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EXHIBIT 10.16
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of August
26, 1999 among APPLIED ANALYTICAL INDUSTRIES, INC., a Delaware corporation (the
"Borrower"), each of the undersigned domestic subsidiaries of the Borrower
(individually a "Guarantor", and collectively the "Guarantors"; together with
the Borrower, individually a "Pledgor", and collectively the "Pledgors") and
BANK OF AMERICA, N.A., a national banking association (the "Lender").
RECITALS
A. Pursuant to that certain Loan Agreement, dated December 30, 1996, as
amended February 13, 1998 and May 19, 1999 (the "Revolving Credit Agreement"),
the Lender has extended revolving credit loans (the "Revolving Loans") to the
Borrower in the amount of up to $20,000,000. The Borrower's obligations to the
Lender arising under the Revolving Credit Agreement, including without
limitation all principal, interest, fees, and other charges in respect of the
Revolving Loans, shall be referred to herein as the "Revolving Loan
Obligations".
B. Pursuant to (i) that certain promissory note dated December 31, 1997
made by the Borrower in favor of the Lender in the original principal amount of
$2,083,155.00 and having a maturity date of December 31, 2002, and (ii) that
certain promissory note dated March 28, 1996 made by the Borrower in favor of
the Lender in the original principal amount of $998,000.00 and having a
maturity date of December 31, 2000 (collectively, the "Term Notes" and each a
"Term Note"; the Lender's advances to or for the benefit of the Borrower as
evidenced by the Term Notes shall be referred to as the "Term Loans"). The
Borrower's obligations to the Lender arising under the Term Notes, including
without limitation all principal, interest, fees and other charges in respect of
the Term Loans shall be referred to as the "Term Loan Obligations".
C. The Lender has also issued, on the application and request of the
Borrower as account party, four letters of credit described as follows: (i)
letter of credit no. 919888 in the amount of DM 10,000,000 designating Deutsche
Bank as the beneficiary and having an expiry date of August 31, 1999 (the
"Deutsche Bank Letter of Credit"); (ii) letter of credit no. 919887 in the
amount of DM 2,100,000 designating Bayerishe Vereinsbank as the beneficiary and
having an expiry date of August 31, 1999 (the "Vereinsbank Letter of Credit");
(iii) letter of credit no. 972664 in the amount of U.S. $279,750 designating
North Brunswick II LLC as the beneficiary and having an expiry date of July 31,
2000; and (iv) that certain letter of credit issued by the Lender in connection
with certain industrial revenue bond financing of the Borrower (collectively,
the "Letters of Credit"). For purposes hereof, "LOC Obligations" shall mean, at
any time, the sum of (i) the maximum amount which is, or at any time thereafter
may become, available to be drawn under the Letters of Credit, as amended from
time to time, plus (ii) the aggregate amount of all drawings under the Letters
of Credit honored by the Lender but not therefore reimbursed by the Borrower,
and all fees, charges, expenses and related obligations of the Borrower to the
Lender arising under the applications for the Letters of Credit, any amendments
thereto, or under any documents delivered in connection therewith.
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D. The Lender has also enabled the establishment of a lease financing
facility in favor of the Borrower pursuant to the terms of (i) that certain
Participation Agreement, dated as of October 2, 1998 (the "Participation
Agreement"), among the Borrower, First Security Bank, N.A., as Owner Trustee
(the "Owner Trustee") under the AAI Realty Trust 1998-1, the lenders and holders
identified therein and from time to time party thereto, and NationsBank, N.A.
(now known as Bank of America, N.A.) as Agent; (ii) that certain Lease
Agreement, dated as of October 2, 1998, between the Owner Trustee as lessor and
the Borrower as lessee; (iii) that certain Agency Agreement, dated as of
October 2, 1998, between the Borrower as construction agent and the Owner
Trustee as lessor; and (iv) each of the other Operative Agreements (as defined
in the Participation Agreement), in each case as amended, modified,
supplemented, extended or renewed from time to time. The foregoing documents,
instruments and agreements shall be referred to collectively as the "TROL
Transaction Documents" and the Borrower's obligations thereunder, in any
capacity, shall be referred to collectively as the "TROL Obligations". The
Revolving Credit Agreement, the Term Notes, the Letters of Credit, and the TROL
Transaction Documents shall be referred to collectively as the "Existing Credit
Documents".
E. The Borrower has failed to comply with the financial covenants set
forth in Section 6.01(p)(v) of the Revolving Credit Agreement for the fiscal
quarter ending June 30, 1999 (the "Existing Default"). The occurrence of the
Existing Default under the Revolving Credit Agreement causes a cross-default
under the terms of the TROL Transaction Documents and the Term Notes.
F. The Borrower has requested that (i) the Lender forbear from exercising
its remedies with respect to the Existing Default, (ii) that the Lender
continue to make available to the Borrower the credit and related facilities
established by the Existing Credit Documents, and (iii) that the Lender extend
the expiry dates on the Deutsche Bank Letter of Credit and the Vereinsbank
Letter of Credit until November 30, 1999. The Lender has agreed to do so upon
the terms and subject to the conditions set forth in that certain Amendment and
Forbearance Agreement (the "Amendment Agreement") by and between the Borrower
and the Lender, dated as of even date herewith, including, without limitation,
the Pledgors' execution and delivery of this Pledge Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Amendment
Agreement or in the Amended Credit Documents. For purposes of this Agreement,
(a) the term "Domestic Subsidiary" shall mean each direct and indirect
Subsidiary of the Borrower that is incorporated or organized under the laws of
any state of the United States or the District of Columbia, whether existing as
of the date hereof or hereafter created or acquired; and (b) the term "Foreign
Subsidiary" shall mean any direct or indirect Subsidiary of the Borrower that
is not a Domestic Subsidiary.
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2. Pledge and Grant of Security Interest. To secure the prompt payment and
performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Lender, and grants to the Lender, a continuing
security interest in any and all right, title and interest of such Pledgor in
and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Pledged Collateral"):
(a) Pledged Shares. (i) 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of capital stock of each
Domestic Subsidiary set forth on Schedule 2(a) attached hereto and (ii) 65%
(or, if less, the full amount owned by such Pledgor) of the issued and
outstanding shares of each class of capital stock or other ownership
interests entitled to vote (within the meaning of Treas. Reg. Section
1.956-2(c)(2)) "Voting Equity") and 100% (or, if less, the full amount owned
by such Pledgor) of the issued and outstanding shares of each class of
capital stock or other ownership interests not entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Non-Voting Equity") owned by
such Pledgor of each Foreign Subsidiary set forth on Schedule 2(a) attached
hereto, in each case together with the certificates (or other agreements or
instruments), if any, representing such shares, and all options and other
rights, contractual or otherwise, with respect thereto (collectively,
together with the shares of capital stock described in Section 2(b) and
2(c) below, the "Pledged Shares"), including, but not limited to, the
following:
(1) all shares or securities representing a dividend on any of
the Pledged Shares, or representing a distribution or return of capital
upon or in respect of the Pledged Shares, or resulting from a stock
split, revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to the holder of, or
otherwise in respect of, the Pledged Shares; and
(2) without affecting the obligations of the Pledgors under any
provision prohibiting such action hereunder or under any of the Amended
Credit Documents, in the event of any consolidation or merger involving
the issuer of any Pledged Shares and in which such issuer is not the
surviving corporation, all shares of each class of the capital stock of
the successor corporation formed by or resulting from such
consolidation or merger.
(b) Additional Shares. 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of capital stock of any
Person which hereafter becomes a Domestic Subsidiary and 65% (or, if less,
the full amount owned by such Pledgor) of the Voting Equity and 100% (or, if
less, the full amount owned by such Pledgor) of the Non-Voting Equity owned
by such Pledgor of any Person which hereafter becomes a Foreign Subsidiary,
including, without limitation, the certificates representing such shares
(provided, however, that no Person that is a Foreign Subsidiary shall be
required to pledge any shares hereunder).
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(c) Proceeds. All proceeds and products of the foregoing, however and
whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby specifically
understood and agreed that a Pledgor may from time to time hereafter deliver
additional shares of stock to the Lender as collateral security for the Pledgor
Obligations. Upon delivery to the Lender, such additional shares of stock shall
be deemed to be part of the Pledged Collateral of such Pledgor and shall be
subject to the terms of this Pledge Agreement whether or not Schedule 2(a) is
amended to refer to such additional shares.
3. Security for Pledgor Obligations. The security interest created hereby
in the Pledged Collateral of each Pledgor constitutes continuing collateral
security for all of the Revolving Loan Obligations, the Term Loan Obligations,
the LOC Obligations, and the TROL Obligations, now existing or hereafter
arising pursuant to the Existing Credit Documents or the Amended Credit
Documents, owing from the Borrower or any other Pledgor to the Lender or any
affiliate of the Lender in any capacity, howsoever evidenced, created, incurred
or acquired, whether primary, secondary, direct, contingent, or joint and
several, including, without limitation, all obligations and liabilities
incurred in connection with collecting and enforcing the foregoing
(collectively, the "Pledgor Obligations").
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Lender (i) simultaneously with
or prior to the execution and delivery of this Pledge Agreement, all
certificates representing the Pledged Shares of such Pledgor and (ii)
promptly upon the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a Pledgor.
Prior to delivery to the Lender, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by such
Pledgor for the benefit of the Lender pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, substantially in the form provided in Exhibit 4(a)
attached hereto.
(b) Additional Securities. If such Pledgor shall receive by virtue of
its being or having been the owner of any Pledged Collateral, any (i) stock
certificate, including without limitation, any certificate representing a
stock dividend or distribution in connection with any increase or reduction
of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock splits, spin-off or split-off, promissory
notes or other instrument; (ii) option or right, whether as an addition to,
substitution for, or an exchange for, any Pledged Collateral or otherwise;
(iii) dividends payable in securities; or (iv) distributions of securities
in connection with a partial or total liquidation, dissolution or reduction
of capital, capital surplus or paid-in surplus, then such Pledgor shall
receive such stock certificate, instrument, option, right or distribution
in trust for the benefit of the Lender, shall segregate it from such
Pledgor's other property and shall deliver it forthwith to the Lender in
the exact form received together with any
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necessary endorsement and/or appropriate stock power duly executed in
blank, substantially in the form provided in Exhibit 4(a), to be held by
the Lender as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(c) Financing Statements. Each Pledgor shall execute and deliver to
the Lender such UCC or other applicable financing statements as may be
reasonably requested by the Lender in order to perfect and protect the
security interest created hereby in the Pledged Collateral of such Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Lender that so long as any of the Pledgor Obligations remain
outstanding (other than unasserted indemnity claims), or any Amended Credit
Document is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are duly
authorized and validly issued, are fully paid and nonassessable and are not
subject to the preemptive rights of any Person. All other shares of stock
constituting Pledged Collateral will be duly authorized and validly issued,
fully paid and nonassessable and not subject to the preemptive rights of
any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal and
beneficial owner of such Pledged Collateral free and clear of any Lien,
other than Permitted Liens. There exists no "adverse claim" within the
meaning of Section 8-302 of the Uniform Commercial Code as in effect in the
State of North Carolina (the "UCC") with respect to the Pledged Shares of
such Pledgor.
(c) Exercising of Rights. The exercise by the Lender of its rights
and remedies hereunder will not violate any law or governmental regulation
or any material contractual restriction binding on or affecting a Pledgor
or any of its property.
(d) Pledgor's Authority. No authorization, approval or action by, and
no notice or filing with any Governmental Authority or with the issuer of
any Pledged Stock is required either (i) for the pledge made by a Pledgor or
for the granting of the security interest by a Pledgor pursuant to this
Pledge Agreement or (ii) for the exercise by the Lender of its rights and
remedies hereunder (except as may be required by laws affecting the offering
and sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates a valid
security interest in favor of the Lender in the Pledged Collateral. The
taking possession by the Lender of the certificates representing the
Pledged Shares and all other certificates and instruments constituting
Pledged Collateral will perfect and establish the first priority of the
Lender's security interest in the Pledged Shares and, when properly
perfected by filing or registration, in all other Pledged Collateral
represented by such Pledged Shares
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and instruments securing the Pledgor Obligations. Except as set forth in
this Section 5(e), no action is necessary to perfect or otherwise protect
such security interest.
(f) No Other Shares. No Pledgor owns any shares of stock other than
as set forth on Schedule 2(a) attached hereto.
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding (other than unasserted indemnity claims)
or any Amended Credit Document is in effect or any Letter of Credit shall
remain outstanding, and until all of the Commitments shall have been
terminated, such Pledgor shall:
(a) Books and Records. Xxxx its books and records (and shall cause
the issuer of the Pledged Shares of such Pledgor to xxxx its books and
records) to reflect the security interest granted to the Lender pursuant to
this Pledge Agreement.
(b) Defense of Title. Warrant and defend title to and ownership of
the Pledged Collateral of such Pledgor at its own expense against the
claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all Liens, except for Permitted Liens (as
defined in the Security Agreement executed by and among the Pledgors and
the Lender as of even date herewith), and not sell, exchange, transfer,
assign, lease or otherwise dispose of Pledged Collateral of such Pledgor or
any interest therein.
(c) Further Assurances. Promptly execute and deliver at its expense
all further instruments and documents and take all further action that may
be necessary and desirable or that the Lender may reasonably request in
order to (i) perfect and protect the security interest created hereby in
the Pledged Collateral of such Pledgor (including without limitation any
and all action necessary to satisfy the Lender that the Lender has obtained
a first priority perfected security interest in any capital stock); (ii)
enable the Lender to exercise and enforce its rights and remedies hereunder
in respect of the Pledged Collateral of such Pledgor; and (iii) otherwise
effect the purposes of this Pledge Agreement, including, without limitation
and if requested by the Lender, delivering to the Lender irrevocable
proxies in respect of the Pledged Collateral of such Pledgor.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any restriction
with respect to any of the Pledged Collateral of such Pledgor.
(e) Compliance with Securities Laws. File all reports and other
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
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7. Advances by Lender. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Lender may, at its sole option
and in its reasonable discretion, perform the same and in so doing may expend
such sums as the Lender may reasonably deem advisable in the performance
thereof, including, without limitation, the payment of any insurance premiums,
the payment of any taxes, a payment to obtain a release of a Lien or potential
Lien, expenditures made in defending against any adverse claim and all other
expenditures which the Lender may make for the protection of the security
hereof or which may be compelled to make by operation of law. All such sums and
amounts so expended shall be repayable by the Pledgors on a joint and several
basis promptly upon timely notice thereof and demand therefor, shall constitute
additional Pledgor Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in Section 3.01 of the
Revolving Credit Agreement. No such performance of any covenant or agreement by
the Lender on behalf of any Pledgor, and no such advance or expenditure
therefor, shall relieve the Pledgors of any default under the terms of this
Pledge Agreement or the other Amended Credit Documents. The Lender may make any
payment hereby authorized in accordance with any xxxx, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such xxxx, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax
lien, title or claim except to the extent such payment is being contested in
good faith by a Pledgor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the
Revolving Credit Agreement, the Term Notes, or the TROL Transaction Documents
shall constitute an Event of Default shall be an Event of Default hereunder (an
"Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Lender shall have, in respect of the
Pledged Collateral of any Pledgor, in addition to the rights and remedies
provided herein, in the Amended Credit Documents, the rights and remedies
of a secured party under the UCC or any other applicable law.
(b) Sale of Pledged Collateral. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the
generality of this Section and without notice, the Lender may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged
Collateral, or any part thereof, in one or more parcels, at public or
private sale, at any exchange or broker's board or elsewhere, at such price
or prices and on such other terms as the Lender may deem commercially
reasonable, for cash, credit or for future delivery or otherwise in
accordance with applicable law. To the extent permitted by law, the Lender
may in such event bid for the purchase of such securities. Each Pledgor
agrees that, to the extent notice of sale shall be required by law and has
not been waived by such Pledgor, any requirement of reasonable notice shall
be met if notice, specifying the place of any public sale or the time after
which any private sale is to be made, is personally served on or mailed
postage prepaid to such Pledgor in accordance with the notice provisions of
the Revolving Credit Agreement at least 10 days before the
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time of such sale. The Lender shall not be obligated to make any sale of
Pledged Collateral of such Pledgor regardless of notice of sale having been
given. The Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(c) Private Sale. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the Lender may
deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any of the securities constituting Pledged Collateral and
that the Lender may, therefore, determine to make one or more private sales
of any such securities to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution
or resale thereof. Each Pledgor acknowledges that any such private sale may
be at prices and on terms less favorable to the seller than the prices and
other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Lender shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of 1933.
Each Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such offer may be
advertised without prior registration under the Securities Act of 1933), or
(ii) made privately in the manner described above shall be deemed to
involve a "public sale" under the UCC, notwithstanding that such sale may
not constitute a "public offering" under the Securities Act of 1933, and
the Lender may, in such event, bid for the purchase of such securities.
(d) Retention of Pledged Collateral. In addition to the rights and
remedies hereunder, upon the occurrence of an Event of Default, the Lender
may, after providing the notices required by Section 9-505(2) of the UCC or
otherwise complying with the requirements of applicable law of the relevant
jurisdiction, retain all or any portion of the Pledged Collateral in
satisfaction of the Pledgor Obligations. Unless and until the Lender shall
have provided such notices, however, the Lender shall not be deemed to have
retained any Pledged Collateral in satisfaction of any Pledgor Obligations
for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Lender is legally entitled, the Pledgors shall be jointly and severally
liable for the deficiency, together with interest thereon at the default
rate specified in Section 3.01 of the Revolving Credit Agreement, together
with the costs of collection and the reasonable fees of any attorneys
employed by the Lender to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Pledgor Obligations shall be
returned to the Pledgors or to whomsoever a court of competent jurisdiction
shall determine to be entitled thereto.
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10. Rights of the Lender.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Lender
and each of its designees or agents as attorney-in-fact of such Pledgor,
irrevocably and with power of substitution, with authority to take any or
all of the following actions upon the occurrence and during the continuance
of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and give
discharges and releases concerning the Pledged Collateral of such
Pledgor, all as the Lender may reasonably determine;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any of the Pledged Collateral of such Pledgor
and enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Lender may
deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the Pledged
Collateral of such Pledgor;
(v) to direct any parties liable for any payment under any of
the Pledged Collateral to make payment of any and all monies due and to
become due thereunder directly to the Lender or as the Lender shall
direct;
(vi) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect
of or arising out of any Pledged Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments, proxies, stock
powers, verifications, notices and other documents relating to the
Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give such
discharges or releases as the Lender may deem reasonably appropriate;
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(ix) execute and deliver all assignments, conveyances, statements,
financing statements, renewal financing statements, pledge agreements,
affidavits, notices and other agreements, instruments and documents
that the Lender may determine necessary in order to perfect and
maintain the security interests and liens granted in this Pledge
Agreement and in order to fully consummate all of the transactions
contemplated therein;
(x) to exchange any of the Pledged Collateral of such Pledgor or
other property upon any merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Pledged Collateral of such
Pledgor with any committee, depository, transfer agent, registrar or
other designated agency upon such terms as the Lender may determine;
(xi) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of the
Pledged Shares of such Pledgor into the name of the Lender or into the
name of any transferee to whom the Pledged Shares of such Pledgor or
any part thereof may be sold pursuant to Section 9 hereof; and
(xii) to do and perform all such other acts and things as the
Lender may reasonably deem to be necessary, proper or convenient in
connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding (other than unasserted indemnity claims), any Amended Credit
Document or any Letter of Credit shall remain outstanding and (ii) until all of
the Commitments shall have been terminated. The Lender shall be under no duty
to exercise or withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Lender in this Pledge
Agreement, and shall not be liable for any failure to do so or any delay in
doing so. The Lender shall not be liable for any act or omission or for any
error of judgment or any mistake of fact or law in its individual capacity or
its capacity as attorney-in-fact except acts or omissions resulting from its
gross negligence or willful misconduct. This power of attorney is conferred on
the Lender solely to protect, preserve and realize upon its security interest
in Pledged Collateral.
(b) Performance by the Lender of Pledgor's Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein, the
Lender itself may perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of the Lender incurred in connection
therewith shall be payable by the Pledgors on a joint and several basis pursuant
to Section 13 hereof.
(c) Assignment by the Lender. The Lender may from time to time assign
the Pledgor Obligations and any portion thereof and/or the Pledged Collateral
and any
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portion thereof, and the assignee shall be entitled to all of the rights
and remedies of the Lender under this Pledge Agreement in relation thereto.
(d) The Lender's Duty of Care. Other than the exercise of reasonable
care to assure the safe custody of the Pledged Collateral while being held
by the Lender hereunder, the Lender shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that
Pledgors shall be responsible for preservation of all rights in the Pledged
Collateral of such Pledgor, and the Lender shall be relieved of all
responsibility for Pledged Collateral upon surrendering it or tendering the
surrender of it to the Pledgors. The Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which the Lender accords its own
property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Lender shall not have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Lender has
or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and be
continuing, to the extent permitted by law, each Pledgor may exercise
any and all voting and other consensual rights pertaining to the
Pledged Collateral of such Pledgor or any part thereof for any purpose
not inconsistent with the terms of this Pledge Agreement or the Amended
Credit Documents; and
(ii) Upon the occurrence and during the continuance of an Event
of Default, all rights of a Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph (i) of this Section shall cease and all such
rights shall thereupon become vested in the Lender which shall then
have the sole right to exercise such voting and other consensual
rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and be
continuing and subject to Section 4(b) hereof, each Pledgor may receive
and retain any and all dividends (other than stock dividends and other
dividends constituting Pledged Collateral which are addressed
hereinabove) or interest paid in respect of the Pledged Collateral to
the extent they are allowed under the Amended Credit Documents.
12
(ii) Upon the occurrence and during the continuance of an Event of
Default:
(A) all rights of a Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to receive
and retain pursuant to paragraph (i) of this Section shall cease
and all such rights shall thereupon be vested in the Lender which
shall then have the sole right to receive and hold as Pledged
Collateral such dividends and interest payments; and
(B) all dividends and interest payments which are received by
a Pledgor contrary to the provisions of paragraph (A) of this
Section shall be received in trust for the benefit of the Lender,
shall be segregated from other property or funds of such Pledgor,
and shall be forthwith paid over to the Lender as Pledged
Collateral in the exact form received, to be held by the Lender as
Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(g) Release of Pledged Collateral. The Lender may release any of the
Pledged Collateral from this Pledge Agreement or may substitute any of the
Pledged Collateral for other Pledged Collateral without altering, varying
or diminishing in any way the force, effect, lien, pledge or security
interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall continue
as a first priority lien on all Pledged Collateral not expressly released
or substituted.
11. Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, any payments in respect of the Pledgor Obligations and
any proceeds of any Pledged Collateral, when received by the Lender in cash or
its equivalent, will be applied in reduction of the Pledgor Obligations in the
order determined by the Lender in its sole and absolute discretion, and each
Pledgor irrevocably waives the right to direct the application of such payments
and proceeds and acknowledges and agrees that the Lender shall have the
continuing and exclusive right to apply and reapply any and all such payments
and proceeds in the Lender's sole discretion, notwithstanding any entry to the
contrary upon any of its books and records.
12. Costs of Counsel. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses of the
Lender, (a) as required under the Amended Credit Documents or the Amendment
Agreement, and (b) as necessary to protect the Pledged Collateral or to
exercise any rights or remedies under this Pledge Agreement or with respect to
any Pledged Collateral. All of the foregoing costs and expenses shall
constitute Pledgor Obligations hereunder.
13
13. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Pledgor Obligations remain outstanding (other than unasserted indemnity
claims) or any Amended Credit Document or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Upon such payment and termination, this Pledge Agreement shall
be automatically terminated and the Lender shall, upon the request and at
the expense of the Pledgors, (i) promptly return all certificates
representing the Pledged Shares, all other certificates and instruments
constituting Pledged Collateral and all instruments of transfer or
assignment which have been delivered to the Lender pursuant to this Pledge
Agreement and (ii) forthwith release all of its liens and security
interests hereunder and shall execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Pledgors
evidencing such termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this Pledge
Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Pledgor Obligations is rescinded or must
otherwise be restored or returned by the Lender as a preference, fraudulent
conveyance or otherwise under any bankruptcy, insolvency or similar law,
all as though such payment had not been made; provided that in the event
payment of all or any part of the Pledgor Obligations is rescinded or must
be restored or returned, all reasonable costs and expenses (including
without limitation any reasonable legal fees and disbursements) incurred by
the Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Pledgor Obligations.
14. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except in a writing signed by a duly authorized officer of the
Lender.
15. Successors in Interest. This Pledge Agreement shall create a continuing
security interest in the Collateral and shall be binding upon each Pledgor, its
successors and assigns and shall inure, together with the rights and remedies
of the Lender hereunder, to the benefit of the Lender and its successors and
permitted assigns; provided, however, that none of the Pledgors may assign its
rights or delegate its duties hereunder without the prior written consent of
the Lender. To the fullest extent permitted by law, each Pledgor hereby
releases the Lender, and its successors and assigns, from any liability for any
act or omission relating to this Pledge Agreement or the Collateral, except for
any liability arising from the gross negligence or willful misconduct of the
Lender or its officers, employees or agents.
16. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with the terms of the Revolving Credit
Agreement.
17. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which
14
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Pledge Agreement to produce or account for more than one
such counterpart.
18. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
19. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action
or proceeding with respect to this Pledge Agreement may be brought in the
courts of the State of North Carolina, or of the United States for the
Western District of North Carolina, and, by execution and delivery of this
Pledge Agreement, each Pledgor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
such courts. Each Pledgor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Borrower at the address for notices pursuant
to the terms of the Revolving Credit Agreement, such service to become
effective 30 days after such mailing. Nothing herein shall affect the right
of the Lender to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against any Pledgor in
any other jurisdiction.
(b) Each Pledgor hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Pledge
Agreement brought in the courts referred to in subsection (a) hereof and
hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
21. Severability. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Pledge Agreement, Amendment Agreement, the Security
Agreement, and the Amended Credit Documents represent the entire agreement of
the parties
15
hereto and thereto, and supersede all prior agreements and understandings, oral
or written, if any, among the parties hereto.
23. Survival. All representations and warranties of the Pledgors hereunder
shall survive the execution and delivery of this Pledge Agreement, the
Amendment Agreement, the Amended Credit Documents and the Security Agreement.
24. Other Security. To the extent that any of the Pledgor Obligations are
now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Lender shall have the right to proceed against such other property,
guarantee or endorsement upon the occurrence of any Event of Default, and the
Lender has the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Lender shall at any time
pursue, relinquish, subordinate, modify or take with respect thereto, without
in any way modifying or affecting any of them or any of the Lender's rights or
the Pledgor Obligations under this Pledge Agreement, or under any other of the
Amended Credit Documents or under the Security Agreement.
25. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by
the Lender under the Amended Credit Documents, for the mutual benefit,
directly and indirectly, of each of the Pledgors and in consideration of
the undertakings of each of the Pledgors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Pledgors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Pledgors with respect to the
payment and performance of all of the Pledgor Obligations arising under
this Pledge Agreement, the other Amended Credit Documents and the Security
Agreement, it being the intention of the parties hereto that all the
Pledgor Obligations shall be the joint and several obligations of each of
the Pledgors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the obligations of a
Guarantor shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state
and including, without limitation, the Bankruptcy Code).
16
WHEREFORE, each of the parties hereto has caused a counterpart of this
Pledge Agreement to be duly executed and delivered as of the date first above
written.
BORROWER: APPLIED ANALYTICAL INDUSTRIES, INC.,
a Delaware corporation
/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxxxxx
---------------------------------- -----------------------------------
Xxxxxx X. Xxxxx Name: Xxxxxxxxx X. Xxxxxxxx
---------------------------------- ---------------------------------
Executive Vice President Title Chief Executive Officer
---------------------------------- ---------------------------------
GUARANTORS:
AAI LEARNING CENTER INC.
AAI TECHNOLOGIES, INC.
AAI PROPERTIES, INC.
KANSAS CITY ANALYTICAL SERVICES, INC.
MEDICAL AND TECHNICAL RESEARCH
ASSOCIATES, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxxxx X. Xxxxxxxx
---------------------------------
Title Chairman of the Board
---------------------------------
Accepted and agreed to in Wilmington, North Carolina as of the date first
above written.
BANK OF AMERICA, N.A.,
as Lender
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxx
---------------------------------
Title Vice President
---------------------------------
17
Schedule 2(a)
to
Pledge Agreement
dated as of August _____, 1999
in favor of Bank of America, N.A.
as Lender
PLEDGED STOCK
PLEDGOR: APPLIED ANALYTICAL INDUSTRIES, INC.
Number of Certificate Percentage
Name of Subsidiary Shares Number Ownership
------------------ ------ ------ ---------
AAI Learning Center Inc. 100%
AAI Technologies, Inc. 100%
Kansas City Analytical 100%
Services, Inc.
Medical and Technical 100%
Research Associates, Inc.
AAI Properties, Inc. 100%
18
Exhibit 4(a)
to
Pledge Agreement
dated as of August __, 1999
in favor of Bank of America, N.A.
as Lender
Irrevocable Stock Power
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
the following shares of capital stock of__________________________,
a _________________________ corporation:
No. of Shares Certificate No.
and irrevocably appoints _____________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
APPLIED ANALYTICAL INDUSTRIES,
INC.
By:
-----------------------------------
Name:
---------------------------------
Title
---------------------------------
