PLEDGE AGREEMENT
dated as of April 22, 2021
by
CRESTLINE PACKAGING SOLUTIONS LLC, an Ohio limited liability company, as Pledgor
in favor of
IRONWOOD CAPITAL FINANCE LLC, a Delaware limited liability company, as Secured Party
This PLEDGE AGREEMENT (this "Agreement") is entered into as of April 22, 2021, by CRESTLINE PACKAGING SOLUTIONS LLC, an Ohio limited liability company (the "Pledgor"), with its principal place of business at 4510 Harshman Road, Dayton, OH 45424, in favor of IRONWOOD CAPITAL FINANCE LLC, a Delaware limited liability company (the "Secured Party"), with its principal office at 600 Lexington Avenue, 22nd Floor, New York, NY 10022.
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RECITALS
WHEREAS:
A. The Pledgor is the sole and exclusive record and beneficial owner of one hundred percent (100%) of the issued and outstanding membership interests (the "Pledged Interests") in Crestline Coatings Inc., an Ohio corporation ("CCI"), registered with the Ohio Secretary of State under Filing No. 4389201, with Employer Identification Number 31-2093417 and registered address at 4510 Harshman Road, Dayton, OH 45424.
B. The Pledgor, as Borrower, and the Secured Party, as Lender, have entered into that certain Mezzanine Credit Agreement dated as of April 22, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Mezzanine Credit Agreement"), pursuant to which the Secured Party has agreed to extend to the Pledgor a subordinated secured mezzanine term loan in the original principal amount of Twenty Million Dollars ($20,000,000) (the "Mezzanine Loan"), subject to the terms and conditions set forth therein.
C. The Mezzanine Loan bears interest at a rate of ten and one-half percent (10.50%) per annum (1,050 basis points), consisting of eight percent (8.00%) per annum payable in cash on each applicable Interest Payment Date and two and one-half percent (2.50%) per annum payable in kind (PIK), with a final maturity date of May 7, 2026. The Mezzanine Loan is secured by second-priority liens on substantially all assets of the Pledgor and CCI pursuant to that certain Security Agreement (Second Lien) dated as of April 22, 2021 (the "Security Agreement"), by the Pledgor and CCI in favor of the Secured Party.
D. The Secured Party, Pinnacle Commercial Bank, N.A. ("Pinnacle"), as Senior Agent, and the Pledgor, as Borrower, have entered into that certain Intercreditor Agreement dated as of April 22, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Intercreditor Agreement"), which establishes the relative priorities of the liens and security interests of the Senior Agent and the Secured Party and sets forth certain standstill arrangements, turnover provisions, and other agreements between the Senior Agent and the Secured Party with respect to the Collateral (as defined herein).
E. The pledge of the Pledged Interests granted hereunder is a second-priority pledge, expressly subordinated and junior in all respects to any first-priority pledge of the Pledged Interests heretofore or hereafter granted by the Pledgor in favor of Pinnacle Commercial Bank, N.A. under or in connection with that certain Senior Credit Agreement dated September 12, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senior Credit Agreement"), among the Pledgor, CCI, and Pinnacle Commercial Bank, N.A., as Senior Agent, providing for a Thirty-Five Million Dollar ($35,000,000) revolving credit facility and a Twenty-Five Million Dollar ($25,000,000) term loan A, in each case as provided in, and subject to the terms of, the Intercreditor Agreement.
F. It is a condition precedent to the making of the Mezzanine Loan under the Mezzanine Credit Agreement that the Pledgor shall have executed and delivered this Pledge Agreement to the Secured Party on or before the Closing Date (as defined in the Mezzanine Credit Agreement).
G. The Pledgor will directly benefit from the proceeds of the Mezzanine Loan, which are to be used to fund capital expenditures for the expansion of the Pledgor's manufacturing facility located in Dayton, Ohio (total project cost of Twenty-Eight Million Five Hundred Thousand Dollars ($28,500,000), consisting of Twenty Million Dollars ($20,000,000) from the Mezzanine Loan and Eight Million Five Hundred Thousand Dollars ($8,500,000) of equity co-investment from Ridgeway Capital Partners Fund III, L.P.), and accordingly has determined that the execution and delivery of this Agreement and the pledge of the Pledged Interests hereunder are in the best interests of the Pledgor and its members.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein set forth, and the making of the Mezzanine Loan and other financial accommodations under the Mezzanine Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby agrees with the Secured Party as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Agreement" means this Pledge Agreement, dated as of April 22, 2021, between the Pledgor and the Secured Party, as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"CCI" means Crestline Coatings Inc., an Ohio corporation, registered with the Ohio Secretary of State under Filing No. 4389201, with Employer Identification Number 31-2093417, and having its registered address at 4510 Harshman Road, Dayton, OH 45424.
"Collateral" has the meaning set forth in Section 2.1 of this Agreement.
"Distributions" means all dividends, distributions (whether in cash, securities, or other property), returns of capital, cash, instruments, investment property, and other property or payments received, receivable, or otherwise distributed or distributable in respect of, in exchange for, or on account of any of the Pledged Interests, whether pursuant to a liquidation, dissolution, recapitalization, reorganization, or otherwise.
"Event of Default" has the meaning assigned to such term in the Mezzanine Credit Agreement.
"Intercreditor Agreement" means that certain Intercreditor Agreement dated as of April 22, 2021, among Pinnacle Commercial Bank, N.A., as Senior Agent, Ironwood Capital Finance LLC, as Mezzanine Lender, and acknowledged by Crestline Packaging Solutions LLC, as Borrower, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Mezzanine Credit Agreement" means that certain Mezzanine Credit Agreement dated as of April 22, 2021, between the Pledgor, as Borrower, and the Secured Party, as Lender, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Obligations" or "Secured Obligations" means all obligations of the Pledgor to the Secured Party arising under or in connection with the Mezzanine Credit Agreement, the Mezzanine Promissory Note dated April 22, 2021 in the original principal amount of Twenty Million Dollars ($20,000,000), this Agreement, the Security Agreement, the Warrant Agreement dated April 22, 2021, and all other Loan Documents (as defined in the Mezzanine Credit Agreement), in each case whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, joint or several, due or to become due, and howsoever arising, including without limitation all obligations in respect of (a) principal (including PIK interest accreted to principal), (b) interest (including cash pay interest at 8.00% per annum and PIK interest at 2.50% per annum, and including interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization, or similar proceeding, whether or not allowed as a claim in such proceeding), (c) fees (including the origination fee of Four Hundred Thousand Dollars ($400,000) payable on the Closing Date), (d) premiums (including prepayment premiums of 103% of par during Year 1, 102% of par during Year 2, 101% of par during Year 3, and par thereafter through maturity), (e) expenses, (f) indemnification obligations, and (g) all other amounts payable by the Pledgor under any Loan Document.
"Organizational Documents" means, with respect to CCI, its articles of incorporation, bylaws, and any shareholders' agreements, operating agreements, or comparable organizational or governance documents, each as in effect from time to time.
"Permitted Liens" has the meaning assigned to such term in the Mezzanine Credit Agreement.
"Pledged Interests" means one hundred percent (100%) of the issued and outstanding shares of capital stock, membership interests, or other equity interests of CCI, as the case may be, together with all rights, privileges, preferences, and other benefits pertaining or incidental thereto, as more fully described in Schedule I hereto, and any additional shares, interests, or equity securities of CCI hereafter acquired by the Pledgor.
"Pledgor" means Crestline Packaging Solutions LLC, an Ohio limited liability company, registered with the Ohio Secretary of State under Filing No. 4217835, with Employer Identification Number 31-1784562, headquartered at 4510 Harshman Road, Dayton, OH 45424.
"Proceeds" has the meaning assigned to such term in the Uniform Commercial Code as in effect from time to time in the State of New York, and shall in any event include, without limitation, all cash, instruments, investment property, and other property received or receivable upon the sale, exchange, collection, or other disposition of any Collateral, including any insurance proceeds.
"Secured Party" means Ironwood Capital Finance LLC, a Delaware limited liability company, and its successors and assigns.
"Security Agreement" means that certain Security Agreement (Second Lien) dated as of April 22, 2021, by the Pledgor and CCI in favor of the Secured Party, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Senior Agent" or "Senior Lender" means Pinnacle Commercial Bank, N.A., a national banking association, in its capacity as Administrative Agent and Lender under the Senior Credit Agreement, and its successors and assigns in such capacity.
"Senior Credit Agreement" means that certain Senior Credit Agreement dated September 12, 2019, among the Pledgor, CCI, and Pinnacle Commercial Bank, N.A., as Administrative Agent and Lender, providing for a revolving credit facility in an aggregate principal amount of Thirty-Five Million Dollars ($35,000,000) and a term loan A in the original principal amount of Twenty-Five Million Dollars ($25,000,000), as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York or, where the context requires or where applicable with respect to the creation, perfection, or priority of security interests, the Uniform Commercial Code as in effect from time to time in the State of Ohio.
Section 1.2 — Interpretation and Rules of Construction
(a) Capitalized terms used but not otherwise defined in this Agreement shall have the meanings assigned to such terms in the Mezzanine Credit Agreement.
(b) References herein to any "Article," "Section," "Schedule," or "Exhibit" shall refer to the corresponding Article, Section, Schedule, or Exhibit of this Agreement, unless the context otherwise requires.
(c) The headings and captions contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning, interpretation, or construction of this Agreement.
(d) Words importing the singular shall include the plural and vice versa, and words importing any gender shall include all other genders, as the context may require.
(e) References to "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(f) Any reference to any statute, law, regulation, or rule shall be deemed to refer to such statute, law, regulation, or rule as amended, modified, supplemented, or replaced from time to time (and, in the case of any statute, to any successor statute).
(g) Any reference to any agreement or instrument shall be deemed to include such agreement or instrument as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms (subject to any restrictions on such amendment, restatement, supplement, or modification set forth in the Loan Documents).
(h) The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
ARTICLE II — PLEDGE AND GRANT OF SECURITY INTEREST
Section 2.1 — Pledge
As security for the prompt and complete payment and performance of all Secured Obligations, the Pledgor hereby pledges, assigns, hypothecates, and grants to the Secured Party a continuing second-priority security interest in and lien upon all of the Pledgor's right, title, and interest in, to, and under the following, whether now owned or existing or hereafter acquired or arising (collectively, the "Collateral"):
(a) Pledged Interests. One hundred percent (100%) of the issued and outstanding shares of capital stock, membership interests, or other equity interests of CCI, as more fully described in Schedule I hereto, and any certificates or instruments representing such interests;
(b) Distributions. All Distributions, including without limitation all dividends (whether in cash, securities, or other property), distributions, returns of capital, and other payments or distributions of any kind now or hereafter made on, with respect to, or in exchange for any of the Pledged Interests, whether arising from the ordinary operations of CCI or in connection with any merger, consolidation, liquidation, dissolution, recapitalization, reorganization, or similar transaction;
(c) Additional Interests. All additional shares of capital stock, membership interests, or other equity interests of CCI hereafter acquired by the Pledgor, by any means whatsoever, including without limitation by way of stock split, stock dividend, reclassification, recapitalization, reorganization, merger, consolidation, exchange, conversion, or otherwise, and any certificates or instruments representing such interests; and
(d) Proceeds. All Proceeds of any and all of the foregoing, in whatever form, including without limitation all cash, instruments, investment property, general intangibles, and other property received, receivable, or otherwise distributed upon the sale, exchange, collection, or other disposition of any of the foregoing.
Section 2.2 — Security for Obligations
The pledge and security interest granted pursuant to Section 2.1 secures the prompt and complete payment and performance of all Secured Obligations arising under the Mezzanine Credit Agreement and the other Loan Documents, including without limitation the Mezzanine Loan in the original principal amount of Twenty Million Dollars ($20,000,000), together with all accrued and unpaid interest (whether cash pay or PIK), fees (including the origination fee), premiums (including prepayment premiums), costs, expenses, indemnification obligations, and all other amounts owing to the Secured Party thereunder, whether now existing or hereafter arising. The Pledgor acknowledges and agrees that this Agreement shall remain in full force and effect until all Secured Obligations have been indefeasibly paid in full in cash and all commitments under the Mezzanine Credit Agreement have been terminated.
Section 2.3 — Subordination to Senior Liens
(a) The security interest and lien granted by the Pledgor to the Secured Party hereunder is expressly subordinate and junior in all respects to any security interest, lien, or pledge heretofore or hereafter granted to or in favor of Pinnacle Commercial Bank, N.A., as Senior Agent, under the Senior Credit Agreement or any other Senior Loan Documents (as defined in the Intercreditor Agreement), as more fully set forth in, and subject to the terms and conditions of, the Intercreditor Agreement.
(b) The Secured Party's rights and remedies under this Agreement are in all respects subject to the terms, conditions, limitations, and restrictions set forth in the Intercreditor Agreement, including without limitation (i) the one hundred eighty (180) day standstill period following delivery of written notice to the Senior Agent as provided in Section 5.2 of the Intercreditor Agreement, (ii) the turnover provisions set forth in Article IV of the Intercreditor Agreement, and (iii) the Senior Agent's right to direct the disposition of Collateral during the standstill period as provided in Section 5.3 of the Intercreditor Agreement.
(c) In the event of any conflict or inconsistency between the terms and provisions of this Agreement and the terms and provisions of the Intercreditor Agreement, the Intercreditor Agreement shall govern and control with respect to the matter that is the subject of such conflict or inconsistency. The Secured Party hereby acknowledges that it has received a copy of the Intercreditor Agreement and is fully familiar with the terms and conditions thereof.
ARTICLE III — DELIVERY OF PLEDGED INTERESTS; PERFECTION
Section 3.1 — Delivery of Certificates
(a) If the Pledged Interests are, at any time, represented by one or more certificates, the Pledgor shall promptly deliver (or cause to be delivered) to the Secured Party (or to a collateral agent designated in writing by the Secured Party) all such certificates representing the Pledged Interests, in each case accompanied by duly executed, undated stock powers or assignment forms endorsed in blank, in form and substance satisfactory to the Secured Party, sufficient to transfer such Pledged Interests. The Secured Party shall hold such certificates and stock powers as part of the Collateral in accordance with the terms of this Agreement and, to the extent applicable, the Intercreditor Agreement.
(b) If the Pledged Interests are, at any time, uncertificated, the Pledgor shall promptly take, and shall cause CCI to take, all steps necessary under applicable law (including Ohio Revised Code Chapter 1308 and Article 8 of the UCC) to (i) cause CCI to register the pledge of the Pledged Interests on the books and records of CCI, (ii) cause CCI to deliver to the Secured Party a written acknowledgment, in form and substance satisfactory to the Secured Party, confirming such registration and agreeing to comply with instructions originated by the Secured Party without further consent by the Pledgor (to the extent permitted by the Intercreditor Agreement), and (iii) otherwise perfect the Secured Party's security interest in such uncertificated Pledged Interests by "control" (as defined in Section 8-106 of the UCC) or by any other method available under applicable law.
(c) In the event that the Pledgor hereafter acquires any additional equity interests in CCI, the Pledgor shall promptly deliver to the Secured Party any certificates representing such interests, together with duly executed, undated stock powers or assignment forms endorsed in blank, or, if such interests are uncertificated, shall promptly take (and cause CCI to take) all steps necessary to perfect the Secured Party's security interest therein in the manner described in clause (b) above.
Section 3.2 — UCC Filings
(a) The Pledgor hereby authorizes the Secured Party to file, at the Pledgor's expense, one or more UCC-1 financing statements (and any amendments, continuations, or other filings related thereto) with the Ohio Secretary of State and in any other filing office as the Secured Party may deem necessary or desirable, describing the Pledged Interests, all Distributions, all Proceeds, and all other Collateral as collateral of the Secured Party. The Pledgor agrees that any such financing statement may include a description of the Collateral in the broadest terms permitted by Article 9 of the UCC.
(b) The Pledgor agrees to execute and deliver to the Secured Party, promptly upon request, any and all amendments to financing statements, continuation statements, and other filings and documents as the Secured Party may from time to time reasonably request in order to create, preserve, maintain, and protect the perfection and priority of the Secured Party's second-priority security interest in the Collateral. The Pledgor shall pay all filing fees and costs incurred in connection with such filings.
(c) The Pledgor shall not file, or authorize or permit to be filed, any financing statement or amendment or termination statement with respect to any financing statement filed pursuant to this Section 3.2 without the prior written consent of the Secured Party, except as may be required by the Senior Agent pursuant to the Intercreditor Agreement.
Section 3.3 — Further Assurances
The Pledgor shall, from time to time upon the reasonable request of the Secured Party, promptly execute and deliver, and cause CCI to execute and deliver, such instruments, documents, agreements, and other writings, and take such other actions (including, without limitation, causing notation on CCI's register of members, stockholders, or other equity holders), as the Secured Party may reasonably request to perfect, maintain, protect, and enforce the Secured Party's second-priority security interest in and lien upon the Collateral, including without limitation any instruments, documents, or agreements necessary to enable the Secured Party to exercise its rights and remedies hereunder upon the occurrence and during the continuance of an Event of Default (subject in all cases to the Intercreditor Agreement).
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE PLEDGOR
The Pledgor hereby represents and warrants to the Secured Party as of the date hereof, and as of each date on which such representations and warranties are required to be restated or reaffirmed under the Mezzanine Credit Agreement, as follows:
Section 4.1 — Organization and Good Standing
(a) The Pledgor is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Ohio, registered with the Ohio Secretary of State under Filing No. 4217835. The Pledgor has full power and authority to own its properties and to carry on its business as currently conducted.
(b) CCI is a corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio, registered with the Ohio Secretary of State under Filing No. 4389201. CCI has full corporate power and authority to own its properties and to carry on its business as currently conducted, and is duly qualified and in good standing in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect (as defined in the Mezzanine Credit Agreement).
Section 4.2 — Authority and Authorization
(a) The Pledgor has full limited liability company power and authority to execute and deliver this Agreement, to pledge the Pledged Interests as collateral security as provided herein, and to perform all of its obligations hereunder.
(b) The execution, delivery, and performance of this Agreement by the Pledgor have been duly authorized by all necessary action on the part of the members and managers of the Pledgor, including without limitation the resolutions of the Board of Managers of the Pledgor, as certified in the Officer's Certificate delivered to the Secured Party on the date hereof in connection with the closing of the Mezzanine Loan. No further consent, approval, authorization, or other action by, or notice to or filing with, any Person (including any member, manager, or other equity holder of the Pledgor) is required in connection with the execution, delivery, or performance of this Agreement by the Pledgor, except as have been duly obtained or made.
Section 4.3 — Enforceability
This Agreement has been duly executed and delivered by the Pledgor and constitutes a valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or similar laws affecting the enforcement of creditors' rights generally, and (b) general principles of equity, whether applied in a proceeding at law or in equity (including concepts of materiality, reasonableness, good faith, and fair dealing).
Section 4.4 — No Conflicts
The execution, delivery, and performance of this Agreement by the Pledgor, and the pledge of the Pledged Interests pursuant hereto, do not and will not (a) violate or conflict with the Organizational Documents or other governing documents of the Pledgor or CCI, (b) violate or conflict with any applicable law, statute, rule, or regulation of any governmental authority having jurisdiction over the Pledgor or CCI or any of their respective properties, (c) violate or conflict with any order, judgment, injunction, award, or decree of any court, arbitrator, or governmental authority binding upon the Pledgor or CCI, or (d) violate, conflict with, result in a breach or default under, or give rise to any right of termination, cancellation, or acceleration under any material agreement, contract, or instrument to which the Pledgor or CCI is a party or by which any of their respective properties may be bound, other than the Senior Credit Agreement and the related Senior Loan Documents, for which the consent of Pinnacle Commercial Bank, N.A. has been duly obtained pursuant to the consent letter dated March 15, 2021.
Section 4.5 — Ownership of Pledged Interests
(a) The Pledgor is the sole record and beneficial owner of one hundred percent (100%) of the issued and outstanding shares of capital stock, membership interests, or other equity interests of CCI, constituting all of the Pledged Interests described in Schedule I hereto.
(b) The Pledged Interests have been validly issued in accordance with the Organizational Documents of CCI and applicable law, and are fully paid and non-assessable (to the extent such concepts are applicable under Ohio law).
(c) The Pledged Interests are free and clear of all liens, claims, charges, encumbrances, security interests, pledges, hypothecations, and restrictions of every kind and nature, whether voluntary or involuntary, except for: (i) the first-priority lien of Pinnacle Commercial Bank, N.A. under the Senior Credit Agreement and the related Senior Loan Documents, and (ii) the second-priority lien and security interest created by this Agreement in favor of the Secured Party.
(d) No Person other than the Pledgor has any right, title, or interest in or to the Pledged Interests, and no Person has any option, warrant, or other right (whether contingent or otherwise) to acquire any of the Pledged Interests from the Pledgor, except as contemplated by the Mezzanine Credit Agreement and the related Loan Documents.
Section 4.6 — No Other Equity Interests
As of the date hereof, CCI has no outstanding options, warrants, convertible securities, rights of first refusal, preemptive rights, or other rights, agreements, or commitments to issue, sell, or otherwise transfer any additional shares of capital stock, membership interests, or other equity interests of CCI to any Person. The Pledgor acknowledges that the Warrant Agreement dated April 22, 2021 between the Pledgor and the Secured Party pertains to equity interests of the Pledgor (and not of CCI) and does not create any lien on, or right to acquire, any equity interests of CCI.
Section 4.7 — Location; Chief Executive Office
(a) The Pledgor's chief executive office and principal place of business is located at 4510 Harshman Road, Dayton, OH 45424. The Pledgor's jurisdiction of organization is the State of Ohio.
(b) CCI's registered address and principal place of business is located at 4510 Harshman Road, Dayton, OH 45424. CCI's jurisdiction of organization is the State of Ohio.
(c) The Pledgor has not, during the five (5) years preceding the date hereof, been known by any legal name other than "Crestline Packaging Solutions LLC," nor has the Pledgor changed its jurisdiction of organization during such period.
Section 4.8 — Consents
All consents, approvals, authorizations, licenses, permits, registrations, and orders of, and all filings and declarations with, any governmental authority or any other Person that are required for the execution, delivery, and performance of this Agreement by the Pledgor, and for the pledge of the Pledged Interests hereunder, have been duly obtained, made, or given and are in full force and effect, including without limitation: (a) the consent of Pinnacle Commercial Bank, N.A. as required under Section 7.12 of the Senior Credit Agreement, as evidenced by the consent letter dated March 15, 2021, and (b) any consents required under the Organizational Documents of CCI in connection with the creation or perfection of a security interest in the Pledged Interests.
Section 4.9 — No Litigation
There is no pending, or to the knowledge of the Pledgor threatened in writing, action, suit, arbitration, investigation, or other proceeding before or by any court, arbitrator, governmental body, agency, or official, or any other Person, that (a) challenges the validity or enforceability of this Agreement, the pledge of the Pledged Interests hereunder, or the security interest or lien created hereby, (b) seeks to enjoin, restrain, or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or (c) would, if adversely determined, reasonably be expected to have a Material Adverse Effect on the Pledgor's ability to perform its obligations under this Agreement.
ARTICLE V — COVENANTS OF THE PLEDGOR
The Pledgor hereby covenants and agrees with the Secured Party that, from and after the date hereof and until the indefeasible payment in full in cash of all Secured Obligations and the termination of all commitments under the Mezzanine Credit Agreement:
Section 5.1 — Maintenance of Pledged Interests
The Pledgor shall at all times maintain its ownership of one hundred percent (100%) of the issued and outstanding equity interests in CCI. The Pledgor shall not sell, transfer, assign, convey, exchange, or otherwise dispose of, or grant any option, warrant, or other right with respect to, any of the Pledged Interests, or enter into any agreement or commitment to do so, without the prior written consent of the Secured Party, which consent may be withheld in the Secured Party's sole and absolute discretion, except as otherwise expressly permitted under the terms of the Mezzanine Credit Agreement and subject to the terms of the Intercreditor Agreement.
Section 5.2 — Restriction on Liens
The Pledgor shall not create, incur, assume, or permit to exist any lien, security interest, pledge, charge, encumbrance, or other restriction of any kind on any of the Pledged Interests, other than: (a) the first-priority lien of Pinnacle Commercial Bank, N.A. under the Senior Credit Agreement and the related Senior Loan Documents, (b) the second-priority lien and security interest created by this Agreement in favor of the Secured Party, and (c) any other lien expressly permitted as a "Permitted Lien" under the Mezzanine Credit Agreement.
Section 5.3 — Preservation of CCI
The Pledgor shall cause CCI to (a) maintain its corporate existence and good standing under the laws of the State of Ohio, (b) maintain all qualifications, licenses, permits, and authorizations necessary for the conduct of its business except where the failure to maintain any such qualification, license, permit, or authorization would not reasonably be expected to have a Material Adverse Effect, (c) comply in all material respects with all applicable laws, statutes, rules, regulations, orders, judgments, and decrees, and (d) preserve and protect all of its material assets and properties. The Pledgor shall not, without the prior written consent of the Secured Party, permit CCI to merge or consolidate with any other Person, dissolve, liquidate, or wind up its affairs, or convey, transfer, or lease all or substantially all of its assets to any Person, except as otherwise expressly permitted under the Mezzanine Credit Agreement.
Section 5.4 — Defense of Collateral
The Pledgor shall at its own cost and expense defend the Collateral against, and take such action as is necessary to remove, all liens, claims, charges, encumbrances, and other adverse claims against or to the Collateral, other than Permitted Liens. The Pledgor shall promptly notify the Secured Party in writing of any lien, claim, or encumbrance asserted against the Collateral that is not a Permitted Lien, and shall take all commercially reasonable steps to discharge or cause the release of any such lien, claim, or encumbrance within thirty (30) days after the Pledgor becomes aware thereof.
Section 5.5 — Distributions
(a) Prior to an Event of Default. Until the occurrence and during the continuance of an Event of Default, the Pledgor shall be entitled to receive and retain all Distributions made on or with respect to the Pledged Interests for its own use and benefit; provided, however, that the receipt and retention of any such Distribution by the Pledgor shall be subject to the terms and conditions of the Mezzanine Credit Agreement (including without limitation the negative covenants relating to restricted payments set forth in Section 7.06 of the Mezzanine Credit Agreement) and the Intercreditor Agreement.
(b) During the Continuance of an Event of Default. Upon the occurrence and during the continuance of an Event of Default, all Distributions received by, or payable to, the Pledgor on or with respect to the Pledged Interests shall be received and held in trust by the Pledgor for the benefit of the Secured Party, shall be segregated from other funds of the Pledgor, and shall be promptly paid over to the Secured Party in the exact form received (duly endorsed or assigned to the Secured Party, if required) to be applied to the Secured Obligations in such order as the Secured Party shall determine, all subject to the terms and conditions of the Intercreditor Agreement (including without limitation the turnover provisions set forth therein).
Section 5.6 — Voting Rights
(a) Prior to an Event of Default. Until the occurrence and during the continuance of an Event of Default, the Pledgor shall be entitled to exercise all voting rights, powers of consent, and other governance rights with respect to the Pledged Interests for all purposes not inconsistent with the terms of this Agreement, the Mezzanine Credit Agreement, or the Intercreditor Agreement; provided, however, that the Pledgor shall not exercise any such voting right, power of consent, or other governance right in any manner that would (i) impair the value of the Collateral in any material respect, (ii) be inconsistent with or result in a violation or breach of any term, condition, or covenant contained in this Agreement or the Mezzanine Credit Agreement, or (iii) otherwise be prejudicial to the interests of the Secured Party.
(b) During the Continuance of an Event of Default. Upon the occurrence and during the continuance of an Event of Default, and subject in all respects to the terms and conditions of the Intercreditor Agreement, the Secured Party shall have the right (but not the obligation) to exercise all voting rights, powers of consent, and other governance rights with respect to the Pledged Interests, and the Pledgor hereby grants to the Secured Party an irrevocable proxy, coupled with an interest, to vote the Pledged Interests and to exercise all other rights, powers, and privileges pertaining thereto. The Pledgor shall execute and deliver to the Secured Party such additional proxies, authorizations, and instruments as the Secured Party may reasonably request to effectuate the foregoing.
Section 5.7 — Notice of Changes
The Pledgor shall provide the Secured Party with at least thirty (30) days' prior written notice of any of the following: (a) any change in the Pledgor's legal name, identity, or organizational structure (including any conversion from a limited liability company to a corporation or other form of entity), (b) any change in the Pledgor's jurisdiction of organization, (c) any change in the location of the Pledgor's chief executive office or principal place of business, or (d) any change in the organizational structure of CCI, including without limitation any issuance or proposed issuance of additional equity interests by CCI, any amendment to the Organizational Documents of CCI, or any change in CCI's jurisdiction of organization.
Section 5.8 — Further Assurances
The Pledgor shall, at any time and from time to time, upon the written request of the Secured Party, promptly execute and deliver such additional instruments, documents, certificates, and agreements as the Secured Party may reasonably request to carry out the purposes and intent of this Agreement, to perfect and maintain the Secured Party's second-priority security interest in and lien upon the Collateral, and to enable the Secured Party to exercise and enforce its rights and remedies hereunder, including without limitation (a) amendments to UCC financing statements, (b) control agreements, (c) additional pledge or security agreements, and (d) such other instruments as may be required by applicable law to maintain the perfection and priority of the Secured Party's security interest in the Collateral, in each case at the sole cost and expense of the Pledgor.
ARTICLE VI — REMEDIES UPON EVENT OF DEFAULT
Section 6.1 — Rights Upon Event of Default
Upon the occurrence and during the continuance of an Event of Default (as defined in the Mezzanine Credit Agreement), and in each case subject to the terms, conditions, and limitations set forth in the Intercreditor Agreement (including without limitation the one hundred eighty (180) day standstill period described in Section 6.5 below and in Section 5.2 of the Intercreditor Agreement), the Secured Party may exercise any or all of the following rights and remedies:
(a) UCC and Other Remedies. Exercise any and all rights and remedies available to a secured party under Article 9 of the UCC, under this Agreement, under the Mezzanine Credit Agreement, or under any other applicable law, including without limitation the right to take possession of, collect, receive, and otherwise realize upon the Collateral, or any part thereof.
(b) Foreclosure and Sale. Foreclose on the Pledged Interests and sell, assign, transfer, or otherwise dispose of the Pledged Interests, or any part thereof, at one or more public or private sales, in one or more parcels, at such time or times, at such place or places, and upon such terms and conditions as the Secured Party may deem commercially reasonable, all without demand of performance or other demand, advertisement, or notice of any kind (except such notice as is specifically required by this Agreement or by applicable law that cannot be waived). The Pledgor agrees that the Secured Party may be a purchaser at any such public sale.
(c) Transfer of Pledged Interests. Transfer the Pledged Interests, or any part thereof, into the name of the Secured Party or its nominee or designee, and cause CCI to register such transfer on the books and records of CCI.
(d) Voting and Governance Rights. Exercise all voting rights, powers of consent, and other governance rights with respect to the Pledged Interests, including without limitation the right to vote, consent, approve, or take any other action in the capacity of sole shareholder, member, or equity holder of CCI, including the right to appoint and remove directors, managers, and officers of CCI.
(e) Receipt of Distributions. Receive and retain all Distributions on the Pledged Interests, and apply the same to the Secured Obligations in such order as the Secured Party shall determine (consistent with the Mezzanine Credit Agreement and the Intercreditor Agreement).
Section 6.2 — Notice of Sale
The Secured Party shall provide the Pledgor with at least ten (10) Business Days' prior written notice (which the Pledgor and the Secured Party agree constitutes commercially reasonable notice for purposes of the UCC and applicable law) of the time and place of any public sale, or of the time after which any private sale or other disposition of the Collateral is to be made. Such notice shall be delivered to the Pledgor at the address set forth in Section 7.1 of this Agreement (or at such other address as the Pledgor may have provided to the Secured Party in writing).
Section 6.3 — Application of Proceeds
The Proceeds of any sale, disposition, or other realization upon the Collateral (including any Distributions received by the Secured Party during the continuance of an Event of Default) shall be applied by the Secured Party in the following order of priority:
(a) First, to the payment of all costs, fees, and expenses (including reasonable and documented attorneys' fees and expenses, appraisal fees, and other costs of collection and disposition) incurred by the Secured Party in connection with the exercise of its rights and remedies hereunder, including the costs of any sale or other disposition of the Collateral;
(b) Second, to the payment and satisfaction of the Secured Obligations (including principal, accrued and unpaid interest, fees, premiums, expenses, indemnities, and all other amounts owing to the Secured Party under the Loan Documents), in such order and manner as the Secured Party shall determine in its sole discretion, consistent with the Mezzanine Credit Agreement; and
(c) Third, any surplus remaining after the indefeasible payment in full of all Secured Obligations and all costs and expenses shall be paid to the Pledgor, or to such other Person or Persons as may be entitled thereto under applicable law or as directed by a court of competent jurisdiction.
The Pledgor shall remain liable for any deficiency remaining after the application of the Proceeds of the Collateral as provided above.
Section 6.4 — Private Sale
The Pledgor acknowledges that the Pledged Interests have not been registered under the Securities Act of 1933, as amended, or under any applicable state securities or "blue sky" laws, and that, as a result, the Secured Party may be unable to effect a public sale of the Pledged Interests in compliance with such laws. The Pledgor agrees that a private sale or sales of the Pledged Interests made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner, and that the Secured Party shall have no obligation to delay the sale of the Pledged Interests for any period of time necessary to permit the registration thereof under such laws. The Pledgor further agrees that the Secured Party shall not incur any liability as a result of the sale of the Pledged Interests, or any portion thereof, at any private sale if such sale is conducted in a commercially reasonable manner, even if the Secured Party accepts the first offer received and does not offer the Pledged Interests to more than one offeree.
Section 6.5 — Limitation by Intercreditor Agreement
Notwithstanding anything to the contrary contained in this Article VI or elsewhere in this Agreement, all rights and remedies of the Secured Party under this Agreement are subject in all respects to the terms, conditions, limitations, and restrictions set forth in the Intercreditor Agreement, including without limitation:
(a) the one hundred eighty (180) day standstill period following delivery of written notice by the Secured Party to the Senior Agent of the Secured Party's intention to exercise remedies, as more fully described in Section 5.2 of the Intercreditor Agreement, during which standstill period the Secured Party shall not exercise any of the remedies set forth in this Article VI unless otherwise permitted by the Intercreditor Agreement;
(b) the turnover provisions set forth in Article IV of the Intercreditor Agreement, pursuant to which any Proceeds of Collateral received by the Secured Party in contravention of the Intercreditor Agreement shall be promptly turned over to the Senior Agent for application in accordance with the Senior Credit Agreement; and
(c) the Senior Agent's right to direct the disposition of Collateral during the standstill period, and the Secured Party's obligation to cooperate with the Senior Agent in connection therewith, as more fully described in Section 5.3 of the Intercreditor Agreement.
To the extent the Secured Party exercises any remedies under this Article VI, it shall do so in compliance with all applicable requirements of the Intercreditor Agreement. Nothing in this Section 6.5 shall be construed to limit or waive the Secured Party's rights under the Intercreditor Agreement itself.
Section 6.6 — Cumulative Remedies
The rights and remedies of the Secured Party under this Agreement, the Mezzanine Credit Agreement, the Security Agreement, and the other Loan Documents are cumulative and not exclusive of any other rights or remedies that the Secured Party may have at law, in equity, or otherwise. No failure or delay on the part of the Secured Party 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 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.
ARTICLE VII — MISCELLANEOUS
Section 7.1 — Notices
All notices, demands, requests, consents, approvals, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when (a) delivered personally, (b) sent by registered or certified mail, return receipt requested, postage prepaid, (c) sent by a nationally recognized overnight courier service, or (d) sent by electronic mail (with confirmation of receipt), addressed as follows (or to such other address as a party may designate by written notice to the other party in accordance with this Section 7.1):
If to the Pledgor:
Crestline Packaging Solutions LLC 4510 Harshman Road Dayton, OH 45424
Attention: Raymond Cho, General Counsel
Email: rcho@crestlinepackaging.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 1251 Avenue of the Americas, 40th Floor New York, NY 10020
Attention: Philip Hartmann
Email: phartmann@calderwoodharkness.com
If to the Secured Party:
Ironwood Capital Finance LLC 600 Lexington Avenue, 22nd Floor New York, NY 10022
Attention: Derek Calloway, Managing Director
Email: dcalloway@ironwoodcapital.com
with a copy (which shall not constitute notice) to:
Whitfield & Rao LLP 51 West 52nd Street, 34th Floor New York, NY 10019
Attention: Naveen Rao
Email: nrao@whitfieldrao.com
Notices delivered personally or by overnight courier shall be deemed given upon receipt. Notices sent by registered or certified mail shall be deemed given three (3) Business Days after the date of mailing. Notices sent by electronic mail shall be deemed given upon confirmation of receipt by the recipient (excluding any automated or "out-of-office" reply).
Section 7.2 — Amendments and Waivers
(a) No amendment, modification, supplement, or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Pledgor and the Secured Party. No waiver of any provision of this Agreement or consent to any departure by the Pledgor therefrom shall in any event be effective unless the same shall be in writing and signed by the Secured Party, and any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(b) Any amendment, modification, supplement, or waiver of any provision of this Agreement must be consistent with, and shall not contravene or conflict with, the terms and provisions of the Intercreditor Agreement. In the event that any proposed amendment, modification, or waiver would be inconsistent with the Intercreditor Agreement, such amendment, modification, or waiver shall not be effective unless the prior written consent of the Senior Agent shall have been obtained in accordance with the Intercreditor Agreement.
Section 7.3 — Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the Pledgor and the Secured Party and their respective successors and permitted assigns; provided, however, that the Pledgor shall not assign, delegate, or transfer any of its rights or obligations under this Agreement without the prior written consent of the Secured Party (and any purported assignment, delegation, or transfer without such consent shall be void and of no force or effect). The Secured Party may assign its rights and obligations hereunder in accordance with the provisions of the Mezzanine Credit Agreement, and any such assignee shall be entitled to the benefits of this Agreement as if such assignee were the Secured Party hereunder.
Section 7.4 — Governing Law
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York (including without limitation Section 5-1401 of the New York General Obligations Law), without regard to the conflicts of law principles thereof that would result in the application of the laws of any other jurisdiction; provided, however, that to the extent that the creation, perfection, or priority of the security interest granted hereunder is governed by the laws of the State of Ohio, the UCC as in effect in the State of Ohio shall govern with respect to such matters.
Section 7.5 — Submission to Jurisdiction; Venue
(a) Each of the Pledgor and the Secured Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of (i) the courts of the State of New York sitting in the Borough of Manhattan, City and County of New York, and (ii) the United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action, suit, or proceeding arising out of or relating to this Agreement, the other Loan Documents, or the transactions contemplated hereby or thereby, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action, suit, or proceeding may be heard and determined in any such court.
(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action, suit, or proceeding arising out of or relating to this Agreement in any court referred to in clause (a) above, and the defense of an inconvenient forum to the maintenance of any such action, suit, or proceeding in any such court.
(c) Each of the parties hereto agrees that service of process in any such action, suit, or proceeding may be made by delivery of such process in accordance with the notice provisions of Section 7.1 of this Agreement.
Section 7.6 — Waiver of Jury Trial
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF THE SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, OR ENFORCEMENT HEREOF OR THEREOF. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.6.
Section 7.7 — Severability
If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable under any applicable law, such provision shall be ineffective only to the extent of such invalidity, illegality, or unenforceability, and the remaining provisions of this Agreement shall continue in full force and effect. To the extent permitted by applicable law, the parties hereto waive any provision of law that renders any provision of this Agreement invalid, illegal, or unenforceable in any respect.
Section 7.8 — Entire Agreement
This Agreement, together with the Mezzanine Credit Agreement, the Security Agreement, the Intercreditor Agreement, the Mezzanine Promissory Note dated April 22, 2021, the Warrant Agreement dated April 22, 2021, and the other Loan Documents, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, of the parties with respect thereto. There are no representations, warranties, covenants, or agreements among the parties hereto with respect to the subject matter hereof other than those expressly set forth or referred to in this Agreement and the other Loan Documents.
Section 7.9 — Termination and Release
(a) Upon the indefeasible payment in full in cash of all Secured Obligations and the termination of all commitments under the Mezzanine Credit Agreement, the security interest and lien created by this Agreement shall automatically terminate and be of no further force or effect, and all rights in the Collateral shall revert to the Pledgor.
(b) Upon such termination, the Secured Party shall, at the request and sole expense of the Pledgor, promptly execute and deliver to the Pledgor (i) UCC-3 termination statements, (ii) releases or discharges of the security interest and lien created by this Agreement, and (iii) such other instruments, documents, and agreements as may be reasonably necessary to evidence the release of the Collateral from the lien and security interest created by this Agreement. The Secured Party shall also return to the Pledgor (or to such Person as the Pledgor may direct) all certificates, stock powers, and other documents held by the Secured Party as part of the Collateral.
Section 7.10 — Counterparts; Electronic Execution
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission (including in portable document format (PDF) or any electronic signature complying with the U.S. federal ESIGN Act of 2000) shall be effective as delivery of a manually executed counterpart hereof.
Section 7.11 — Headings
The article and section headings and the table of contents contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning, interpretation, or construction of this Agreement.
Section 7.12 — Reinstatement
If at any time any payment of any of the Secured Obligations, or any part thereof, is rescinded or must otherwise be restored or returned by the Secured Party upon the insolvency, bankruptcy, reorganization, dissolution, liquidation, or similar proceeding of the Pledgor or CCI, or upon or as a result of the appointment of a receiver, intervenor, or conservator of, or trustee or similar officer for, the Pledgor or CCI, or any substantial part of the property of the Pledgor or CCI, or for any other reason, this Agreement and the obligations of the Pledgor hereunder shall continue to be effective or shall be reinstated, as the case may be, all as though such payment had not been made, and the Pledgor shall pay, or cause to be paid, to the Secured Party an amount equal to the amount so rescinded, restored, or returned, together with interest thereon at the rate specified in the Mezzanine Credit Agreement.
[Remainder of this page intentionally left blank; signature pages follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered as of the date first written above.
PLEDGOR:
CRESTLINE PACKAGING SOLUTIONS LLC
By: ________
Name: Gerald F. Novak
Title: Chief Executive Officer
Date: April 22, 2021
By: ________