EXHIBIT 4.10
PARENT PLEDGE AGREEMENT
This PARENT PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "PLEDGE AGREEMENT"),
dated as of June 30, 1997, is made by PLI HOLDINGS INC., a Delaware corporation
(the "PLEDGOR"), in favor of Agents (as defined below) for each of the Secured
Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER"(prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), The Bank of Nova Scotia
("SCOTIABANK"), as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT"), and Scotiabank, as agent for the Canadian Lenders
under the Canadian Facility (in such capacity, the "CANADIAN AGENT", and
together with the U.S. Agent, collectively, the "AGENTS"), the Lenders and the
Issuers have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION") the rights
and obligations of LHPG as (and has become) the "U.S. Borrower" under the Credit
Agreement;
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Pledgor is
required to execute and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this
Pledge Agreement inasmuch as the Pledgor will derive substantial direct and
indirect benefits from the Credit Extensions made from time to time to the
Borrowers by the Lenders and the Issuer pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuers to make Credit Extensions (including the initial Credit
Extensions) to the Borrowers pursuant to the Credit Agreement, and to induce
Secured Parties to enter into Rate Protection Agreements, if any, the Pledgor
agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the FIRST RECITAL.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
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"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property.
"LENDERS" are defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED PROPERTY" means all Pledged Shares and all other pledged
shares of Capital Stock, all other securities, all assignments of any amounts
due or to become due, all other instruments which are now being delivered by the
Pledgor to the Agent or may from time to time hereafter be delivered by the
Pledgor to the Agent for the purpose of pledge under this Pledge Agreement or
any other Loan Document, and all proceeds of any of the foregoing.
"PLEDGED SHARE ISSUER" means each Person identified in ITEM A of
ATTACHMENT 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person, and each Person whose Capital Stock is required to be
pledged hereunder and under the Credit Agreement from time to time.
"PLEDGED SHARES" means all shares of Capital Stock of any Pledged
Share Issuer which are delivered or required
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to be delivered from time to time by the Pledgor to the Agent as Pledged
Property hereunder.
"PLEDGOR" is defined in the PREAMBLE.
"SCOTIABANK" is defined in the FIRST RECITAL.
"SECURED PARTY" means, as the context may require, the Lenders, the
Issuers, the Agents, each counterparty to a Rate Protection Agreement that is
(or at the time such Rate Protection Agreement is entered into, was) a Lender or
an Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
"SECURITIES ACT" is defined in SECTION 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of New York, or, as the context may require, in any other jurisdiction the laws
of which may apply to all or a portion of the Collateral in which a security
interest is granted hereunder.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
in the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Pledge Agreement, including
its preamble and recitals, with such meanings.
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ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Agents, for their benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Agents, for their benefit and the ratable
benefit of the Secured Parties, a continuing security interest in, all of the
following property (the "COLLATERAL"):
(a) all issued and outstanding shares of Capital Stock of each Pledged
Share Issuer identified in ITEM A of ATTACHMENT 1 hereto;
(b) all other Pledged Shares issued from time to time that are
required to be pledged pursuant to the terms of the Credit Agreement;
(c) all other Pledged Property hereafter delivered to the Agents in
connection with this Pledge Agreement;
(d) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(e) all proceeds of any of the foregoing.
SECTION 2.2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures
the payment in full in cash of all Obligations now or hereafter existing under
the Credit Agreement, the Notes and each other Loan Document.
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Agents pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank provided, however, that in the case of a non-U.S. Subsidiary
of the Pledgor, unless otherwise required by the terms of the
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Credit Agreement, not more than 65% of the Capital Stock of such non-U.S.
Subsidiary shall be pledged by the Pledgor to the Agents.
The Pledgor shall deliver or shall cause to be delivered promptly, but
in any event within five Business Days following issuance, in pledge hereunder
to the Agents, for their benefit and the ratable benefit of each of the other
Secured Parties, any and all additional shares of Capital Stock of a Pledged
Share Issuer issued to the Pledgor and all other Pledged Property issued,
distributed or otherwise delivered to or acquired by the Pledgor in respect of
such Pledged Share Issuer's Pledged Shares.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES. In the event that any
Dividend or liquidating dividend is to be paid on any Pledged Share at a time
when no Default of the nature set forth in Section 10.1.9 of the Credit
Agreement or Event of Default has occurred and is continuing or would result
therefrom, such Dividend, liquidating dividend or payment may be paid
directly to the Pledgor. If any such Default or Event of Default has
occurred and is continuing, then any such Dividend, liquidating dividend or
payment shall be paid directly to the Agents.
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full in cash of
all Obligations, the termination or expiration of all Letters of Credit,
the termination of all Rate Protection Agreements and the termination of
all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Agents
hereunder, to the benefit of the Agents and each other Secured Party.
Without limiting the foregoing CLAUSE (C), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other
Person or entity, and such
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other Person or entity shall thereupon become vested with all the rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Pledge Agreement) or otherwise, subject, however, to any
contrary provisions in such assignment or transfer, and to the provisions of
Section 12.11 and Article XI of the Credit Agreement. Upon (i) the sale,
transfer or other disposition of Collateral in accordance with the Credit
Agreement or (ii) the payment in full in cash of or cash collateralization in
full of all Obligations, the termination, expiration or cash collateralization
of all Letters of Credit, the termination of all Rate Protection Agreements and
the termination of all Commitments, the security interests granted herein shall
automatically terminate with respect to (x) such Collateral (in the case of
clause (i)) and all rights to such Collateral shall revert to the Pledgor or (y)
all Collateral (in the case of clause (ii)) and all rights to the Collateral
shall revert to the Pledgor. Upon any such termination, the Agents will, at the
Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all other
Collateral held by the Agents hereunder, and execute and deliver to the Pledgor
such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 2.6. SECURITY INTEREST ABSOLUTE. All rights of the Agents
and the security interests granted to the Agents hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional,
irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note, any other Loan Document or any instrument or document relating
thereto;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against any Borrower, any other Obligor or any other Person
under the
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provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise; or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other extension,
compromise or renewal of any Obligation,
(d) any reduction, limitation, impairment or termination of any
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Obligations or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note, any other Loan Document or any instrument or document relating
thereto;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver
or release of or addition to or consent to departure from any guaranty,
for any of the Obligations; or
(g) any other circumstances which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations) available
to, or a legal or equitable discharge of, any Borrower, any other Obligor,
any surety or any guarantor.
SECTION 2.7. POSTPONEMENT OF SUBROGATION, ETC. The Pledgor will
not exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until
the
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prior payment, in full and in cash, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements and the termination of all Commitments. Any amount paid to the
Pledgor on account of any payment made hereunder prior to the payment in full of
all Obligations shall be held in trust for the benefit of the Secured Parties
and each holder of a Note and shall immediately be paid to the Secured Parties
and each holder of a Note and credited and applied against the Obligations,
whether matured or unmatured, in accordance with the terms of the Credit
Agreement; PROVIDED, HOWEVER, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations, and
(b) all Obligations have been paid in full, all Letters of Credit
have been terminated or expired, all Rate Protection Agreements have been
terminated and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation
to the Pledgor of an interest in the Obligations resulting from such payment
by the Pledgor. In furtherance of the foregoing, for so long as any
Obligations, Letters of Credit or Commitments remain outstanding or any Rate
Protection Agreement remains in full force and effect, the Pledgor shall
refrain from taking any action or commencing any proceeding against any
Borrower or any other Obligor (or its successors or assigns, whether in
connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party
or any holder of a Note.
SECTION 2.8. JUDGMENT. The Pledgor hereby agrees that, with respect
to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in
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Canadian Dollars hereunder into another currency, then the rate of
exchange used shall be that at which the Agents, in accordance with
normal banking procedures could purchase Canadian Dollars with such
other currency on the Business Day preceding that on which final
judgment is given; and
(b) the obligation of the Pledgor in respect of any sum due from it to
any Secured Party or any holder of a Canadian Note hereunder or any other
Loan Document shall, notwithstanding any judgment in a currency other than
Canadian Dollars, be discharged only to the extent that on the Business
Day following receipt by the Secured Party or holder, as the case may be,
of any sum adjudged to be so due in a currency other than Canadian Dollars
such Secured Party or holder, as the case may be, may, in accordance with
normal banking procedures, purchase Canadian Dollars with such other
currency; in the event that the Canadian Dollars so purchased are less
than the amount originally due to any Secured Party or holder of a
Canadian Note in Canadian Dollars, the Pledgor, as a separate obligation
and notwithstanding any such judgment, hereby indemnifies and holds
harmless such Secured Party and holder against such loss, and if the
Canadian Dollars so purchased exceed the sum originally due to such
Secured Party or holder in Canadian Dollars, such Secured Party or holder,
as the case may be, shall remit to the Guarantor such excess.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES, ETC. The Pledgor
represents and warrants unto each Secured Party, as at the date of each pledge
and delivery hereunder (including each pledge and delivery of Pledged Shares) by
the Pledgor to the Agents of any Collateral, as set forth in this ARTICLE III.
SECTION 3.1.1. OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to
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pledge and assign) such Collateral, free and clear of all liens, security
interests, options, or other charges or encumbrances, except any lien or
security interest granted pursuant hereto in favor of the Agents.
SECTION 3.1.2. VALID SECURITY INTEREST. The execution and delivery
of this Pledge Agreement, together with the delivery by the Pledgor of such
Collateral to the Agents, is effective to create a valid, perfected, first
priority security interest in such Collateral and all proceeds thereof, securing
the Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. AS TO PLEDGED SHARES. In the case of any Pledged
Shares constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of Capital Stock of each Pledged Share
Issuer (except in the case of Pledged Shares of non-U.S. Subsidiaries, in which
case, unless otherwise required pursuant to the terms of the Credit Agreement,
65% of the stock has been so pledged). The Pledgor has no Subsidiaries other
than the Pledged Share Issuers, except as set forth in ITEM B of ATTACHMENT 1.
SECTION 3.1.4. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Agents of the voting or other rights
provided for in this Pledge Agreement, or, except with respect to any
Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
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SECTION 3.1.5. COMPLIANCE WITH LAWS. The Pledgor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which might would reasonably be expected to
have a Material Adverse Effect or which might materially adversely affect the
aggregate value of the Collateral under all Pledge Agreements or the aggregate
worth of the Collateral under all Pledge Agreements as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. The Pledgor covenants and agrees
that, so long as any portion of the Obligations shall remain unpaid, any Letters
of Credit shall be outstanding, any Rate Protection Agreement shall remain in
full force and effect or any Secured Party shall have any outstanding
Commitment, the Pledgor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this ARTICLE IV.
SECTION 4.1.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except in favor of the Agents hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Agents in
and to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that may be necessary or desirable,
or that the Agents may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
the Agents to exercise and enforce their rights and remedies hereunder with
respect to any Collateral.
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SECTION 4.1.2. STOCK POWERS, ETC. The Pledgor agrees that all
Pledged Shares (and all other shares of Capital Stock constituting
Collateral) delivered by the Pledgor pursuant to this Pledge Agreement will
be accompanied by duly executed, undated blank stock powers, or other
equivalent instruments of transfer acceptable to the Agents. The Pledgor
will, from time to time upon the request of the Agents, promptly deliver to
the Agents such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Agents, with respect to the
Collateral as the Agents may reasonably request and will, from time to time
upon the request of the Agents after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the Agents.
SECTION 4.1.3. CONTINUOUS PLEDGE. Subject to SECTION 2.4, the
Pledgor will, at all times, keep pledged to the Agents pursuant hereto all
Pledged Shares and all other shares of Capital Stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral;
PROVIDED, HOWEVER, that, in the event of any sale of Pledged Shares permitted by
Section 9.2.11 of the Credit Agreement, such Pledged Shares shall be deemed
automatically released from the pledge and security interest hereunder without
any consent or other action of the Agents or any other Person and the Agents
will, at the request of the Pledgor and at the Pledgor's sole cost and expense,
execute and deliver such documents (without recourse and without representation
or warranty) as the Pledgor may reasonably request to evidence such release.
The Pledgor will not permit any Pledged Share Issuer to issue any Capital Stock
which shall not have been immediately duly pledged hereunder on a first priority
perfected basis PROVIDED, that, subject to Section 9.1.7 of the Credit
Agreement, not more than 65% of the Capital Stock of each Pledged Share Issuer
that is a non-U.S. Subsidiary shall be so pledged.
SECTION 4.1.4. VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
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(a) after any Default of the nature referred to in Section 10.1.9 of
the Credit Agreement or any Event of Default shall have occurred and be
continuing, promptly upon receipt of notice thereof by the Pledgor and
without any request therefor by the Agents, to deliver (properly endorsed
where required hereby or requested by the Agents) to the Agents all
Dividends, Distributions, all interest, all principal, all other cash
payments, and all proceeds of the Collateral, all of which shall be held
by the Agents as additional Collateral for use in accordance with
SECTION 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Agents have notified the Pledgor of the Agents' intention to
exercise their voting power under CLAUSE (B) of this SECTION 4.1.4
(i) the Agents may exercise (to the exclusion of the Pledgor) the
voting power and all other incidental rights of ownership with
respect to any Pledged Shares or other shares of Capital Stock
constituting Collateral and the Pledgor hereby grants the Agents an
irrevocable proxy, exercisable under such circumstances, to vote
the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Agents such additional proxies
and other documents as may be necessary to allow the Agents to
exercise such voting power.
All Dividends, Distributions, cash payments, and proceeds at any time and from
time to time held by the Pledgor but which the Pledgor is then obligated to
deliver to the Agents, shall, until delivery to the Agents, be held by the
Pledgor separate and apart from its other property in trust for the Agents. The
Agents agrees that unless an Event of Default shall have occurred and be
continuing and the Agents shall have given the notice referred to in CLAUSE (B)
of this SECTION 4.1.4, the Pledgor shall have the exclusive voting power with
respect to any shares of Capital Stock (including any of the Pledged Shares)
constituting Collateral and the Agents shall, upon the written request of the
Pledgor, promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are
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necessary to allow the Pledgor to exercise voting power with respect to any such
share of Capital Stock (including any of the Pledged Shares) constituting
Collateral; PROVIDED, HOWEVER, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Pledgor that would impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
ARTICLE V
THE AGENTS
SECTION 5.1. AGENTS APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably appoints each Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the such Agent's discretion, to take any
action and to execute any instrument which such Agent may deem necessary or
advisable to accomplish the purposes of this Pledge Agreement, including after
the occurrence and during the continuance of a Default of the nature set forth
in Section 10.1.9 of the Credit Agreement or an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above; and
(c) to file any claims or take any action or institute any proceedings
which such Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of such Agent with
respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
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SECTION 5.2. AGENTS MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Agents may themselves perform, or cause
performance of, such agreement, and the expenses of the Agents incurred in
connection therewith shall be payable by the Pledgor pursuant to SECTION 6.5.
SECTION 5.3. AGENTS HAVE NO DUTY. The powers conferred on the Agents
hereunder are solely to protect their interests (on behalf of the Secured
Parties) in the Collateral and shall not impose any duty on them to exercise any
such powers. Except for reasonable care of any Collateral in their possession
and the accounting for moneys actually received by them hereunder, the Agents
shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Agents have or are deemed to have knowledge
of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Agents are required to exercise
reasonable care in the custody and preservation of any of the Collateral in
their possession; PROVIDED, HOWEVER, the Agents shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if they take such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Agents to comply with
any such request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
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(a) The Agents may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
them, all the rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and
also may, without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any
of the Agents' offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agents may deem commercially
reasonable. The Agents or any of the other Secured Parties may, to the
extent permitted by Section 9-504 of the U.C.C., be the purchaser of any
of the Collateral so sold and the obligations of the Pledgor of such
Collateral to such Secured Party may be applied as a credit against the
purchase price. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' prior notice to the Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Agents shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Agents may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Upon any such sale the Agents
shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser (including the Agents or
any of the other Secured Parties) at any such sale shall hold the
Collateral so sold absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor, and the
Pledgor hereby specifically waives, to the extent it may lawfully do so,
all rights of redemption, stay or appraisal which it has or may have under
any rule of law or statute now existing or hereafter adopted.
(b) The Agents may
(i) transfer all or any part of the Collateral into the name of
the Agents or their
17
nominee, with or without disclosing that such Collateral is subject
to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Agents of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. SECURITIES LAWS. If the Agents shall determine to
exercise their right to sell all or any of the Collateral pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Agents, the Pledgor will, at
its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the
opinion of the Agents, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended
(the "SECURITIES ACT"), and to use its best efforts to cause the
registration statement relating thereto to
18
become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Agents, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Agents;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or use its best efforts to cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Agents or the Secured Parties by reason of
the failure by the Pledgor to perform any of the covenants contained in this
Section and, consequently, agrees that, if the Pledgor shall fail to perform any
of such covenants, it shall pay, as liquidated damages and not as a penalty, an
amount equal to the value (as determined by the Agents) of the Collateral on the
date the Agents shall demand compliance with this Section and the full amount of
any such payments shall be applied in accordance with SECTION 6.4.
SECTION 6.3. COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Agents are hereby authorized to comply with any
limitation or restriction in connection with such sale as they may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance
19
with such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Agents be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. APPLICATION OF PROCEEDS. If any Event of Default shall
have occurred and be continuing, all cash proceeds received by the Agents in
respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral may, in the discretion of the Agents, be held by the
Agents as additional collateral security for, or at any time thereafter be
applied (after payment of any amounts payable to the Agents pursuant to SECTION
6.5) in whole or in part by the Agents against, all or any part of the
Obligations.
Any surplus of such cash or cash proceeds held by the Agents and
remaining after payment in full in cash of or cash collateralization of all
the Obligations, the termination, expiration or cash collateralization of all
Letters of Credit, the termination of all Rate Protection Agreements and the
termination of all Commitments, shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.5. INDEMNITY AND EXPENSES. The Pledgor hereby indemnifies
and holds harmless the Agents from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Agents' gross negligence or wilful misconduct. Upon demand,
the Pledgor will pay to the Agents the amount of any and all reasonable
20
expenses, including the reasonable fees and disbursements of their counsel and
of any experts and agents, which the Agents (in their capacity as Agents and not
as Lenders) may incur in connection with:
(a) this Pledge Agreement, the Credit Agreement, each other Loan
Document or any instrument or document relating thereto;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Agents
hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN DOCUMENT. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Agents (on behalf of the Lenders or the Required Lenders, as the
case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 7.3. PROTECTION OF COLLATERAL. The Agents may from time to
time, at their option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the
21
continuance of an Event of Default) and the Agents may from time to time take
any other action which the Agents reasonably deem necessary for the maintenance,
preservation or protection of any of the Collateral or of their security
interest therein, it being understood and agreed that in each such case all
costs and expenses incurred by the Agents in connection therewith shall be
payable by the Pledgor pursuant to SECTION 6.5.
SECTION 7.4. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile
and, if to the Pledgor, mailed or telecopied or delivered to it in care of
the U.S. Borrower, and, if to the Agents, mailed or telecopied or delivered
to them, in each case at the addresses or facsimile numbers specified in the
Credit Agreement, or, with respect to the Pledgor or the Agents, at such
other address or facsimile number as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such notices and other communications, when mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any such
notice or communication, if transmitted by telecopier, shall be deemed given
when transmitted and electronically confirmed.
SECTION 7.5. SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. SEVERABILITY. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Pledge Agreement.
SECTION 7.7. COUNTERPARTS. This Pledge Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed
to be an
22
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
23
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
PLI HOLDINGS INC.
By /s/ William B. Towne
----------------------------
Name: William B. Towne
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Agent
By /s/ Gary McDonough
----------------------------
Name:
Title:
24
ATTACHMENT 1
to Parent
Pledge Agreement
Item A. PLEDGED SHARES
--------------
None.
COMMON STOCK
---------------------------------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
---------- ----------- -----------
LEINER HEALTH PRODUCTS INC. 1,000 1,000 100%
Item B. ADDITIONAL SUBSIDIARIES
-----------------------
None.
25