CUSTODY, PLEDGE AND SECURITY AGREEMENT
CUSTODY, PLEDGE AND SECURITY AGREEMENT dated as of August 1, 1997 is
entered into among ADVANCED AERODYNAMICS AND STRUCTURES, INC., a limited
partnership organized under the laws of the State of Delaware (the "Company'),
THE SUMITOMO BANK, LIMITED, a banking corporation organized under the laws of
Japan, acting through its Los Angeles Branch ("Sumitomo"), and FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, as custodian (the "Custodian"), pursuant to
the Reimbursement Agreement dated as of August 1, 1997 between the Company and
Sumitomo (hereinafter, as the same may from time to time be amended or
supplemented, called the "Reimbursement Agreement"):
RECITALS
1. On August 5, 1997, the California Economic Development Financing
Authority (the "Issuer") issued its Variable Rate Demand Industrial Development
Revenue Bonds, Series 1997 (Advanced Aerodynamics and Structures, Inc. Project)
(the "Bonds") pursuant to an Indenture of Trust dated as of August 1, 1997 (as
amended or supplemented from time to time, the "Indenture") between the Issuer
and First Trust of California, National Association, as trustee (together with
any successor trustee under the Indenture, the "Trustee").
2. The Indenture requires that the Bonds be purchased from the owners
thereof on the dates on which the Bonds are subject to optional or mandatory
tender pursuant to Sections 4.06 and 4.07 of the Indenture (any such date is
referred to herein as the "Tender Date") under the circumstances set forth in
the Indenture.
3. The Company has agreed to enter into the Reimbursement Agreement and
thereby cause Sumitomo to issue its transferable irrevocable direct pay letter
of credit (the "Letter of Credit") which may be drawn upon, inter alia, to pay
the purchase price of Bonds which are subject to optional or mandatory tender on
such Tender Dates.
4. Bonds tendered or deemed to have been tendered pursuant to the Indenture
which are purchased by a draw on the Letter of Credit will be registered in the
name of Sumitomo or its nominee pursuant to this Pledge Agreement unless
Sumitomo directs otherwise.
5. It is a condition precedent to Sumitomo's delivery of the Letter of
Credit that the Company enter into this Custody, Pledge and Security Agreement
(as amended or supplemented from time to time, this "Pledge Agreement") with
Sumitomo and the Custodian.
6. First Trust of California, National Association has been appointed as
the Trustee under the Indenture and has also agreed to act as a custodian under
this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Sumitomo to
1
enter into the Reimbursement Agreement and issue the Letter of Credit thereunder
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement or the indenture shall have such defined meanings when
used herein.
2. Pledge. The Company hereby pledges, assigns, hypothecates, transfers and
delivers to Sumitomo all its right, title and interest in and to all Bonds, as
the same may be from time to time delivered to the Trustee by the owners
thereof, that may be purchased with funds drawn under the Letter of Credit (the
"Pledged Bonds"), and hereby grants to Sumitomo a first lien on, and security
interest in, all rights, title and interest of the Company in and to the Pledged
Bonds, the interest thereon and all proceeds thereof, as collateral security for
the prompt and complete payment when due of all amounts due to Sumitomo under
the Reimbursement Agreement and the performance of all other obligations of the
Company under the Reimbursement Agreement and the other Credit Documents (all of
the foregoing being hereinafter called the "Obligations").
3. Custody and Registration of Bonds: Fees of Custodian.
(a) Sumitomo hereby designates and appoints the Custodian as its agent
and bailee to perfect Sumitomo's pledge, assignment and security interest in the
Pledged Bonds and to serve in accordance with the terms and conditions of this
Pledge Agreement as custodial agent of Sumitomo for the Pledged Bonds, the
interest thereon and all proceeds thereof. Upon any drawing under the Letter of
Credit for the purchase price of the Bonds, the Trustee. shall deliver such
Pledged Bonds to the Custodian, and the Custodian hereby accepts such
appointment and agrees to perform as custodial agent for Sumitomo and to hold
Pledged Bonds on behalf of Sumitomo in accordance with the provisions of this
Pledge Agreement. Upon receipt of such Bonds, the Custodian shall notify the
Remarketing Agent and the Company (by telecopier or other electronic
communication) that Bonds equal to the portion of the purchase price
attributable to principal are being held by the Custodian for Sumitomo pursuant
to this Pledge Agreement.
(b) Unless otherwise directed by Sumitomo (but subject to the
provisions of Section 11 hereof), the Custodian shall cause either (A) any
Pledged Bonds which have not been remarketed in accordance with the Remarketing
Agreement to be registered by the Trustee in the name of Sumitomo or its nominee
or (B) if DTC is the registered owner of all Bonds, any Pledged Bonds which have
not been remarketed in accordance with the Remarketing Agreement to be
registered in the name of DTC with Sumitomo's or its nominee's beneficial
ownership interest of such Pledged Bonds recorded by DTC on its books. The
Company hereby agrees that it will execute and deliver such documents and take
such steps as Sumitomo may reasonably request in order to perfect and maintain
perfected Sumitomo's security interest in the Collateral.
2
(c) The Company irrevocably constitutes and appoints the Custodian as
its attorney to cause the transfer of any Pledged Bonds on the books kept for
the registration thereof and authorizes the Custodian to deliver Pledged Bonds
to the Trustee for reregistration, if appropriate, and delivery in accordance
with the terms of this Pledge Agreement.
(d) The fees of the Custodian, if any, in connection with this Pledge
Agreement shall be for the account of the Company.
4. Payments on the Bonds: Voting Rights.
(a) If, while this Pledge Agreement is in effect, the Company shall
become entitled to receive or shall receive any payment, including, without
limitation, any payment of principal, premium, interest or proceeds of sale, in
respect of the Pledged Bonds, such payment shall be subject to this Pledge
Agreement. Any such payment shall be made directly to Sumitomo, and, in the
event any such payment is received by the Company, the Company agrees to accept
the same as Sumitomo's agent, to hold the same in trust on behalf of Sumitomo
and to deliver the same forthwith to Sumitomo. AU sums of money so paid in
respect of the Pledged Bonds which are received by the Company and paid to
Sumitomo and all such amounts which shall be paid directly to Sumitomo by the
Trustee shall be credited against the Obligations of the Company owed to
Sumitomo. If the payments are in excess of the amounts owed to Sumitomo,
Sumitomo shall return the excess to the Company.
(b) During such time as Bonds are pledged to Sumitomo under the terms
of this Pledge Agreement, Sumitomo shall be entitled to exercise all of the
rights of an owner of Bonds with respect to voting, consenting and directing the
Trustee as if Sumitomo were the owner of such Bonds, and the Company hereby
grants and assign to Sumitomo all such rights.
5. Collateral. The Pledged Bonds, all income therefrom and proceeds thereof
are herein collectively sometimes called the "Collateral."
6. Release of the Bonds.
(a) Simultaneously with the receipt by the Custodian of the proceeds
of sale of any Pledged Bonds which are remarketed in accordance with the
Indenture and the Remarketing Agreement for a purchase price of not less than
the principal amount thereof, Pledged Bonds in a principal amount equal to the
purchase price shall be released from the lien of this Pledge Agreement and
delivered at the direction of the Remarketing Agent. The Custodian agrees that
the proceeds of such sale will be disbursed in accordance with the provisions of
Section 8.11 of the Indenture.
3
(b) Upon receipt by the Custodian of written notice from Sumitomo,
which notice may be sent by telecopy if immediately confirmed in wilting, that
Sumitomo has received payment or prepayment in full of all amounts owing under
the Reimbursement Agreement, all such Pledged Bonds and any other Collateral
pledged to Sumitomo then subject to the lien of this Pledge Agreement shall be
released herefrom and registered in the name of and delivered to the Company or
its order.
7. Exculpatory Provisions. Neither the Custodian nor any of its offlcers,
directors, employees, agents, attorneys-in-fact or affiliates shall be liable
for any action lawfully taken or omitted to be taken by it or such person under
or in connection with this Pledge Agreement (except for its or each person's own
gross negligence or willful misconduct), including any failure to correct or
realize upon the Obligations or any Collateral, security or guaranty therefor or
any part thereof The Company hereby indemnifies the Custodian from and against
any and all claims, losses, damages, liabilities and expenses which may be
imposed on, incurred by or asserted against the Custodian in any way related to
or arising out of the subject matter of this Pledge Agreement (except for such
claims, losses, damages, liabilities and expenses which arise out of the
Custodian's gross negligence or willful misconduct). The Custodian undertakes to
perform only such duties as are expressly set forth herein. The Custodian may
rely and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it to
be genuine- and to have been signed or presented by an Authorized Bank
Representative; "Authorized Bank Representative" means any one of the persons at
the time designated to act on behalf of Sumitomo by written certificate
furnished to the Custodian, which certificate shall be substantially in the form
set forth in Attachment A attached hereto and by reference made a part hereof,
and may be changed from time to time by Sumitomo furnishing a new certificate to
the Custodian. The Custodian may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. Notwithstanding any provision to the contrary contained herein,
the Custodian shall not be responsible for any act or failure to act absent its
gross negligence or willful misconduct.
8. Resignation or Removal of Custodian. The Custodian may resign and be
discharged from its duties and obligations hereunder by giving at least thirty
(30) days' prior written notice of such resignation to Sumitomo, specifying the
date on which such resignation is to take effect. Sumitomo, with the consent of
the Company (which consent shall not be unreasonably withheld and which shall
not be required if an Event of Default (as defined in Section 9 hereof) has
occurred and is continuing), may remove and discharge the Custodian from its
duties and obligations hereunder by giving at least five (5) Business Days'
prior written notice of such removal to the Custodian specifying the date on
which such removal is to take effect.
9. Event of Default. The term "Event of Default" as used in this Pledge
Agreement shall mean (a) an Event of Default under and as defined in the
Reimbursement Agreement or (b) (i) the failure by any of the parties hereto to
comply with the provisions of Sections 3 or 6 hereof, (ii) the failure by the
Company to perform or observe any covenant contained in Section 12 or 13 hereof,
4
or (iii) any representation or warranty made by the Company pursuant to Section
12 hereof proving to have been incorrect in any material respect when made.
10. Rights of Sumitomo. Sumitomo shall not be liable for failure to collect
or realize upon the Obligations or any Collateral or any security or other
guarantee therefor, or any part thereof, or for any delay in so doing, nor shall
either party be under any obligation to take any action whatsoever with regard
thereto. If an Event of Default or event which with notice or lapse of time or
both would become an Event of Default has occurred and is continuing, Sumitomo
may thereafter, without notice, exercise all rights, privileges or options
pertaining to any Pledged Bonds pledged to Sumitomo as if Sumitomo were the
holder and absolute owner thereof, upon such terms and conditions as Sumitomo
may determine, all without liability except to account for Collateral or other
property actually received by it, but Sumitomo shall not have any duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
11. Remedies. In the event any portion of the Obligations has been
declared due and payable, Sumitomo may, with the prior written approval of the
Company, forthwith collect, receive, appropriate and realize upon the Collateral
pledged to it, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral pledged to it, or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange, broker's board or
at any of Sumitomo's branches, agencies or offices, or elsewhere upon such terms
and conditions as Sumitomo and the Company may deem advisable and at such prices
as Sumitomo and the Company may deem best, for cash or on credit or for future
delivery without assumption of any credit risk, with the right to Sumitomo upon
any such sale or sales, public or private, to purchase the whole or any part of
said Collateral pledged to it and so sold, free of any right or equity of
redemption in the Company which right or equity is hereby expressly waived or
released. Sumitomo shall pay over the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral pledged to
it or in any way relating to the rights of Sumitomo hereunder, including
reasonable attorneys' fees and legal expenses, to the payment, in whole or in
part, of the Obligations in such order as Sumitomo may elect.
12. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants that:
(a) on the date of delivery to Sumitomo or to the Custodian for the
account of Sumitomo of any Pledged Bonds described herein, the Company shall
have taken no action which would create any right, title or interest in and to
the Pledged Bonds in favor of the Remarketing Agent or the Trustee;
(b) it has, and on the date of delivery to Sumitomo or to the
Custodian for the account of Sumitomo of any Pledged Bonds will have, full
power, authority and legal right
5
to pledge all of Its right, title and interest in and to the Pledged Bonds
pursuant to this Pledge Agreement;
(c) this Pledge Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights a.-,id,
to the extent that such instruments require or may require, enforcement by a
court of equity, such principles of equity as the court having jurisdiction may
impose;
(d) no consent of any other party (including, without limitation, the
creditors of the Company) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority, domestic or foreign, is required
to be obtained by the Company in connection with the execution, delivery or
performance of this Pledge Agreement;
(e) the execution, delivery and performance of this Pledge Agreement
will not result in a material violation of any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree directly binding
on the Company of any court, arbitrator or governmental authority, domestic or
foreign, or of the Company's organizational documents, or of any mortgage,
indenture, lease, contract, or other agreement, instrument or undertaking to
which the Company is a party or which, to the best knowledge of the Company,
purports to be binding upon the Company or upon any of its respective assets and
will not result in the creation or imposition of any lien, charge or encumbrance
on or security interest in any of the assets of the Company except as
contemplated by this Pledge Agreement; and
(f) the pledge, assignment and delivery of the Pledged Bonds pursuant
to this Pledge Agreement will create a valid first lien on and a first perfected
security interest in Sumitomo in all right, title or interest of the Company in
or to such Bonds, and the income and proceeds thereof, subject to no prior
pledge, lien, mortgage, hypothecation, security interest, charge, option or
encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Company which would include
the Pledged Bonds. The Company covenants and agrees that it will defend
Sumitomo's right, title and security interest in and to the Pledged Bonds and
the income and proceeds thereof against the claims and demands of all persons
whomsoever.
13. No Disposition, Etc. The Company agrees that it will not, without the
prior written consent of Sumitomo, sell, assign, transfer, exchange or otherwise
dispose of, or grant any option with respect to, the Collateral (except as
provided in Section 6 of this Pledge Agreement), nor will it create, incur or
permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the Collateral,
or any interest therein, or any proceeds thereof, except for the Hen and
security interest provided for by this Pledge Agreement.
6
14. Further Assurances. The Company agrees that at any time and from time
to time, upon the written request of Sumitomo, the Company will execute and
deliver such further documents and do such @er acts and perform all things as
Sumitomo may reasonably request in order to effect the purposes of this Pledge
Agreement.
15. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. No Waiver: Cumulative Remedies. Sumitomo shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Sumitomo,
and then only to the extent therein set forth. A waiver by Sumitomo of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Sumitomo would otherwise have on any further occasion. No
failure to exercise nor any delay in exercising by Sumitomo of any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
17. Waivers, Amendments: Applicable Law. None of the terms or provisions of
this Pledge Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Sumitomo, the Company and the Custodian.
This Pledge Agreement and all obligations of the Company hereunder shall be
binding upon the successors and assigns of the Company and shall, together with
the rights and remedies of Sumitomo, inure to the benefit of Sumitomo and its
respective successors and assigns. THE OBLIGATIONS OF THE PARTIES UNDER THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.
18. Term. This Pledge Agreement shall remain in full force and effect for
so long as the Letter of Credit is in effect or any amount is owed to Sumitomo
under this Pledge Agreement, the Reimbursement Agreement or any other Credit
Documents, provided that in the event of the resignation or removal of the
Trustee under the Indenture, the Custodian shall resign or be removed under this
Pledge Agreement, and the successor Trustee appointed under the Indenture shall
be appointed as the successor custodian under this Pledge Agreement.
19. Notices. Unless otherwise provided for in this Pledge Agreement, any
notice required or permitted to be given under this Pledge Agreement may be
given by certified or registered mail, return receipt requested, or by,
telecopy, charges prepaid, or by commercial overnight delivery service, prepaid,
addressed:
7
If to the Company:
Advanced Aerodynamics and Structures, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx, Ph.D.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
If to the Custodian:
First Trust of California, National Association
Xxx Xxxxxxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Trust Department
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
If to Sumitomo:
The Sumitomo Bank, Limited
Los Angeles Branch
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Manager - Structured Finance
and Financial Institutions Group
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Any notice sent by mail shall be deemed given three (3) days after it is
deposited in the mails. Any notice sent by telecopy shall be deemed given when
sent. Any notice sent by commercial overnight delivery service shall be deemed
given one (1) Business Day after it is deposited for delivery. Notwithstanding
anything herein to the contrary, notices to release Bonds from Sumitomo to the
Custodian may be made by telecopy and each such notice shall be promptly
confirmed in writing as specified above.
20. Execution in Counterparts. This Pledge Agreement may be executed in
multiple counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
8
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their duly authorized officers as of the day
and year first above written.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
(SEAL)
THE SUMITOMO BANK, LIMITED
By:
, Los Angeles Branch
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION, as Custodian
By:
Its:
9
ATTACHMENT A
TO
PLEDGE AGREEMENT
CERTIFICATE DESIGNATING AUTHORIZED BANK REPRESENTATIVES
The Sumitomo Bank, Limited, acting through its Los Angeles Branch
("Sumitomo"), hereby certifies to FIRST TRUST OF CALIFORNIA, NATIONAL
ASSOCIATION (the "Custodian"), as custodian agent for Sumitomo in accordance
with that certain Custody, Pledge and Security Agreement, dated as of August 1,
1997 among Advanced Aerodynamics and Structures, Inc., Sumitomo and the
Custodian, that the "Authorized Bank Representatives' for Sumitomo from the date
of this Certificate until the Custodian's receipt of a Certificate furnished in
replacement hereof shall be the following individuals so designated below:
Name Specimen Signature
IN WITNESS WHEREOF, Sumitomo has executed this Certificate as of this lst
day of August, 1997.
THE SUMITOMO BANK, LIMITED
By:
Title:
10
