Collateral Assignment Agreement, dated as of April 1, 1998 (as amended, the
"Collateral Assignment Agreement").
In consideration of the premises and of the agreements herein contained,
the Pledgor, Financial Security and the Collateral Agent agree as follows:
SECTION 1. SECURITY INTEREST. As security for the full and complete
performance of all of the obligations of the Pledged Entity under the Loan
Agreements (the "Obligations"), Pledgor hereby delivers, pledges and assigns to
the Collateral Agent on behalf of Financial Security, and creates in the
Collateral Agent on behalf of Financial Security, a first priority security
interest in all of the Pledgor's right, title and interest in, to and under its
shares of the Pledged Entity (collectively, the "Pledged Shares"), together with
all of Pledgor's rights and privileges with respect thereto, including without
limitation all dividends thereon, all proceeds, income and profits thereof and
all property received in exchange thereof or in substitution therefor (the
"Collateral").
SECTION 2. STOCK DIVIDENDS, OPTIONS OR OTHER ADJUSTMENTS. Until the
Termination Date (as defined in Section 17), the Pledgor shall deliver, as
Collateral, to the Collateral Agent, any and all additional shares of stock or
any other property of any kind distributable on or by reason of the Collateral,
whether in the form of or by way of stock dividends, warrants, total or partial
liquidation, conversion, prepayments, redemptions or otherwise. If any
additional shares of capital stock, instruments or other property a security
interest in which can be perfected only by possession by the Collateral Agent,
which are distributable on or by reason of the Collateral pledged hereunder,
shall come into the possession or control of the Pledgor, Pledgor shall
forthwith transfer and deliver such property to the Collateral Agent, as
Collateral hereunder.
SECTION 3. DELIVERY OF SHARE CERTIFICATES; STOCK POWERS. Simultaneously
with the delivery of this Pledge Agreement, the Pledgor is delivering to the
Collateral Agent all instruments and stock certificates representing the
Collateral, together with stock powers duly executed in blank by Pledgor.
Pledgor shall promptly deliver to the Collateral Agent, or cause the Pledged
Entity or any other entity issuing any Collateral to deliver directly to the
Collateral Agent, share certificates or other instruments representing any
Collateral acquired or received after the date of this Pledge Agreement with a
stock or bond power duly executed by Pledgor. If at any time either the
Collateral Agent or Financial Security notifies Pledgor that it requires
additional stock powers endorsed in blank, Pledgor shall, at its expense,
promptly execute in blank and deliver the requested power to the requesting
party.
SECTION 4. POWER OF ATTORNEY. Pledgor hereby constitutes and irrevocably
appoints the Collateral Agent and Financial Security, or either one acting
alone, with full power of substitution and revocation, as Pledgor's true and
lawful attorney-in-fact, with the power, after the occurrence of a Stock Pledge
Event (as defined in Section 10), to the full extent permitted by law, to affix
to any certificates and documents representing the Collateral the stock or bond
powers delivered with respect thereto, and to transfer or cause the transfer of
the Collateral, or any part thereof, on the books of the Pledged Entity or other
entity issuing any Collateral, to the name of the Collateral Agent or Financial
Security or any nominee, and thereafter to exercise, with respect to such
Collateral, all the rights, powers and remedies of an owner. The power of
attorney granted pursuant to this Pledge Agreement and all authority hereby
conferred are granted and conferred solely to protect Financial Security's
interest in the Collateral and shall not impose any duty upon the Collateral
Agent or Financial Security to exercise any power. This power of attorney shall
be irrevocable as one coupled with an interest until the occurrence of the
Termination Date.
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SECTION 5. INDUCING REPRESENTATIONS OF PLEDGOR.
(a) Pledgor represents and warrants to Financial Security that:
(i) The Pledged Shares are validly issued, fully paid and
nonassessable.
(ii) The Pledged Shares represent all of the issued and
outstanding capital stock of the Pledged Entity.
(iii) The Pledgor is the sole legal and beneficial owner of
the Pledged Shares, free and clear of all Liens (other than the Lien
created by this Pledge Agreement) and the Pledgor has the
unqualified power, right and authority to execute and perform this
Pledge Agreement.
(iv) No options, warrants or other agreements with respect to
the Collateral are outstanding.
(v) Any consent, approval or authorization of, or designation
or filing with, any authority on the part of the Pledgor which is
required in connection with the pledge and security interest granted
under this Pledge Agreement has been obtained or effected.
(vi) Neither the execution and delivery of this Pledge
Agreement by the Pledgor, the consummation of the transaction
contemplated hereby nor the satisfaction of the terms and conditions
of this Pledge Agreement:
(A) conflicts with or results in any breach or violation
of any provision of the articles of incorporation or bylaws of
the Pledgor or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently
in effect having applicability to the Pledgor or any of its
properties, including regulations issued by an administrative
agency or other governmental authority having supervisory
powers over the Pledgor;
(B) conflicts or will conflict with, constitutes or will
constitute a default (or an event which with the giving of
notice or the passage of time, or both, would constitute a
default) by the Pledgor under, or a breach of, or contravenes
or will contravene any provision of its organizational
documents, either Loan Agreement, or any Mortgage Note
(collectively, the "Borrower Documents") or any loan
agreement, mortgage, indenture or other agreement or
instrument to which the Pledgor is a party or by which it or
any of its properties is or may be bound or affected; or
(C) results in or requires the creation of any Lien upon
or in respect of any of the Pledgor's assets (other than the
Lien created by this Pledge Agreement).
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(vii) Upon the Pledgor's delivery of the Pledged Shares to the
Collateral Agent, the Collateral Agent, on behalf of Financial
Security, will have a valid, perfected first priority Lien on the
Collateral, enforceable as such against all creditors of the Pledgor
and against all Persons purporting to purchase any of the Collateral
from the Pledgor.
(b) Any damages payable due to a breach of this Section 5 are
limited to amounts payable (i) pursuant to a drawing under Irrevocable
Letter of Credit No. P-360919 issued by The Chase Manhattan Bank and dated
April 1, 1998 and (ii) from the Collateral, including pursuant to any
action taken with respect to the Collateral pursuant to Section 10 hereof.
SECTION 6. OBLIGATIONS OF PLEDGOR.
(a) Pledgor hereby covenants and agrees as follows:
(i) Pledgor shall not incur, assume or guarantee any
indebtedness for money borrowed by the Pledged Entity.
(ii) Pledgor does not, and will not, assume liability for any
debts of the Pledged Entity and does not, and will not, guarantee
any of the debts or obligations of the Pledged Entity. Pledgor will
not hold itself out as being liable for the debts of the Pledged
Entity.
(iii) Pledged Entity is not referred to as a "department" or
"division" in the incorporation or other internal materials, records
or documents of Pledgor.
(iv) Pledgor shall conduct its business solely in its own name
so as not to mislead others as to the identity of the Pledged Entity
with which those others are concerned and particularly will use its
best efforts to avoid the appearance of conducting business on
behalf of the Pledged Entity. Without limiting the generality of the
foregoing, all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts,
statements and loan applications, will be made solely in the name of
the Pledgor.
(v) Pledgor will act solely in its corporate name and through
its duly authorized officers or agents in the conduct of its
business.
(vi) Where necessary and appropriate, Pledgor shall disclose
the nature of the transaction referred to above and the independent
corporate status of the Pledged Entity to creditors of Pledgor, if
any.
(vii) The annual financial statements of Pledgor, including
consolidated financial statements, if any, will disclose the effects
of Pledgor's transactions in accordance with generally accepted
accounting principles and will disclose that the assets of the
Pledged Entity are not available to pay any creditors of Pledgor.
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(viii)The resolutions, agreements and other instruments of
Pledgor, if any, underlying the transactions described in this
Pledge Agreement will be continuously maintained by Pledgor as the
official records.
(ix) Pledgor will use its best efforts to maintain an
arm's-length relationship with the Pledged Entity.
(x) Pledgor will use its best efforts to keep its assets and
its liabilities wholly separate from those of the Pledged Entity.
(xi) Except for actions taken by it as the sole shareholder of
the Pledged Entity, Pledgor will not direct, or otherwise control,
the ongoing business decisions of the Pledged Entity.
(b) Any damages payable due to a breach of this Section 6 are
limited to amounts payable (i) pursuant to a drawing under Irrevocable
Letter of Credit No. P-360919 issued by The Chase Manhattan Bank and dated
April 1, 1998 and (ii) from the Collateral, including pursuant to any
action taken with respect to the Collateral pursuant to Section 10 hereof.
SECTION 7. FURTHER COVENANTS; CERTAIN VOTING RIGHTS.
(a) Pledgor hereby further covenants and agrees as follows:
(i) The Pledgor will not sell, transfer or convey any interest
in, or suffer or permit any Lien or encumbrance to be created upon
or with respect to, any of the Collateral (other than as created
under this Pledge Agreement) during the term of this Pledge
Agreement.
(ii) The Pledgor will, at its own expense, at any time and
from time to time at the request of the Collateral Agent or
Financial Security, do, make, procure, execute and deliver all acts,
things, writings, assurances and other documents as may be
reasonably requested by the Collateral Agent or Financial Security
to preserve or establish Financial Security's Lien on the
Collateral.
(iii) The Pledgor has not and will not take any action which
would cause the Pledged Entity to issue any other capital stock,
without the prior written consent of Financial Security. Any such
issuance shall be subject to this Pledge Agreement.
(iv) The Pledgor will not consent to any amendment of the
Pledged Entity's Certificate of Incorporation or Bylaws without the
prior written consent of Financial Security.
(v) The Pledgor will not voluntarily permit the Pledged Entity
to engage in any dissolution, insolvency proceeding, liquidation,
consolidation, merger, asset sale, transfer of ownership or
amendment of organic documents without the prior written consent of
Financial Security.
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(vi) Pledgor will not file or cause to be filed a voluntary
petition in bankruptcy against the Pledged Entity, nor seek
substantive consolidation of the assets and liabilities of the
Pledged Entity and Pledgor in any bankruptcy or insolvency
proceeding, for one year and one day after maturity of all debt of
the Pledged Entity under the Loan Agreements.
(b) (i) Subject to Section 8, so long as no Stock Pledge Event (as
defined in Section 10) exists, Pledgor shall be entitled to vote its
Pledged Stock and to give consents, waivers or ratifications in respect of
its Pledged Stock;
(ii) provided, however, that until the date described in
7(a)(vi), no vote shall be cast, or consent, waiver or ratification
given, by Pledgor with respect to any matter described in Section
7(a) hereof, any matter prohibited by the organizational documents
of the Pledged Entity in effect as of the date hereof or as amended
with the prior written consent of Financial Security, any matter
relating to the Loan Agreements, or any matter relating to the
Borrower Collateral (as defined in the Loan Agreements) without the
prior written consent of Financial Security.
All rights of Pledgor to vote and give consents, waivers and
ratifications pursuant to (b)(i) above shall cease if a Stock Pledge Event
exists, except to the extent that Financial Security in writing otherwise
agrees.
SECTION 8. VOTING PROXY. Pledgor hereby grants to the Collateral Agent on
behalf of Financial Security an irrevocable proxy to vote the Pledged Shares
with respect to any matter described in Section 7(b)(ii) above, which proxy is
coupled with an interest and shall continue until the Termination Date. Pledgor
represents and warrants that it has directed the Pledged Entity to reflect the
Collateral Agent's right to vote the Collateral, on behalf of Financial
Security, on the Pledged Entity's books. Upon the request of the Collateral
Agent or Financial Security, Pledgor shall deliver to the Collateral Agent such
further evidence of such irrevocable proxy or such further irrevocable proxy to
vote the Collateral as the Collateral Agent or Financial Security may reasonably
request. The Collateral Agent shall exercise all such rights to vote the
Collateral granted hereunder in accordance with the written directions given by
Financial Security.
SECTION 9. RIGHTS OF FINANCIAL SECURITY. At any time and without notice,
Financial Security may, upon providing the Collateral Agent with the full amount
necessary to carry out such direction, direct the Collateral Agent to discharge
any taxes, liens, security interests or other encumbrances levied or placed on
the Collateral, or pay for the maintenance and preservation of the Collateral.
The Collateral Agent shall have no duty or obligation to follow any direction
provided in this Section 9 unless Financial Security has provided the Collateral
Agent with the full amount necessary to carry out such direction.
SECTION 10. REMEDIES UPON EVENT OF DEFAULT.
(a) If a material default exists under this Pledge Agreement or an
"Event of Default" exists under either Loan Agreement, any Mortgage Note
or the Insurance Agreement (any such event, a "Stock Pledge Event"),
Financial Security may, directly or through the Collateral Agent, without
notice to Pledgor:
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(i) cause the Collateral to be transferred to the Collateral
Agent's name or Financial Security's name or in the name of nominees
of either and thereafter exercise as to such Collateral all of the
rights, powers and remedies of an owner;
(ii) collect by legal proceedings or otherwise all amounts now
or hereafter payable on account of the Collateral, and hold all such
sums as part of the Collateral, or apply such sums to the payment of
the Obligations in such manner and order as Financial Security may
decide, in its sole discretion; and
(iii) enter into any extension, subordination, reorganization,
deposit, merger, or consolidation agreement, or any other agreement
relating to or affecting the Collateral, and in connection therewith
deposit or surrender control of the Collateral thereunder, and
accept other property in exchange therefor and hold and apply such
property or money so received in accordance with the provisions
hereof.
(b) In addition to all the rights and remedies of a secured party
under the Uniform Commercial Code, Financial Security shall have the
right, and without demand of performance or other demand, advertisement or
notice of any kind, except as specified below, to or upon Pledgor or any
other person (all and each of which demands, advertisements and/or notices
are hereby expressly waived to the extent permitted by law), to proceed
forthwith, or direct the Collateral Agent to proceed forthwith, to
collect, receive, appropriate and realize upon the Collateral, or any part
thereof and to proceed forthwith to sell, assign, give an option or
options to purchase, contract to sell, or otherwise dispose of and deliver
the Collateral or any part thereof in one or more parcels in accordance
with applicable securities laws and in a manner designed to ensure that
such sale will not result in a distribution of the Pledged Shares in
violation of the Securities Act and on such terms (including, without
limitation, a requirement that any purchaser of all or any part of the
Collateral shall be required to purchase any securities constituting the
Collateral solely for investment and without any intention to make a
distribution thereof) as Financial Security, in its sole and absolute
discretion deems appropriate without any liability for any loss due to
decrease in the market value of the Collateral during the period held. If
any notification of intended disposition of the Collateral is required by
law, such notification shall be deemed reasonable and properly given if
mailed to Pledgor, postage prepaid, at least 10 days before any such
disposition at the address indicated in Section 20. Any disposition of the
Collateral or any part thereof may be for cash or on credit or for future
delivery without assumption of any credit risk, with the right of
Financial Security to purchase all or any part of the Collateral so sold
at any such sale or sales, public or private, free of any equity or right
of redemption in Pledgor, which right of equity is, to the extent
permitted by applicable law, hereby expressly waived or released by
Pledgor.
(c) Financial Security, in its sole discretion, may elect to obtain
or cause the Collateral Agent to obtain the advice of any independent
nationally known investment banking firm which is a member firm of the New
York Stock Exchange, with respect to the method and manner of sale or
other disposition of any of the Collateral, the best price reasonably
obtainable therefor, the consideration of cash and/or credit terms, or any
other details concerning such sale or disposition; costs and expenses of
obtaining such advice shall
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be for the account of the Pledged Entity. Financial Security, in its sole
discretion, may elect to sell, or cause the Collateral Agent to sell, the
Collateral on any credit terms which it deems reasonable; the
out-of-pocket costs and expenses of such sale shall be for the account of
the Pledged Entity. The sale of any of the Collateral on credit terms
shall not relieve the Pledged Entity of its liabilities with respect to
the Obligations. All payments received by the Collateral Agent, if any,
and Financial Security in respect of any sale of the Collateral shall be
applied to the Obligations as and when such payments are received. Pledgor
shall not have an obligation to register the Pledged Shares under the
Securities Act or any state securities laws.
(d) Pledgor recognizes that it may not be feasible to effect a
public sale of all or a part of the Collateral by reason of certain
prohibitions contained in the Securities Act and that it may be necessary
to sell privately to a restricted group of purchasers who will be obliged
to agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view for the distribution or resale
thereof. Pledgor agrees that private sales may be at prices and other
terms less favorable to the seller than if the Collateral were sold at
public sale and that neither the Collateral Agent nor Financial Security
has any obligation to delay the sale of any Collateral for the period of
time necessary to permit the registration of the Collateral for public
sale under the Securities Act. Pledgor agrees that a private sale or sales
made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
(e) If any consent, approval or authorization of any state,
municipal or other governmental department, agency or authority shall be
necessary to effectuate any sale or other disposition of the Collateral,
or any partial disposition of the Collateral, Pledgor will execute all
such applications and other instruments as may be required in connection
with securing any such consent, approval or authorization and will
otherwise use its best efforts to secure the same.
(f) Upon any sale or other disposition, the Collateral Agent, acting
at the direction of Financial Security, or Financial Security, shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold or disposed of. Each purchaser at any such sale or
other disposition (including Financial Security) shall hold the Collateral
free from any claim or right of whatever kind, including any equity or
right of redemption of Pledgor. Pledgor specifically waives, to the extent
permitted by applicable law, all rights of redemption, stay or appraisal
which it may have under any rule of law or statute now existing or
hereafter adopted.
(g) Neither the Collateral Agent nor Financial Security shall be
obligated to make any sale or other disposition of the Collateral, unless
the terms thereof shall be satisfactory to Financial Security. The
Collateral Agent or Financial Security may, without notice or publication,
adjourn any private or public sale and, upon 10 days' prior notice to
Pledgor, hold such sale at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral, on
credit or future delivery, the Collateral so sold may be retained by the
Collateral Agent or Financial Security until the selling price is paid by
the purchaser thereof, but neither the Collateral Agent nor Financial
Security shall incur
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any liability in case of the failure of such purchaser to take up and pay
for the property so sold and, in case of any such failure, such property
may again be sold as herein provided.
(h) Except as otherwise expressly provided herein, all of the rights
and remedies herein provided, including, but not limited to the foregoing,
shall be cumulative and not exclusive of any other remedies provided by
law or any other agreement, and shall be enforceable alternatively,
successively or concurrently as Financial Security may deem expedient.
SECTION 11. LIMITATION ON LIABILITY.
(a) Neither the Collateral Agent nor Financial Security, nor any of
their respective directors, officers or employees, shall be liable to
Pledgor or to the Pledged Entity for any action taken or omitted to be
taken by it or them hereunder, or in connection herewith, except that the
Collateral Agent and Financial Security shall each be liable for its own
negligence, bad faith or willful misconduct.
(b) The Collateral Agent shall incur no liability to Financial
Security except for the Collateral Agent's negligence or willful
misconduct in carrying out its duties hereunder.
(c) The Collateral Agent shall be protected and shall incur no
liability to any party in relying upon the accuracy, acting in reliance
upon the contents, and assuming the genuineness of any notice, demand,
certificate, signature, instrument or other document the Collateral Agent
reasonably believes to be genuine and to have been duly executed by the
appropriate signatory, and (absent actual knowledge to the contrary) the
Collateral Agent shall not be required to make any independent
investigation with respect thereto. The Collateral Agent shall at all
times be free independently to establish to its reasonable satisfaction,
but shall have no duty to independently verify, the existence or
nonexistence of facts that are a condition to the exercise or enforcement
of any right or remedy hereunder.
(d) The Collateral Agent may consult with qualified counsel,
financial advisors or accountants and shall not be liable for any action
taken or omitted to be taken by it hereunder in good faith and in
accordance with the written advice of such counsel, financial advisors or
accountants.
(e) The Collateral Agent shall not be under any obligation to
exercise any of the remedial rights or powers vested in it by this Pledge
Agreement unless it shall have received reasonable security or indemnity
satisfactory to the Collateral Agent against the reasonable costs,
expenses and liabilities which it might incur.
SECTION 12. PERFORMANCE OF DUTIES. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Pledge
Agreement, subject to the provisions of this Pledge Agreement or as directed by
Financial Security in accordance with this Pledge Agreement. The Collateral
Agent on behalf of Financial Security and its successors and assigns shall have
no obligation in respect of the Collateral, except to use reasonable care in
holding the Collateral and to hold and dispose of the same in accordance with
the terms of this Pledge Agreement.
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SECTION 13. APPOINTMENT AND POWERS. Subject to the terms and conditions
hereof, Financial Security appoints The Bank of New York as its Collateral Agent
and The Bank of New York accepts such appointment and agrees to act as
Collateral Agent on behalf of Financial Security to maintain custody and
possession of the Collateral and to perform the other duties of the Collateral
Agent in accordance with the provisions of this Pledge Agreement. The Collateral
Agent shall, subject to the other terms and provisions of this Pledge Agreement,
act upon and in compliance with Financial Security's written instructions
delivered pursuant to this Pledge Agreement as promptly as possible following
receipt of such written instructions. Receipt of written instructions shall not
be a condition to the exercise by the Collateral Agent of its express duties
hereunder, unless this Pledge Agreement provides that the Collateral Agent is
permitted to act only following receipt of such instructions.
SECTION 14. SUCCESSOR COLLATERAL AGENT.
(a) MERGER. Any Person into which the Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it
may sell or transfer its corporate trust business and assets as a whole or
substantially as a whole, or any Person resulting from any such
conversion, merger, consolidation, sale or transfer to which the
Collateral Agent is a party, shall (provided it is otherwise qualified to
serve as the Collateral Agent hereunder) be and become a successor
Collateral Agent hereunder and be vested with all of the title to and
interest in the Collateral and all of the trusts, powers, immunities,
privileges and other matters as was its predecessor without the execution
or filing of any instrument or any further act, deed or conveyance on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
(b) RESIGNATION. The Collateral Agent and any successor Collateral
Agent may resign only (i) with the 45 days' prior written notice to
Financial Security or (ii) if the Collateral Agent is unable to perform
its duties hereunder as a matter of law as evidenced by an opinion of
counsel acceptable to Financial Security. Upon the occurrence of (i) or
(ii) above, the Collateral Agent shall give notice of its resignation by
registered or certified mail to Pledgor (with a copy to Financial
Security). Any resignation by the Collateral Agent shall take effect only
upon the date which is the later of (x) the effective date of the
appointment by Financial Security of a successor Collateral Agent and the
acceptance in writing by such successor Collateral Agent of such
appointment and (y) the date on which the Collateral is delivered to the
successor Collateral Agent. Notwithstanding the preceding sentence, if by
the contemplated date of resignation specified in the written notice of
resignation delivered (as described above) no successor Collateral Agent
has been appointed Collateral Agent or becomes the Collateral Agent
pursuant to subsection (d) below, the resigning Collateral Agent may
petition a court of competent jurisdiction for the appointment of a
successor.
(c) REMOVAL. The Collateral Agent may be removed by Financial
Security at any time, with or without cause, by an instrument or
concurrent instruments in writing delivered to the Collateral Agent. Any
removal pursuant to the provisions of this subsection (c) shall take
effect only upon the later to occur of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in writing
by such successor Collateral Agent of such appointment and of its
obligation to perform its duties hereunder in accordance with
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the provisions hereof and (ii) the date on which the Collateral is
delivered to the successor Collateral Agent.
(d) APPOINTMENT OF AND ACCEPTANCE BY SUCCESSOR.
(i) Financial Security shall have the sole right to appoint
each successor Collateral Agent. Every successor Collateral Agent
appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to Financial Security and Pledgor an instrument in
writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other
documents and instruments as will effectuate the delivery of all
Collateral to the successor Collateral Agent, whereupon such
successor, without any further act, deed or conveyance, shall become
fully vested with all the estates, properties, rights, powers,
duties and obligations of its predecessor. Such predecessor shall,
nevertheless, on the written request of Financial Security, execute
and deliver an instrument transferring to such successor all the
estates, properties, rights and powers of such predecessor
hereunder.
(ii) Every predecessor Collateral Agent shall assign, transfer
and deliver all Collateral held by it as Collateral Agent hereunder
to its successor as Collateral Agent.
(iii) Should any instrument in writing from Pledgor or the
Pledged Entity be reasonably required by a successor Collateral
Agent for more fully and certainly vesting in such successor the
estates, properties, rights, powers, duties and obligations vested
or intended to be vested hereunder in the Collateral Agent, any and
all such written instruments shall, at the request of the successor
Collateral Agent, be forthwith executed, acknowledged and delivered
by Pledgor.
(iv) The designation of any successor Collateral Agent and the
instrument or instruments removing any Collateral Agent and
appointing a successor hereunder, together with all other
instruments provided for herein, shall be maintained with the
records relating to the Collateral and, to the extent required by
applicable law, filed or recorded by the successor Collateral Agent
in each place where such filing or recording is necessary to effect
the transfer of the Collateral to the successor Collateral Agent or
to protect and preserve the security interests granted hereunder.
SECTION 15. REIMBURSEMENT AND INDEMNIFICATION.
(a) The Pledgor hereby agrees to pay, and to protect, indemnify and
save harmless Financial Security and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls
Financial Security within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including,
without limitation, the costs and expenses of defending against any claim
of liability) of any nature arising out of or in connection with this
Pledge Agreement, except such loss, liabilities, actions, suits,
judgments, demands,
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damages, costs or expenses as shall result from the negligence, bad faith
or willful misconduct of Financial Security or its officers, directors,
shareholders, employees, agents and each Person, if any, who controls
Financial Security within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act; PROVIDED, however, that,
any provision herein to the contrary notwithstanding:
(i) Pledgor's obligations pursuant to this Section 15 arising
in connection with any breach of Section 5 or Section 6 hereof shall
be limited to amounts payable (A) pursuant to a drawing under
Irrevocable Letter of Credit No. P-360919 issued by The Chase
Manhattan Bank and dated April 1, 1998 and (B) from the Collateral,
including pursuant to any action taken with respect to the
Collateral pursuant to Section 10 hereof; and
(ii) The only damages indemnifiable or payable with respect to
a breach of Section 7 hereof shall be any loss or damages which (A)
are not recovered by a drawing under Irrevocable Letter of Credit
No. P-360919 issued by The Chase Manhattan Bank and dated April 1,
1998, and (B) result from the loss of the ability or right, or any
delay in the exercise of ability or right, of either the "Collateral
Agent" under the Collateral Assignment Agreement or Financial
Security to realize the full and timely benefits of the Defeasance
Eligible Investments or other Borrower Collateral, or any loss
resulting from a delay in such realization, including any and all
charges, fees, costs and expenses which Financial Security may
reasonably pay or incur, including, but not limited to, attorneys'
and accountants' fees and expenses, in connection with (1)
reimbursement of the Collateral Agent, or (2) the administration,
enforcement, defense or preservation of any rights in respect of any
of the Related Documents (as defined in the Insurance Agreement),
including defending, monitoring or participating in any litigation
or proceeding (including any bankruptcy proceeding in respect of the
Pledged Entity or any affiliate of the Pledged Entity) relating to
any of the Related Documents, any party to any of the Related
Documents or the Transaction.
(b) The obligations of Pledgor under this Section 15 shall survive
the termination of this Pledge Agreement and the resignation or removal of
the Collateral Agent.
SECTION 16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COLLATERAL
AGENT. The Collateral Agent represents and warrants to Pledgor and to Financial
Security as follows:
(a) The Collateral Agent is a state banking corporation, duly
organized, validly existing and in good standing under the laws of the
State of New York and is duly authorized and licensed under applicable law
to conduct its business as presently conducted.
(b) The Collateral Agent has all requisite right, power and
authority to execute and deliver this Pledge Agreement and the other
Transaction Documents to which it is or becomes a party and to perform all
of its duties as Collateral Agent hereunder and thereunder.
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(c) The execution and delivery by the Collateral Agent of this
Pledge Agreement, and the performance by the Collateral Agent of its
duties hereunder, have been duly authorized by all necessary corporate
proceedings and no further approvals or filings, including any
governmental approvals, are required or will be required, as the case may
be, for the valid execution and delivery by the Collateral Agent, or the
performance by the Collateral Agent, of this Pledge Agreement.
(d) The Collateral Agent has duly executed and delivered this Pledge
Agreement, and, assuming the due authorization, execution and delivery
hereof by the other parties hereto, this Pledge Agreement constitutes the
legal, valid and binding obligation of the Collateral Agent, enforceable
against the Collateral Agent in accordance with its terms, except as (i)
such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the enforcement
of creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(e) The Collateral Agent has been paid in full its ordinary
administrative fee for acting as Collateral Agent under this Pledge
Agreement.
SECTION 17. TERMINATION. This Pledge Agreement shall continue in full
force and effect until the date (the "Termination Date") on which the Insurance
Agreement terminates in accordance with its terms.
SECTION 18. RESERVED.
SECTION 19. RESERVED.
SECTION 20. NOTICES. Any notice or other communication given hereunder
shall be in writing and shall be sent by registered mail, postage prepaid, or
personally delivered or telecopied to the recipient as follows:
(a) To the Collateral Agent:
The Bank of New York
Towermarc Plaza
10161 Centurion Parkway
Jacksonville, FL 32256
Attention: Corporate Trust Department
Telephone: (904) 998-4700
Facsimile: (904) 645-1932
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(b) To Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telephone: (212) 826-0100
Facsimile: (212) 339-3518
(212) 339-3529
(c) To Pledgor:
Spartan Holdings, Inc.
203 East Main Street
Spartanburg, SC 29301
Attention: General Counsel
Facsimile: (864) 597-8216
With a copy to:
Advantica Restaurant Group, Inc.
203 East Main Street
Spartanburg, SC 29301
Attention: General Counsel
Facsimile: (864) 596-8327
SECTION 21. GENERAL PROVISIONS.
(a) The failure of the Collateral Agent or Financial Security to
exercise, or delay in exercising, any right, power or remedy hereunder
shall not operate as a waiver thereof, nor shall any single or partial
exercise by the Collateral Agent or Financial Security of any right, power
or remedy hereunder preclude any other or future exercise thereof, or the
exercise of any other right, power or remedy.
(b) The representations of Pledgor herein contained shall survive
the date hereof.
(c) Neither this Pledge Agreement nor the provisions hereof can be
changed, waived or terminated orally. This Pledge Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, legal representatives and assigns. If any provision
of this Pledge Agreement shall be invalid or unenforceable in any respect
or in any jurisdiction, the remaining provisions shall remain in full
force and effect and shall be enforceable to the maximum extent permitted
by law.
(d) Unless otherwise indicated, all references to particular
Sections are references to Sections of this Pledge Agreement.
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(e) This Pledge Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
(f) Each of the parties hereto waives, to the fullest extent
permitted by law, any right it may have to a trial by jury in respect of
any litigation arising directly or indirectly out of, under or in
connection with this Pledge Agreement or any of the transactions
contemplated hereunder. Each of the parties hereto (i) certifies that no
representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (ii) acknowledges
that it has not been induced to enter into this Pledge Agreement and the
other Borrower Documents (as defined in Section 5) to which it is a party
nor will have been induced to enter into any other Borrower Documents to
which it becomes a party by, among other things, this waiver.
(g) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) PLEDGOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ANY COURT IN
THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS PLEDGE
AGREEMENT, THE OTHER BORROWER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREUNDER OR THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH SUIT OR ACTION OR PROCEEDING MAY BE
HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE PARTIES HEREBY WAIVES AND AGREES NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THIS PLEDGE AGREEMENT OR ANY OF THE OTHER
BORROWER DOCUMENTS OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH COURTS. PLEDGOR IRREVOCABLY APPOINTS AND
DESIGNATES CT CORPORATION SYSTEM AS ITS TRUE AND LAWFUL ATTORNEY AND DULY
AUTHORIZED AGENT FOR ACCEPTANCE OF
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SERVICE OF LEGAL PROCESS. PLEDGOR AGREES THAT SERVICE OF SUCH PROCESS UPON
SUCH PERSON SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON IT. NOTHING
CONTAINED IN THIS PLEDGE AGREEMENT SHALL LIMIT OR AFFECT THE RIGHTS OF ANY
PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
START LEGAL PROCEEDINGS RELATED TO ANY OF THE BORROWER DOCUMENTS AGAINST
PLEDGOR OR ITS RESPECTIVE PROPERTY IN THE COURTS OF ANY JURISDICTION.
(i) The Collateral Agent, by the execution hereof, acknowledges
receipt of the Pledged Shares on behalf of Financial Security.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Stock Pledge Agreement on the date first above written.
SPARTAN HOLDINGS, INC.
By:________________________
Name:______________________
Title:_____________________
FINANCIAL SECURITY ASSURANCE, INC.
By:________________________
Alex G. Makowski
Managing Director
THE BANK OF NEW YORK
By:_____________________________
Name:___________________________
Agent
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