EXHIBIT 4.12
CANADIAN BORROWER PLEDGE AGREEMENT
This CANADIAN BORROWER PLEDGE AGREEMENT (as amended, supplemented,
amended and restated or otherwise modified from time to time, this "PLEDGE
AGREEMENT"), dated as of June 30, 1997, made by VITA HEALTH COMPANY (1985) LTD.,
a Manitoba corporation (the "PLEDGOR"), in favor of THE BANK OF NOVA SCOTIA
("SCOTIABANK"), as agent (in such capacity, the "CANADIAN AGENT") 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 the Pledgor, as the Canadian Borrower,
Leiner Health Products Group Inc., a Delaware corporation ("LHPG" or the "U.S.
BORROWER" (prior to the Assumption), 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
Canadian Agent and Scotiabank, as agent for the U.S. Lenders under the U.S.
Facility (in such capacity, the "U.S. AGENT", and together with the Canadian
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;
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 PREAMBLE.
"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,
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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 NOTE ISSUER" means each Person identified in ITEM A of
ATTACHMENT 1 hereto (as supplemented) as the issuer of the Pledged Note
identified opposite the name of such Person.
"PLEDGED NOTES" means all promissory notes of any Pledged Note Issuer
in the form or substantially the form of EXHIBIT A hereto (unless otherwise
consented to by the Canadian Agent, which consent will not be unreasonably
withheld) which are delivered or required to be delivered from time to time by
the Pledgor to the Canadian Agent as Pledged Property hereunder, as such
promissory notes, in accordance with SECTION 4.5, are amended, modified or
supplemented from time to time, together with any promissory note of any Pledged
Note Issuer taken in extension or renewal thereof or substitution therefor.
"PLEDGED PROPERTY" means all Pledged Shares, all Pledged Notes, and
all other pledged shares of Capital Stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which may from time to time hereafter be delivered by the Pledgor to
the Canadian 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 B 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
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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 to be delivered from time to time
by the Pledgor to the Canadian Agent as Pledged Property hereunder.
"PLEDGOR" is defined in the PREAMBLE.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED OBLIGATIONS" is defined in SECTION 2.2.
"SECURED PARTY" means, as the context may require, the Canadian
Lenders, the Canadian Issuers, the Canadian Agent, each counterparty to a Rate
Protection Agreement in respect of the Canadian Facility that is (or at the time
such Rate Protection Agreement is entered into, was) a Canadian Lender or an
Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
"SECURITIES ACT" is defined in CLAUSE (A) of 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.
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SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
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.
ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Canadian Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Canadian Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "COLLATERAL"):
(a) all promissory notes of each Pledged Note Issuer identified in
ITEM A of ATTACHMENT 1 hereto;
(b) all other Pledged Notes issued from time to time that are required
to be pledged pursuant to the terms of the Credit Agreement;
(c) all issued and outstanding shares of Capital Stock of each Pledged
Share Issuer identified in ITEM B of ATTACHMENT 1 hereto;
(d) all other Pledged Shares issued from time to time that are
required to be pledged pursuant to the terms of the Credit Agreement;
(e) all other Pledged Property hereafter delivered to the Canadian
Agent in connection with this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
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SECTION 2.2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures
the payment in full in cash of all Obligations of the Pledgor now or hereafter
existing (all such Obligations being the "SECURED OBLIGATIONS").
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares and all Pledged Notes, shall be delivered to and held by or on behalf of
(and, in the case of the Pledged Notes, endorsed to the order of) the Canadian
Agent 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.
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 AND PAYMENTS ON PLEDGED
NOTES. In the event that any Dividend or liquidating dividend is to be paid on
any Pledged Share or any payment of principal or interest is to be made on any
Pledged Note 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 Canadian Agent.
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
or cash collateralization in full of all Secured Obligations, the
termination or expiration
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or cash collateralization of all Canadian Letters of Credit, the
termination of all Rate Protection Agreements in respect of the Canadian
Facility and the termination of all Canadian Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Canadian Agent
hereunder, to the benefit of the Canadian Agent 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 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 all Secured Obligations, the
termination or expiration of all Canadian Letters of Credit, the termination of
all Rate Protection Agreements in respect of the Canadian Facility and the
termination of all Canadian Commitments, the security interest 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 Canadian Agent
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 and all Pledged
Notes, together with all other Collateral held by the Canadian Agent hereunder,
and execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES, ETC. The Pledgor
represents and warrants for itself unto each Secured Party, as at the date of
each pledge and delivery hereunder (including each pledge and delivery of
Pledged Shares and each pledge and delivery of a Pledged Note) by the Pledgor to
the Canadian Agent of any Collateral, as set forth in this Article, and except
as set forth or may be otherwise provided in the applicable Foreign Pledge
Agreement with respect to a non-U.S. Pledged Share Issuer or Pledged Note
Issuer.
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 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 Canadian
Agent.
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 Canadian Agent, is effective to create a valid, perfected,
first priority security interest in such Collateral and all proceeds thereof,
securing the Secured 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 set forth in ITEM B of ATTACHMENT 1 hereto. The Pledgor has no
Subsidiaries other than the Pledged Share Issuers, except as set forth in ITEM C
of ATTACHMENT 1.
SECTION 3.1.4. AS TO PLEDGED NOTES. In the case of each Pledged
Note, all of such Pledged Notes have been duly authorized, executed, endorsed,
issued and delivered,
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and are the legal, valid and binding obligation of the issuers thereof, and are
not in default.
SECTION 3.1.5. 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 Canadian Agent 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.
SECTION 3.1.6. 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 could reasonably be expected to have a
Material Adverse Effect or which might materially adversely affect the aggregate
value of the Collateral (together with all Collateral under all Pledge
Agreements) or the aggregate worth of the Collateral (together with all
Collateral under all Pledge Agreements) as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. 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 Canadian Agent hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Canadian
Agent in and to
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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
Canadian Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Canadian Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
SECTION 4.2. 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 Canadian Agent. The Pledgor will, from time to time upon the
request of the Canadian Agent, promptly deliver to the Canadian Agent such stock
powers, instruments, and similar documents, satisfactory in form and substance
to the Canadian Agent, with respect to the Collateral as the Canadian Agent may
reasonably request and will, from time to time upon the request of the Canadian
Agent 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 Canadian Agent.
SECTION 4.3. CONTINUOUS PLEDGE. Subject to SECTION 2.4, the Pledgor
will, at all times, keep pledged to the Canadian Agent pursuant hereto all
Pledged Shares and all other shares of Capital Stock constituting Collateral,
all Dividends and Distributions with respect thereto, all Pledged Notes, all
interest, principal and other proceeds received by the Canadian Agent with
respect to the Pledged Notes, 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 Collateral permitted by Section 9.2.11 of the Credit
Agreement, such Collateral shall be deemed automatically released from the
pledge and security interest hereunder
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without any consent or other action of the Canadian Agent or any other Person
and the Canadian Agent 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 except as permitted under the
Credit Agreement.
SECTION 4.4. VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
(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 Canadian Agent, to deliver (properly
endorsed where required hereby or requested by the Canadian Agent) to the
Canadian Agent 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 Canadian Agent 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 Canadian Agent has notified the Pledgor of the Canadian Agent's
intention to exercise its voting power under CLAUSE (B) of this SECTION 4.4
(i) the Canadian Agent 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 Canadian
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Canadian Agent such additional
proxies and other documents
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as may be necessary to allow the Canadian Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Canadian Agent, shall, until
delivery to the Canadian Agent, be held by the Pledgor separate and apart from
its other property in trust for the Canadian Agent. The Canadian Agent agrees
that unless an Event of Default shall have occurred and be continuing and the
Canadian Agent shall have given the notice referred to in CLAUSE (B) of this
SECTION 4.4, 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 Canadian Agent 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 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).
SECTION 4.5. ADDITIONAL UNDERTAKINGS. The Pledgor will not, without
the prior written consent of the Canadian Agent (such consent not to be
unreasonably withheld):
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
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ARTICLE V
THE CANADIAN AGENT
SECTION 5.1. CANADIAN AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby irrevocably appoints the Canadian 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 Canadian Agent's discretion, to
take any action and to execute any instrument which the Canadian 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 the Canadian Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Canadian
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.
SECTION 5.2. CANADIAN AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein, the Canadian Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Canadian Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
SECTION 6.5.
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SECTION 5.3. CANADIAN AGENT HAS NO DUTY. The powers conferred on the
Canadian Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Canadian Agent 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 Canadian Agent has or is 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 Canadian Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; PROVIDED, HOWEVER, the Canadian Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes 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 Canadian
Agent 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:
(a) The Canadian Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C.
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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 Canadian Agent's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Canadian Agent 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
Canadian Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Canadian Agent may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. 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 Canadian Agent may
(i) transfer all or any part of the Collateral into the name of
the Canadian Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
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(ii) notify the parties obligated on any of the Collateral to
make payment to the Canadian Agent 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 Canadian Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Canadian Agent, 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 Canadian Agent, 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 become effective and to remain effective for
such period as prospectuses are required by law to be furnished, and to
make all amendments and
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supplements thereto and to the related prospectus which, in the opinion
of the Canadian Agent, 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 Canadian
Agent;
(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 Canadian Agent 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 Canadian Agent) of
the Collateral on the date the Canadian Agent 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 Canadian Agent is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number
17
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 Canadian Agent 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 Canadian
Agent 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 Canadian Agent, be
held by the Canadian Agent as additional collateral security for, or at any time
thereafter be applied (after payment of any amounts payable to the Canadian
Agent pursuant to SECTION 6.5) in whole or in part by the Canadian Agent
against, all or any part of the Secured Obligations.
Any surplus of such cash or cash proceeds held by the Canadian Agent
and remaining after payment in full in cash of or cash collateralization of all
the Secured Obligations, the termination, expiration or cash collateralization
of all Canadian Letters of Credit, the termination of all Rate Protection
Agreements in respect of the Canadian Facility and the termination of all
Canadian 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 Canadian Agent 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 Canadian Agent's gross negligence or wilful
misconduct. Upon demand,
18
the Pledgor will pay to the Canadian Agent the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Canadian Agent (in its capacity as Canadian
Agent, not as Lender) may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and 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 Canadian
Agent 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 Canadian Agent (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 Canadian Agent may from
time to time, at its 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
19
no such request need be given after the occurrence and during the continuance of
an Event of Default) and the Canadian Agent may from time to time take any other
action which the Canadian Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its 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 facsimile and
mailed or telecopied or delivered to either party hereto, addressed to such
party at such party's address specified in the Credit Agreement or, with respect
to the Pledgor or the Canadian Agent, 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
20
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 PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN
THE PROVINCE, 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 PROVINCE OF
MANITOBA. 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.
21
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.
VITA HEALTH COMPANY (1985) LTD.
By /s/ William B. Towne
----------------------------
Name: William B. Towne
Title: Treasurer
THE BANK OF NOVA SCOTIA,
as Canadian Agent
By /s/ Gary McDonough
----------------------------
Name:
Title: Authorized Signatory
22
EXHIBIT A
to Canadian Borrower
Pledge Agreement
PROMISSORY NOTE
Cdn $_______________ _________, ____
FOR VALUE RECEIVED, the undersigned, ______________, a _______________
corporation (the "MAKER"), promises to pay to the order of VITA HEALTH COMPANY
(1985) LTD., a Manitoba corporation (the "PAYEE"), on demand, the principal sum
of ______________ DOLLARS ($________) or, if less, the aggregate unpaid
principal amount, as reflected on the books and records of the Payee, of all
intercompany loans made from time to time by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "NOTE") from
time to time outstanding shall bear interest at a rate of interest as reflected
in the books and records of the Payee, which the Maker represents to be a lawful
and commercially reasonable rate, payable from time to time on demand of Payee,
and all payments of principal of and interest on this Note shall be payable in
lawful currency of Canada. All such payments shall be made by the Maker to an
account established by the Payee at _______________. Upon notice from the
Canadian Agent that a Default (as defined in the Credit Agreement, hereinafter
defined) of the nature referred to in Section 10.1.9 of the Credit Agreement or
an Event of Default (as defined in the Credit Agreement) has occurred and is
continuing under the Credit Agreement, the Maker shall make such payments, in
same day funds, to such other account as the Canadian Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to, clause (e) of Section 9.2.2 of the Credit
Agreement, dated as of June 30, 1997 (as amended, supplemented, amended and
restated or otherwise modified from time to time, the "CREDIT AGREEMENT"), among
the Payee, as the Canadian Borrower, Leiner Health Products Inc., as the U.S.
Borrower (following the Assumption), The Bank of Nova Scotia, as the Canadian
agent (the "CANADIAN AGENT") and the U.S. Agent, and various financial
institutions as are, or may from time to time become, parties thereto. Upon the
occurrence and continuance of an Event of Default under the Credit Agreement,
and notice thereof by the Canadian Agent to the Maker, the Canadian Agent shall
have all rights of the Payee to collect and accelerate, and enforce all rights
with respect to, the Indebtedness evidenced by this Note. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the
Pledge Agreement pursuant to which this Note has been pledged to the Canadian
Agent as security for the Obligations in respect of the Canadian Facility
outstanding from time to time under the Credit Agreement and each other Loan
Document.
In addition to, but not in limitation of, the foregoing, the Maker
further agrees to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder (including the Canadian Agent as pledgee)
of this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN
THE PROVINCE.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
NOTE. THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
2
PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of THE
BANK OF NOVA SCOTIA, as
Canadian Agent
By
------------------------------
Name:
Title:
3
ATTACHMENT 1
to Canadian
Borrower
Pledge
Agreement
Item A. PLEDGED NOTES
Pledged Note Issuer Description
- ------------------- -----------
None.
Item B. PLEDGED SHARES
Pledged Share Issuer Common Stock
- -------------------- ----------------------------------------
Authorized Outstanding % of Shares
Shares Shares Pledged
---------- ----------- -----------
64804 Manitoba Ltd. unlimited 1 100%
Westcan Pharmaceuticals Ltd. unlimited 1 100%
Item C. ADDITIONAL SUBSIDIARIES
None.