PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of March 19, 1997 is between QUALITY FOOD
CENTERS, INC., a Washington corporation (the "Pledgor"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, in its capacity as Paying Agent under
the Credit Agreement referred to below (in such capacity, the "Paying Agent"):
W I T N E S S E T H:
WHEREAS, the Pledgor, Quality Food Holdings, Inc. and Quality Food, Inc.
are parties to an Amended and Restated Credit Agreement dated as of March 14,
1997 (as amended or otherwise modified from time to time, the "Credit
Agreement"; terms defined in the Credit Agreement are, unless otherwise defined
herein, used herein as defined therein) with various financial institutions,
Bank of America National Trust and Savings Association and The Chase Manhattan
Bank, as Administrative Agents, and the Paying Agent, pursuant to which the
Lenders have agreed to make loans to, and issue letters of credit for the
account of, the Borrowers;
WHEREAS, pursuant to the Credit Agreement, the Pledgor has agreed to
guaranty all obligations of the other Borrower under the Credit Agreement
pursuant to a Guaranty which will be executed on the Restructuring Effective
Date (such Guaranty, the "Intercompany Guaranty (Holdings)"); and
WHEREAS, the obligations of the Pledgor under the Credit Agreement and the
Intercompany Guaranty (Holdings) are to be secured pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Borrowers under or
in connection with the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Pledge. To secure the due and punctual payment of the
Liabilities (as hereinafter defined), the Pledgor hereby pledges and assigns to
the Paying Agent for the benefit of the Agents and the Lenders, and hereby
grants to the Paying Agent for the benefit of the Agents and the Lenders a
security interest in, the following:
(i) all of the shares of stock described on Schedule I hereto (all
such shares, together with other shares delivered or required to be
delivered hereunder are herein called the "Pledged Shares") and the
certificates representing the
Pledged Shares, and all cash, securities, dividends, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares;
(ii) all additional shares of stock of any Subsidiary of the Pledgor
at any time and from time to time acquired by the Pledgor, and the
certificates representing such additional shares, and all cash,
securities, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
(iii) all Intercompany Notes at any time and from time to time
issued to the Pledgor, all indebtedness evidenced thereby, all interest
thereon, and all other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any Intercompany Note;
(iv) all other property hereafter delivered to the Paying Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all thereof; and
(v) all proceeds of any of the foregoing.
(all such Pledged Shares, Intercompany Notes, additional shares, certificates,
notes, instruments, cash, securities, interest, dividends, rights and other
property, and all proceeds thereof, being herein collectively called the
"Collateral"); provided, however, that the "Collateral" shall not include (and
there shall be excluded from the pledge hereunder notwithstanding any delivery
to the Paying Agent thereof) any shares of stock of any Canadian Subsidiary in
excess of 65% of all of the stock of such Canadian Subsidiary.
The term "Liabilities", as used herein, means all obligations (monetary or
otherwise) of the Pledgor under the Credit Agreement, any Note, any L/C-Related
Document, any other Loan Document, any document or instrument executed in
connection therewith, any Swap Contract entered into by the Pledgor with any
Lender and the Intercompany Guaranty (Holdings), in each case howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due.
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SECTION 2. Warranties and Further Assurances.
(a) The Pledgor agrees that it will, promptly upon receipt thereof,
deliver to the Paying Agent any Collateral which may come into the
possession of the Pledgor after the date hereof (other than any
dividends or payments which the Pledgor is entitled to receive and
retain pursuant to Section 5(a)(ii) below), accompanied by
appropriate stock powers duly endorsed to the Paying Agent.
(b) The Pledgor warrants to the Paying Agent that the Pledgor is, or at
the time of any future delivery and pledge thereof will be, the
lawful owner of the Collateral, free of all claims and liens other
than the security interest hereunder, with full right to deliver,
pledge, and assign the Collateral to the Paying Agent as Collateral
hereunder.
(c) The Pledgor agrees to deliver to the Paying Agent from time to time
upon request of the Paying Agent such stock powers and similar
documents, satisfactory in form and substance to the Paying Agent,
with respect to the Collateral as the Paying Agent may reasonably
request. The Pledgor agrees not to grant any Lien on or otherwise
encumber any of its rights to any of the Collateral.
SECTION 3. Care of Collateral. The Paying Agent shall exercise reasonable
care in the custody and preservation of Collateral. The Paying Agent shall be
deemed to have exercised reasonable care if it takes such action as the Pledgor
shall request in a written notice which specifies that such notice is being
given pursuant to this Section 3, but failure of the Paying Agent to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Paying Agent to preserve or protect any right with
respect to the Collateral against any prior party shall be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral.
SECTION 4. Certain Rights Regarding the Collateral and the Liabilities.
(a) The Paying Agent may from time to time, after any of the Liabilities
shall become due and payable, without notice to the Pledgor, take all or any of
the following actions:
(i) transfer all or any part of the Collateral into the name of the
Paying 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 Paying Agent of any amounts 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, and
(iv) take control of any proceeds of the Collateral.
(b) The Paying Agent, any other Agent or any Lender may, furthermore, from
time to time, whether before or after any of the Liabilities shall become due
and payable, without notice to the Pledgor and without affecting the liability
of the Pledgor hereunder, take all or any of the following actions:
(i) retain or obtain a security interest in any property, in
addition to the Collateral, to secure any of the Liabilities,
(ii) retain or obtain the primary or secondary liability of any
party or parties, in addition to the Pledgor, with respect to any of the
Liabilities,
(iii) extend or renew for any period (whether or not longer than the
original period) any of the Liabilities or release or compromise any
obligation of any nature of any party with respect thereto,
(iv) surrender, release or exchange all or any part of any property,
in addition to the Collateral, securing any of the Liabilities, or
compromise or extend or renew for any period any obligations of any nature
of any party with respect to any such property, and
(v) resort to the Collateral for payment of any of the Liabilities
whether or not it shall have resorted to any other property securing the
Liabilities or shall have proceeded against any party primarily or
secondarily liable on any of the Liabilities.
SECTION 5. Dividends, Voting Rights, etc.
(a) So long as no Default (as hereinafter defined) shall have occurred and
be continuing:
(i) The Pledgor shall have the right to vote the Pledged Shares;
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(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and distributions on the Pledged Shares and any and all payments
of principal of or interest on the Intercompany Notes, provided that any
and all stock dividends, and any and all returns of capital or other
distributions made in shares of capital stock or warrants, options or
other rights in respect thereof, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of any
issuer thereof or received in exchange for the Pledged Shares or any part
thereof or as a result of any merger, consolidation, acquisition or other
exchange of assets to which any issuer may be a party or otherwise, shall
be and become part of the Collateral pledged hereunder and, if received by
the Pledgor, shall forthwith be delivered to the Paying Agent or its
designated nominee (accompanied, if appropriate, by proper instruments of
assignment and/or stock powers executed by the Pledgor in accordance with
the Paying Agent's instructions) to be held subject to the terms of this
Pledge Agreement; and
(iii) If the Pledged Shares shall have been registered in the name
of the Paying Agent or its subagent, the Paying Agent shall execute and
deliver (or cause to be executed and delivered) to the Pledgor all such
dividend orders and other instruments as the Pledgor may request for the
purpose of enabling the Pledgor to receive the dividends or other payments
which it is authorized to receive and retain pursuant to subparagraph (i)
above.
(b) Upon the occurrence and during the continuance of a Default: (i) after
written notice from the Paying Agent to the Pledgor, all rights of the Pledgor
pursuant to Section 5(a)(i) to vote the Pledged Shares shall cease, (ii) all
rights of the Pledgor pursuant to Section 5(a)(ii) and 5(a)(iii) shall cease,
and (iii) the Paying Agent shall have the sole and exclusive right and authority
to vote the Pledged Shares and to receive and retain the dividends on the
Pledged Shares and the payments of principal of and interest on the Intercompany
Notes which the Pledgor would otherwise be authorized to receive and retain
pursuant to Section 5(a)(ii). Any and all money and other property paid over to
or received by the Paying Agent pursuant to the provisions of this paragraph (b)
shall be retained by the Paying Agent as additional Collateral hereunder and be
applied in accordance with the provisions hereof.
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SECTION 6. Default.
(a) The occurrence of any of the following shall constitute a Default
hereunder: nonpayment, when due, whether by acceleration or otherwise, of any
amount payable on any of the Liabilities; an Event of Default; an Unmatured
Event of Default under Section 9.1(g) of the Credit Agreement; or the Pledgor
shall default in any agreement contained herein (and, so long as no material
portion of the Collateral is unperfected as a result of such default,
continuation of such default for five Business Days after notice from any Agent
or any Lender). Upon a Default, the Paying Agent may exercise from time to time
any rights and remedies available to it under the Uniform Commercial Code as in
effect from time to time in Illinois or otherwise available to it. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten days before such disposition, postage prepaid, addressed
to the Pledgor, either at the address of the Pledgor shown below, or at any
other address of the Pledgor appearing on the records of the Paying Agent. Any
proceeds of any disposition of Collateral may be applied by the Paying Agent to
the payment of expenses in connection with the Collateral, including Attorney
Costs and legal expenses, and any balance of such proceeds may be applied by the
Paying Agent toward the payment of such of the Liabilities, and in such order of
application, as the Paying Agent may from time to time elect. All rights and
remedies of the Paying Agent expressed herein are in addition to all other
rights and remedies possessed by it, including those under any other agreement
or instrument relating to any of the Liabilities or any security therefor. No
delay on the part of the Paying Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the
Paying Agent of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No action of the Paying
Agent permitted hereunder shall impair or affect the rights of the Paying Agent
in and to the Collateral.
(b) The Pledgor agrees that in any sale of any of the Collateral whenever
a Default hereunder shall have occurred and be continuing, the Paying 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, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any Governmental Authority, and the
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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 Paying Agent be liable or 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 7. Application of Proceeds of Sale or Cash Held as Collateral. The
proceeds of sale of Collateral sold pursuant to Section 6 hereof and/or, after a
Default, any cash held as Collateral hereunder, shall be applied by the Paying
Agent to such of the Liabilities, and in such order of application, as the
Paying Agent shall determine until the Liabilities are paid in full in cash, and
the balance, if any, of such proceeds shall be paid to the Pledgor, its
successors and assigns, or as a court of competent jurisdiction may direct.
SECTION 8. Authority of Paying Agent. The Paying Agent shall have and be
entitled to exercise all such powers hereunder as are specifically delegated to
the Paying Agent by the terms hereof, together with such powers as are
incidental thereto. The Paying Agent may execute any of its duties hereunder by
or through agents or employees and shall be entitled to retain counsel and to
act in reliance upon the advice of such counsel concerning all matters
pertaining to its duties hereunder. Neither the Paying Agent, nor any director,
officer or employee of the Paying Agent, shall be liable nor any action taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own bad faith, gross negligence or willful misconduct. The
Pledgor hereby agrees to reimburse the Paying Agent, on demand, for all
reasonable out-of-pocket expenses incurred by the Paying Agent in connection
with the administration and enforcement of this Agreement (including expenses
incurred by any sub-agent employed by the Paying Agent) and agrees to indemnify
and hold harmless the Paying Agent (and any such sub-agent) from and against any
and all liability incurred by the Paying Agent (or such sub-agent) hereunder or
in connection herewith, unless such liability shall be due to bad faith, willful
misconduct or gross negligence on the part of the Paying Agent (or such
sub-agent).
SECTION 9. Termination. This Pledge Agreement shall terminate when all
Liabilities and all obligations of the Pledgor hereunder have been fully and
finally paid, and all commitments of the Lenders to make Credit Extensions under
Credit Agreement have been terminated, at which time the Paying Agent shall
reassign and redeliver (or cause to be reassigned and redelivered) to the
Pledgor, or to such Person as the Pledgor shall designate, against receipt, such
of the Collateral (if any) as shall not have been sold or otherwise applied by
the Paying Agent pursuant to the terms hereof and shall still be held by it
hereunder, together with
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appropriate instruments of reassignment and release. Any such reassignment shall
be without recourse upon or warranty by the Paying Agent and at the expense of
the Pledgor.
SECTION 10. Notices. Any notice from the Paying Agent to the Pledgor shall
be addressed to the Pledgor either at the Pledgor's address shown on the
signature page hereof or at such other address as the Pledgor may, by written
notice received by the Paying Agent, have designated as its address for notices.
Any such notice shall, if sent by overnight delivery, hand delivery or
registered or certified mail, be effective when delivered (or when delivery is
refused), and, if faxed, be effective when received in legible form by facsimile
machine.
SECTION 11. Binding Agreement; Assignment. This Pledge 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 Pledgor shall not be permitted to assign this Pledge 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 Paying Agent as Collateral under
this Pledge Agreement.
SECTION 12. Miscellaneous. Neither this Pledge Agreement nor any provision
hereof may be amended, modified, waived, discharged or terminated orally nor may
any of the Collateral be released except by an instrument in writing duly signed
by or on behalf of the Paying Agent. The section headings used herein are for
convenience of reference only and shall not limit the provisions of this Pledge
Agreement.
SECTION 13. Governing Law; Interpretation. This Pledge Agreement has been
made and delivered at Chicago, Illinois, and shall be governed by the laws of
the State of Illinois applicable to contracts made and to be fully performed in
such State. 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 the 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
QUALITY FOOD CENTERS, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Title: Vice President, Chief Financial
Officer and Secretary/Treasurer
Address:
▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Paying Agent
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title: Managing Director
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
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SCHEDULE I
TO
PLEDGE AGREEMENT
STOCK
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Issuer No. Shares and Outstanding Outstanding
------ ----------- ------ --------------- -----------
KU Acquisition
Corporation 1 100 100% 100
QHI Acquisition
Corporation 1 1 100% 1
