Exhibit 10.3
EXECUTION COPY
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of September 14, 2001 (this
"Agreement"), by and between R.A.B. ENTERPRISES, INC., a Delaware corporation
(the "Grantor"), and The Chase Manhattan Bank, a New York banking corporation,
as agent (the "Agent") for the benefit of (i) the lenders (the "Lenders") named
in Schedules 2.01(a) and 2.01(b) of the Amended and Restated Credit Agreement
dated as of May 1, 1998, by and among Millbrook Distribution Services Inc., a
Delaware corporation ("Millbrook"), The B. Manischewitz Company, LLC, a Delaware
limited liability company ("Manischewitz", each of Millbrook and Manischewitz a
"Borrower" and, collectively, the "Borrowers"), the Lenders, the Agent and Bank
of America, N.A., as co-agent and documentation agent (the "Co-Agent") (as
heretofore and hereafter amended, modified or supplemented from time to time in
accordance with its terms, the "Amended Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit.
A. The Agent, the Co-Agent and the Lenders have agreed to extend Loans and
certain other financial accommodations including, without limitation, the
issuance of Letters of Credit to the Borrowers pursuant to, and subject to the
terms and conditions of, the Amended Credit Agreement. The obligation of the
Lenders to extend such Loans and of the Agent to issue Letters of Credit under
the Amended Credit Agreement is conditioned on the execution and delivery by the
Grantor of a pledge agreement in the form hereof to secure, on a nonrecourse
basis, the following (collectively, the "Secured Obligations"): all Obligations
(such Obligations to include, without limitation, the due and punctual payment
and performance of (a) the principal of and interest on the Loans (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a), and
interest that, but for the filing of a petition in bankruptcy with respect to
the Borrowers, would accrue on such obligations, whether or not a claim is
allowed against the Borrowers for such interest in the related bankruptcy
proceeding), pursuant to the irrevocable proxy granted herein, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (b) Indebtedness at any time and from time to time under the
Letters of Credit, (c) all obligations of the Grantor at any time and from time
to time under this Pledge Agreement and (d) all other obligations of the
Borrowers at any time and from time to time under the Amended Credit Agreement
and the other Loan Documents).
B. Capitalized terms used herein and not defined herein shall have the
respective meanings assigned to such terms in the Amended Credit Agreement.
Accordingly, the Grantor and the Agent hereby agree as
follows:
1. Pledge. (a) As security for the payment in full of the Secured Obligations,
the Grantor hereby transfers, grants, bargains, sells, conveys, hypothecates,
pledges, sets over, endorses over, and delivers unto the Agent, and grants, on a
non-recourse basis, to the Agent, for its own benefit and for the benefit of the
Lenders, a security interest in, all right, title and interest of the Grantor in
and to the following, whether now owned or hereafter acquired (collectively, the
"Collateral"): (a) the Senior Notes previously repurchased by the Grantor, not
resold by the Grantor, and listed on Schedule I attached hereto; (b) any
additional Senior Notes which are repurchased by the Grantor, not resold by the
Grantor, and not retired; and (c) subject to Section 5 below and the terms and
conditions of the Amended Credit Agreement, all proceeds of the foregoing,
including, without limitation, all cash, securities or other property at any
time and from time to time receivable or otherwise distributed in respect of or
in exchange for any of or all of the foregoing. Each repurchase by the Grantor
of Senior Notes after the date hereof shall be accompanied by a schedule showing
a description of the instruments theretofore and then being pledged hereunder,
which schedule shall be attached hereto as Schedule I and made a part hereof.
Each schedule so delivered shall supersede any prior schedules so delivered.
(b) It is understood and agreed that it is the intention of the foregoing
that this Agreement is a non-recourse obligation and that the Agent's rights to
recover against the Grantor with respect to the Secured Obligations (including,
without limitation the Agent's reasonable fees and out-of-pocket expenses
pursuant to Section 14 hereof) shall be strictly limited to the Collateral only,
and the Agent, the Co-Agent and the Lenders shall have no rights or remedies
against, or recourse to, the Grantor with respect to any of the Secured
Obligations. It is understood and agreed that the Grantor is the beneficial
owner of the Collateral and holds legal title in and to the Collateral (subject
to the security interest granted hereby).
2. Registration in Nominee Name; Delivery of Collateral. Subject to the terms
and conditions of the Amended Credit Agreement, to the extent that any of the
Senior Notes being pledged hereunder on the date hereof are evidenced by an
instrument or other writing, the Grantor shall deliver such instrument or
writing, duly endorsed to the order of the Agent, on the date hereof and the
Grantor agrees to deliver promptly or cause to be delivered to the Agent any and
all other instruments or writings representing any of the Collateral (together
with any necessary endorsement). To the extent that any of the Senior Notes
being pledged hereunder are not evidenced by an instrument or writing, the
Grantor shall cause all such Senior Notes to be held in account number 3367000
(the "Account") at Jefferies & Company, Inc. (the "Broker"), and from and after
the date hereof, the Grantor shall take all actions reasonably requested by the
Agent to cause the Account to be registered in the name of the Agent or the
Agent's nominee; provided, that, notwithstanding anything to the contrary
contained in this Agreement, unless and until an Event of Default shall have
occurred and be continuing, the Grantor shall have the right, in its sole and
absolute discretion, to resell any and all Senior Notes repurchased in
accordance with the terms and provisions of the Amended Credit Agreement
(including, without limitation, the provisions of Section 2.09 thereof) and the
Broker shall take all actions to carry out the instructions of the Grantor in
connection with the foregoing unless and until it has received notice from the
Agent that an Event of Default shall have occurred and be continuing. The
Grantor agrees that all Senior Notes that it has repurchased (and which are not
retired) shall either be (i) evidenced by an instrument (or other writing) that
has been delivered to the Agent in accordance with this Agreement or (ii) held
in the Account.
3. Representations, Warranties and Covenants. The Grantor hereby represents,
warrants and covenants to and with the Agent that:
(a) the Grantor (i) has title to the Collateral that it is pledging hereunder
free and clear of all Liens of every kind and nature, except for the Lien in
favor of the Agent granted pursuant to this Agreement, (ii) except as permitted
under the Amended Credit Agreement, will make no assignment, pledge,
hypothecation or transfer of, or create any security interest in, the
Collateral, and (iii) except as permitted under the Amended Credit Agreement and
subject to Section 5 below, will cause any and all Collateral, whether for value
paid by the Grantor or otherwise, to be forthwith deposited with the Agent and
pledged or assigned hereunder;
(b) the Grantor (i) has the authority to pledge the Collateral it is pledging
hereunder in the manner hereby done or contemplated, and (ii) will defend its
title or interest thereto or therein against any and all attachments, Liens,
claims or other impediments of any nature, however arising, of all persons
whomsoever;
(c) no consent or approval of any governmental body or regulatory authority or
any securities exchange is necessary to the validity of the pledge effected
hereby;
(d) by virtue of the execution and delivery by the Grantor of this Agreement,
(x) when the instruments or other documents representing or evidencing the
Collateral are delivered to the Agent in accordance with this Agreement, if
applicable, the Agent will obtain a valid and perfected first Lien upon and
security interest in such items of Collateral as security for the repayment of
the Secured Obligations, and (y) when the Account has been registered in the
name of the Agent or the Agent's nominee, the Agent will obtain a valid and
perfected first Lien upon and security interest in such items of Collateral as
security for the repayment of the Secured Obligations, in each prior to all
other Liens thereon;
(e) the pledge effected hereby is effective to vest in the Agent the rights of
the Agent in the Collateral as set forth herein; and
(f) all of the Senior Notes being pledged on the date hereof are being held in
the Account and are listed on Schedule I annexed hereto.
All representations, warranties and covenants of the Grantor contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement pursuant to Section 15 hereof.
4. Intentionally Omitted.
(a) Proceeds, etc. Unless and until an Event of Default shall have occurred and
be continuing the Grantor shall be entitled to exercise any and all rights and
powers under the Collateral or any part thereof for any purpose not inconsistent
with the terms of this Agreement and the Amended Credit Agreement provided that
such action would not adversely affect the rights inuring to the Agent or the
Lenders under this Agreement or the Amended Credit Agreement or adversely affect
the rights and remedies of the Agent or the Lenders under this Agreement or the
Amended Credit Agreement or the ability of the Agent or the Lenders to exercise
the same. Notwithstanding anything to the contrary contained herein, the Grantor
shall be permitted to direct the sale of the Senior Notes being pledged
hereunder, and the Agent shall direct the Broker shall have the power and
authority under this Agreement to follow the instructions of a Responsible
Officer of the Grantor regarding the sale of the Senior Notes pledged hereunder
until such time as the Broker shall receive a notice from the Agent of the
occurrence of an Event of Default. Notwithstanding the foregoing, the Grantor
shall, immediately upon the receipt by it of the net proceeds of any such sale
of Senior Notes pledged hereunder, make a capital contribution to the Borrowers
in an amount equal to such net proceeds (such capital contribution to be applied
to prepay the Loans in the manner described in Section 2.09 of the Amended
Credit Agreement).
(b) Upon the occurrence and during the continuance of an Event of Default, all
rights of the Grantor to exercise the rights and powers which it is entitled to
exercise pursuant to Section 5(a) and all such rights shall thereupon become
vested in the Agent, which shall have the sole and exclusive right and authority
to exercise such rights and powers.
(c) Upon the occurrence and during the continuance of an Event of Default, any
payments made in respect of the Collateral shall be and become part of the
Collateral, and, if received by the Grantor, shall not be commingled by the
Grantor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Agent and the
Lenders and shall be forthwith delivered to the Agent in the same form as so
received to be held as part of the Collateral hereunder.
5. Intentionally Omitted.
6. Intentionally Omitted.
7. Remedies upon Event of Default. If an Event of Default shall have occurred
and be continuing, the Agent may sell or otherwise dispose of all or any part of
the Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the Agent
shall deem appropriate. Any such sale or disposition shall be conducted and
shall conform to the standards of commercial reasonableness set forth in the
Uniform Commercial Code as in effect in the State of New York to the extent
applicable to such sale or disposition. Each such purchaser at any such sale
shall hold the property sold absolutely, free from any claim or right on the
part of the Grantor, and the Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and appraisal which the Grantor
now has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
The Agent shall give the Grantor 10 days' written notice
(which the Grantor agrees is commercially reasonable) of the Agent's intention
to make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Agent may fix and state in the notice (if any) of such
sale. At any such sale, the Collateral, or portion thereof, to be sold may be
sold in one lot as an entirety or in separate parcels, as the Agent may (in its
sole and absolute discretion) determine. The Agent shall not be obligated to
make any sale of any Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of such Collateral shall have been given. The
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Agent shall not incur any liability
in case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Section 8, the
Agent may bid for or purchase, free (to the extent permitted by applicable law)
from any right of redemption, stay or appraisal on the part of the Grantor (all
said rights being also hereby waived and released to the extent permitted by
applicable law), with respect to the Collateral or any part thereof offered for
sale and the Agent may make payment on account thereof by using any claim then
due and payable to the Agent or any Lender from the Grantor as a credit against
the purchase price, and the Agent may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further accountability to the
Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the Agent
shall be free to carry out such sale and purchase pursuant to such agreement,
and the Grantor shall not be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after the Agent
shall have entered into such an agreement all Events of Default shall have been
remedied and the Secured Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
8. Application of Proceeds of Sale. Upon the occurrence and during the
continuance of an Event of Default, the Agent may sell the Collateral in
accordance with Section 5 hereof. The proceeds of any sale of Collateral, as
well as any Collateral consisting of cash, shall be applied by the Agent as
follows:
FIRST, to the payment of all reasonable costs and
out-of-pocket expenses incurred by the Agent in connection with such collection
or sale or otherwise in connection with this Agreement or any of the Secured
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Agent hereunder on behalf of the Grantor or to protect and preserve
the Collateral and any other reasonable out-of-pocket costs or expenses incurred
in connection with the exercise of any right or remedy hereunder;
SECOND, to the Agent to reimburse the Agent for that portion
of the payments, if any, made by it with respect to Letters of Credit for which
a Lender, as a participant in such Letter of Credit pursuant to Section 2.18 of
the Amended Credit Agreement, failed to pay its pro rata share thereof as
required pursuant to such Section 2.18;
THIRD, to the Agent to be held as cash collateral to the
extent of undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Amended Credit
Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantor, its successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
9. Agent Appointed Attorney-in-Fact. The Grantor hereby appoints the Agent its
attorney-in-fact, effective only upon the occurrence and continuance of an Event
of Default, for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instrument which the Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Agent shall have the right, only upon the occurrence and during
the continuance of an Event of Default, with full power of substitution either
in the Agent's name or in the name of the Grantor, to ask for, demand, sue for,
collect, receive receipt and give acquittance for any and all moneys due or to
become due and under and by virtue of any Collateral, to endorse checks, drafts,
orders and other instruments for the payment of money payable to the Grantor
representing any interest or dividend, or other distribution payable in respect
of the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and make any agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Agent to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by the Agent. The Agent may
present or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Agent or
omitted to be taken with respect to the Collateral or any part thereof shall
give rise to any defense, counterclaim or offset in favor of the Grantor or to
any claim or action against the Agent or the Lenders in the absence of the gross
negligence or wilful misconduct of the Agent or the Lenders.
10. No Waiver. No failure on the part of the Agent to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Agent preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Agent and the Lenders shall not be deemed to have waived any rights hereunder or
under any other agreement or instrument unless such waiver shall be in writing
and signed by such parties.
11. Intentionally Omitted.
12. Security Interest Absolute. All rights of the Agent hereunder, the grant of
a security interest in the Collateral and all obligations of the Grantor
hereunder, shall be absolute and unconditional irrespective of (i) any lack of
validity or enforceability of the Amended Credit Agreement, any agreement with
respect to any of the Secured Obligations or any other agreement or instrument
relating to any of the foregoing (other than as resulting from the Agent's gross
negligence or willful misconduct), (ii) any change in time, manner or place of
payment of, or in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from the
Amended Credit Agreement or any other agreement or instrument, (iii) any
exchange, release or nonperfection of any other collateral, or any release or
amendment or waiver of or consent to or departure from any guarantee, for all or
any of the Secured Obligations or (iv) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, the Grantor in
respect of the Secured Obligations or in respect of this Agreement.
13. Agent's Fees and Expenses. The Grantor shall be obligated to, upon demand,
pay to the Agent the amount of any and all reasonable out-of-pocket expenses,
including the reasonable fees and expenses of its counsel and of any experts or
agents which the Agent may incur in connection with (i) the custody or
preservation of (after the occurrence and continuance of an Event of Default),
or the sale of, collection from, or other realization upon, any of the
Collateral in accordance herewith, (ii) the exercise or enforcement of any of
the rights of the Agent hereunder in accordance herewith or (iii) the failure by
the Grantor to perform or observe any of the provisions hereof. In addition, the
Grantor indemnifies, and holds the Agent and the Lenders harmless from and
against any and all liability incurred by the Agent or the Lenders hereunder or
in connection herewith, unless such liability shall be due to the gross
negligence or wilful misconduct of the Agent or the Lenders, as the case may be.
Any such amounts payable as provided hereunder or thereunder shall be additional
Secured Obligations secured hereby and by the other Security Documents.
14. Termination. This Agreement shall terminate upon the earlier to occur of (A)
the date when all Senior Notes have been repurchased and retired by the Grantor
and (B) the date when (w) all the Secured Obligations have been fully and
indefeasibly paid in cash, (x) the Lenders have no further commitment to make
any Loans under the Amended Credit Agreement, (y) the Agent shall have no
further obligation to issue any Letters of Credit, and (z) the Lenders have no
further obligation to extend financial accommodations under the Rate Agreements,
if applicable, at which time the Agent shall reassign and deliver to the
Grantor, or to such person or persons as the Grantor shall designate, against
receipt, such of the Collateral (if any) as shall not have been sold or
otherwise still be held by it hereunder, together with appropriate instruments
of reassignment and release; provided, however, that all indemnities of the
Grantor contained in this Agreement shall survive, and remain operative and in
full force and effect regardless of, the termination of this Agreement. Any such
reassignment shall be without recourse to or warranty by the Agent and at the
expense of the Grantor.
15. Notices. All communications and notices hereunder shall be in writing and
given as provided in the Amended Credit Agreement.
16. Further Assurances. The Grantor agrees to do such further acts and things,
and to execute and deliver such additional conveyances, assignments, agreements
and instruments, as the Agent may at any time reasonably request in connection
with the administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm unto the
Agent its rights and remedies hereunder. The Grantor authorizes the Agent to
file financing statements under the Uniform Commercial Code describing the
Collateral (and the Agent shall promptly send copies of any such financing
statements to the Grantor).
17. Binding Agreement; Assignments. This Agreement, and the terms, covenants and
conditions hereof, shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Grantor
shall not be permitted to assign this Agreement or any interest herein or in the
Collateral, or any part thereof, or otherwise pledge, encumber or grant any
option with respect to the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement, and except that
the Agent may not assign its rights hereunder, except in connection with a
resignation of the Agent and the appointment of a substitute Agent in the manner
permitted by the Amended Credit Agreement.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT CONFLICTS OF LAWS
PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
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.
19. Amended Credit Agreement. In the event of any inconsistency or conflict
between the terms and provisions of the Amended Credit Agreement and the terms
and provisions of this Agreement, or with respect to any payment provisions
which could be construed as requiring duplicative payments, the terms and
provisions of the Amended Credit Agreement shall control. Nothing herein shall
require the Grantor to make a duplicate payment if the payment is otherwise
provided for in any other Loan Document.
20. Severability. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
21. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Agreement shall be effective
when a counterpart which bears the signature of the Grantor shall have been
delivered to the Agent.
22. Section Headings. Section headings used herein are for convenience only and
are not to affect the construction of, or be taken into consideration in
interpreting, this Agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement as of the day and year first above written.
R.A.B. ENTERPRISES, INC.
By: /s/ Richard A. Bernstein
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Name: Richard A. Bernstein
Title: Chairman
THE CHASE MANHATTAN BANK, as Agent
By: /s/ Michael J. Miller
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Name: Michael J. Miller
Title: Vice President