Pledge Agreement - Inmark Enterprises Inc., Inmark Services inc., Optimum Group Inc. and PNC Bank NA
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of March 31, 1998 (this "Pledge Agreement")
made by Inmark Enterprises, Inc., Delaware corporation ("Parent"), Inmark
Services, Inc., a Delaware corporation ("Services"), and Optimum Group, Inc., an
Ohio corporation (formerly OG Acquisition Corp. ("New OGI"), in favor of PNC
Bank, National Association ("Lender"). Parent, Services and New OGI shall
collectively be referred to herein as "Grantors" and each individually as
"Grantor." Any capitalized terms used herein and not otherwise defined in
section 1 shall have the meaning ascribed to such term in the Loan Agreement
dated as of even date herewith (the "Loan Agreement") by and among Grantors and
Lender.
PRELIMINARY STATEMENT:
Pursuant to the Loan Agreement, Lender has agreed to make certain Loans
to Services and New OGI (collectively, "Borrower") upon the terms and conditions
set forth therein and the other Loan Document. Parent has agreed to guarantee
the prompt and full payment and other performance of all of the Obligations of
Borrower pursuant to the Guaranty. Each Grantor is the record owner of (A) those
shares of stock described in Part A of Schedule I (the "Pledged Shares") and
issued by the corporations names therein, (B) those other equity securities,
including securities evidencing interests in limited liability companies and
partnerships (the "Other Pledged Equity Securities") described in Part B of
Schedule I and (C) those instruments and other securities evidencing
indebtedness described in Part C of Schedule I and issued by the obligor named
therein (the "Pledged Debt"). It is a condition precedent to the obligation of
Lender to make the Loans that the Grantors execute and deliver to Lender this
Pledge Agreement.
AGREEMENT:
1. Grant and Pledge of Security; Cross Collateralization.
1.1 Grant and Pledge of Security. As security for the full and punctual
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all of the Obligations, whether pursuant to any
Loan Document or otherwise, each Grantor hereby pledges, transfers and assigns
to Lender (and its successors and assigns), and grants to Lender (and its
successors and assigns) security interests in all of its Security Collateral.
The security interests granted hereby, and all remedies and other rights stated
or referred to in this Pledge Agreement or any other Loan Document, shall
continue in full force and effect until the later of (i) the termination of the
Revolving Line of Credit or (ii) the full, final and indefeasible payment and
performance of the Obligations. Each Grantor agrees that all of the Security
Collateral constitutes equal security for all of the Obligations of such
Grantor, and agrees that Lender shall be entitled to sell, retain or otherwise
deal with any or all of such Collateral, in any order or simultaneously as
Lender shall determine in its sole and absolute discretion, free of any
requirement for the marshalling of assets or other restriction upon Lender in
dealing with such Security Collateral. Grantor agrees that Lender may at
Lender's election proceed directly against any Grantor for collection of any or
all of its Obligations without
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first selling, retaining or otherwise dealing with any of the Security
Collateral. Without limiting the generality of the foregoing, this Pledge
Agreement secures the payment of all amounts that constitute part of the
Obligations and would be owed by a Grantor to Lender under the Loan Documents
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving such
Grantor.
1.2 Definition of Security Collateral. For the purposes of the Loan
Documents, "Security Collateral" means (a) the Pledged Shares, the certificates
representing the Pledged Shares, and all dividends, cash, instruments, and other
proceeds and other property from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares;
(b) the Other Pledged Equity Securities, and the certificates representing the
Other Pledged Equity Securities, and all dividends, cash, instruments, and other
proceeds and other property from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of the Other Pledged
Equity Securities; (c) the Pledged Debt, the instruments evidencing the Pledged
Debt, and all interest, cash, instruments, and other proceeds and other property
from time to time received, receivable, or otherwise distributed in respect of
or in exchange for any or all of the Pledged Debt; (d) all additional shares of
stock of any issuer of the Pledged Shares or any other issuer from time to time
acquired by any Grantor in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments, and other proceeds and
other property from time to time received, receivable, or otherwise distributed
in respect of or in exchange for any or all of such shares; (e) all additional
other equity securities of any issuer of the Other Pledged Equity Securities or
any other issuer from time to time acquired by any Grantor in any manner, and
the certificates representing such additional other equity securities, and all
dividends, cash, instruments, and other proceeds and other property from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for any or all of such shares; and (f) all additional indebtedness from time to
time owed to any Grantor by any obligor of the Pledged Debt or any other obligor
and the instruments evidencing such indebtedness, and all interest, cash,
instruments, and other proceeds and other property from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
such indebtedness.
1.3 Cross Collateralization. The Security Collateral of each Grantor
secures all the Obligations and all other obligations now or hereafter
outstanding under all other agreements between any Grantor and Lender or any of
its Affiliates, and the collateral pledged under any such other agreement with
Lender or any of its Affiliates secures the Obligations.
1.4 Delivery of Security Collateral. The Grantors acknowledge that each
has delivered to Lender all certificates, instruments and other Documents
representing Security Collateral that exist on the date hereof and will
immediately deliver to Lender all certificates, instruments and other Documents
representing Security Collateral that comes into existence in the future
immediately after receipt of the same by any Grantor. Concurrently with the
delivery to Lender of each certificate, instrument or other Document
representing Security Collateral, the appropriate Grantor shall, if appropriate,
in form and substance satisfactory to Lender, indorse the same over to Lender in
blank and/or deliver an undated stock powers, bond powers or similar Documents
covering such certificate, instrument or other Document, duly executed in blank
by such Grantor. Pending the delivery by the Grantors of any certificate,
instrument or other Document representing Security Collateral, Grantor shall
hold the same in trust for Lender, as additional collateral security for the
Obligations.
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1.5 Further Assurances. Each Grantor shall execute and deliver such
further Documents (in form and substance satisfactory to Lender) and take such
other actions as Lender may request from time to time in order to obtain and
preserve the full benefits of the Loan Documents and the rights and powers
therein granted. Each Grantor also hereby authorizes Lender to file any
financing statement, and all other types of Documents required to be filed to
perfect any of the Liens granted herein, without the signature of such Grantor
to the extent permitted by applicable law. A carbon, photographic or other
reproduction of this Pledge Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
1.6 Grantors Remains Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Security Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Pledge Agreement had not been executed, (b) the exercise by Lender of any
of the rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreement included in the Security
Collateral and (c) Lender shall not have any obligation or liability under the
contracts and agreements included in the Security Collateral by reason of this
Pledge Agreement or any other Loan Document, nor any Lender be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
2. Representations and Warranties. Each Grantor, jointly and severally,
represents and warrants to Lender that, knowing and intending that Lender will
rely thereon in making the Loans that the following statements are true,
complete and correct:
2.1 Title; Liens; etc. (a) Security Collateral listed on Schedule I
constitutes all of the shares of stock, other equity securities, and debt
securities of any issuer or obligor owned by any Grantor; (b) all of the
information set forth in Schedule I is true, complete and correct; (c) all of
the shares of stock and other equity securities that constitute Security
Collateral have been duly authorized and validly issued and are fully paid and
nonassessable; (d) all of the debt securities that constitute Security
Collateral have been duly authorized, authenticated or issued; (e) the debt
securities that constitute Security Collateral is the legal, valid and binding
obligation of the issuers thereof, enforceable in accordance with its terms, and
is not in default; (f) the Grantor identified as the owner of the Security
Collateral in Schedule I is the legal, record and beneficial owner of, and has
good and marketable title to, such Security Collateral, free and clear of any
Lien except the Lien created by the Collateral Documents; and (g) none of the
Security Collateral is subject to any prohibition against encumbering, pledging,
hypothecating or assigning the same or requires notice or consent in connection
therewith (other than those which have been made or obtained prior to the date
hereof).
2.2 Perfected First Priority Liens. This Pledge Agreement together with
the other Collateral Documents is effective to create in favor of Lender, a
legal, valid and enforceable security interest in all right, title and interest
of Grantors in the Security Collateral. Upon delivery to Lender of the
certificates or instruments evidencing the Security Collateral (together with
stock powers, bond powers or similar Documents executed in blank), this Pledge
Agreement together with the other Collateral Documents shall constitute a fully
perfected first priority Lien on, and security interest in, all right, title and
interest in the Security Collateral for the benefit of Lender.
3. Voting Rights; Dividends; Etc..
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3.1 Voting Rights. So long as no Event of Default shall have occurred
and be continuing, each Grantor shall be permitted to exercise (or refrain from
exercising) any and all voting and other consensual rights with respect to the
Security Collateral for any purpose not inconsistent with the terms of any Loan
Document; provided that (A) no Grantor shall exercise (or refrain from
exercising) any such right, if in Lender's judgment, such action (or inaction)
would or might reasonably be expected to impair any Collateral and (B) each
Grantor shall deliver to Lender at least five calendar days' notice of the
manner in which it intends to exercise (or the reasons for refraining from
exercising) any such right.
3.2 Distributions. So long as no Event of Default shall have occurred
and be continuing, each Grantor shall be entitled to receive and retain any
retain all dividends and interest paid in respect of the Security Collateral;
provided, that any and all
(a) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable, or
otherwise distributed in respect of, or in exchange for, any Security
Collateral;
(b) dividends and other distributions paid or payable in cash in
respect of any Security Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus, or paid-in capital surplus; and
(c) cash paid, payable, or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral
shall be, and shall be forthwith delivered to Lender to hold as Security
Collateral and shall, if received by such Grantor, be received in trust for the
benefit of Lender, be segregated from the other property or funds of all
Grantors, and be forthwith delivered to Lender as Security Collateral in the
same form as so received (with any necessary indorsement or assignment).
3.3 Event of Default - Voting Rights and Distributions. If an Event of
Default shall occur and be continuing,
(a) all right of any Grantor to exercise (or refrain from
exercising) the voting and other consensual rights that it would otherwise be
entitled to exercise pursuant to section 3.1 and to receive dividends and
interest payments that it would otherwise be authorized to receive and retain
pursuant to section 3.2 shall cease, and all such rights shall thereupon become
vested in Lender or its nominee who shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual rights and
to receive and hold as Collateral such dividends and interest payments, all
without liability except to account for property actually received by it;
provided, that Lender shall have no duty to any Grantor to exercise any such
right and shall not be responsible for any failure to do so or delay in so
doing.
(b) all dividend and interest payments that are received by
any Grantor contrary to the provisions of section 3.3(a) shall be received in
trust for the benefit of Lender, shall be segregated from other funds of Grantor
and shall be forthwith paid over to Lender as Collateral in the same form so
received (with any necessary endorsement or assignment).
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(c) The rights of Lender hereunder shall not be conditioned or
contingent upon the pursuit by Lender of any right or remedy against the
Grantors or against any other Person which may be or become liable in respect of
all or any part of the Obligations or against any collateral security therefor,
other guarantee therefor or right of offset with respect thereto. Lender shall
not be liable for any failure to demand, collect or realize upon all or any part
of the Collateral or for any delay in so doing, nor shall Lender be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Grantors or any other person or to take any other action whatsoever with
regard to the Collateral or any part thereof.
3.4 Additional Securities; Other Liens. Each Grantor, jointly and
severally, covenants and agrees that, until full and final payment and
performance of the Obligations and so long as the Revolving Line of Credit
remains in effect, it shall not (and shall cause each of its Subsidiaries and
Affiliates not to) (a) vote to enable, or take any other action to permit, any
of the issuers of any Security Collateral to issue any additional shares of
stock or any additional other equity securities to any Person other than a
Grantor, (b) sell, assign, transfer, exchange or otherwise dispose of, or grant
any option with respect to, the Security Collateral or (c) create, incur or
permit to exist any Lien with respect to, any of the Security Collateral, or any
interest therein, except for the Lien provided for by the Collateral Documents.
4. Additional Powers of Lender.
4.1 Irrevocable Authorization and Instruction. In addition to those
rights, powers and privileges, granted to Lender in section 5 of the Security
Agreement and in other Loan Documents, each Grantor hereby authorizes and
instructs each issuer of any Security Collateral to comply with any instruction
concerning such Security Collateral received by it from Lender in writing that
(a) states that an Event of Default has occurred and is continuing, and (b) is
otherwise in accordance with the terms of the Loan Documents, without any other
or further instructions from any Grantor; and each Grantor agrees that each such
entity shall be fully protected in so complying.
4.2 Irrevocability; Lender's Discretion. Each Grantor, jointly and
severally, covenants and agrees that any action described in section 4.1 may be
taken at Lender's sole and absolute discretion, at any time and from time to
time, and (except as may be stated specifically to the contrary in section 4.1
with respect to any power) and each Grantor hereby ratifies and confirms all
actions so taken. Each Grantor, jointly and severally, further covenants and
agrees that the powers of attorney granted by section 4 are coupled with an
interest and shall be irrevocable until full and final payment and performance
of the Obligations and until the Revolving Line of Credit is no longer in
effect; that said powers are granted solely for the protection of Lender's
interest and Lender shall have no duty to exercise any thereof; that the
decision whether to exercise any of such powers, and the manner of exercise,
shall be solely within Lender's discretion; and that neither Lender nor any of
its directors, officers, employees or agents shall be liable for any act of
omission or commission, or for any mistake or error of judgment, in connection
with any such powers.
5. Rights Regarding Collateral. Upon the occurrence of an Event of Default,
Lender shall be entitled to the rights and remedies, and each Grantor, jointly
and severally, shall have the obligations, set forth in the Loan Documents,
including those in section 8 of the Loan Agreement and those in the Security
Agreement.
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6. Registration Rights. If Lender shall determine to exercise its rights to sell
all or any of the Security Collateral pursuant to section 5, each Grantor
jointly and severally agrees that, upon request of Lender, it will, at its own
expense:
(a) execute and deliver, and cause each issuer of the Security
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 Lender, advisable to register such
Security Collateral under the provisions of the Securities Act of 1933,
as from time to time amended (the "Securities Act"), and 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 supplements thereto and to
the related prospectus which, in the opinion of Lender, 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 Security Collateral
under the state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Security
Collateral, as requested by Lender;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earning statement which will
satisfy the provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Security Collateral or any
part thereof valid and binding and in compliance with applicable law.
Each Grantor further acknowledges the impossibility of ascertaining the amount
of damages which would be suffered by Lender or the Banks by reason of the
failure by such Grantor to perform any of the covenants contained in this
section and, consequently, agrees that, if such Grantor 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 of the Security Collateral on the date Lender shall
demand compliance with this section.
7. Security Interest Absolute. All rights of Lender and the pledge, transfer and
assignment and security interest hereunder, and all obligations of each Grantor
hereunder, shall be absolute and unconditional, irrespective of (a) any lack of
validity, regularity, or enforceability of any Loan Document, (b) any change in
time, manner, or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from any Loan Document, including, any increase in the Obligations resulting
from the extension of additional credit to Borrower or any of its Subsidiaries
or Affiliates or otherwise; (c) any taking, exchange, release, or non-perfection
of any other Collateral or any taking, release, or amendment or waiver or
consent to departure from any guaranty, for all or any of the Obligations; (d)
any manner of application of the Collateral, or proceeds thereof, to all or any
of the Obligations, or any manner of sale or other disposition of any Collateral
for all or any of the Obligations or any other assets of Borrower or any of its
Subsidiaries or Affiliates; (e) any change, restructuring, or termination or the
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corporate existence of Borrower or any of its Subsidiaries or Affiliates; or (f)
any other circumstance that might otherwise constitute a defense available to,
or a discharge of, Borrower or a third-party Grantor of a security interest.
8. Miscellaneous Provisions.
8.1 Entire Agreement. This Pledge Agreement together with the other
Loan Documents constitute the entire agreement among the parties with respect to
their subject matter, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions among the respective parties, whether
express or implied, oral or written.
8.2 Schedules. All of the Schedules to this Pledge Agreement are hereby
incorporated by reference and made a part hereof.
8.3 Certain Applicable Loan Provisions. Without limiting the generality
or specificity of anything in the Loan Agreement, for the avoidance of doubt the
provisions of sections 8, 11.1 (except the first sentence thereof), 11.2, 11.3,
11.4, 11.5, 11.6, 11.8, 11.10 and Exhibit A of the Loan Agreement apply to this
Pledge Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has caused this Pledge Agreement to be duly executed and delivered on
the date and year first above written.
INMARK ENTERPRISES, INC.
By: /s/ John P. Benfield
Name: John P. Benfield
Title: President
INMARK SERVICES, INC.
By: /s/ John P. Benfield
Name: John P. Benfield
Title: President
OPTIMUM GROUP, INC.
(formerly OG Acquisition Corp.)
By: /s/ John P. Benfield
Name: John P. Benfield
Title: President
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<TABLE>
<S> <C> <C> <C> <C> <C>
SCHEDULE I
Part A
Stock Class of Stock Par Value Number of Percentage
Issuer/Holder Stock Certificate Shares Ownership of
No(s). Issuer
(fully-diluted
basis)
Inmark Common 2 $.001 5,000 100%
Services,
Inc./Inmark
Enterprises, Inc.
Optimum Common 3 None 100 100%
Group, Inc./
Inmark
Services, Inc.
</TABLE>
<TABLE>
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Part B
<S> <C> <C> <C> <C>
Issuer/Holder Description of Certificate Number of Percentage
Equity No(s). Securities Ownership of Issuer
Security (fully-diluted basis)
N/A
====================================================================================================================================
Part C
Issuer/Holder Description of Certificate Final Original Principal
Debt No(s). Maturity Amount
N/A
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</TABLE>
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