EXHBIT 10.4
PLEDGE AGREEMENT
This Agreement is made as of February 29, 1996 by EMCON, a California
corporation ("Debtor"), in favor of THE BANK OF CALIFORNIA, N.A. ("Bank").
Recitals
Debtor and Bank have executed a Credit Agreement of even dated
herewith (as the same may be amended or supplemented from time to time, the
"Credit Agreement"), pursuant to which Bank has agreed to extend certain credit
facilities to Borrower on the condition, among others, that Borrower pledge to
Bank and grant to Bank a continuing security interest in certain shares of stock
and other property as security for Borrower's obligations under the Credit
Agreement. All capitalized terms used in this Agreement that are not otherwise
defined herein shall have the meanings ascribed thereto in the Credit Agreement.
1. Grant of Security Interest. Debtor hereby grants to Bank a
continuing security interest in all issued and outstanding shares of capital
stock of each of Debtor's Subsidiaries identified on Schedule 1 annexed to this
Agreement (as such Schedule may be amended or supplemented from time to time),
now owned or hereafter acquired by Debtor (the "Pledged Shares"), all stock
rights, rights to subscribe, liquidating dividends, stock dividends, new
securities or other property to which Debtor is or may become entitled to
receive on account of such Pledged Shares, and all proceeds thereof
("Collateral"). Except as provided in Section 5(d)(i), in the event Debtor
receives any of the above forms of property, Debtor will promptly deliver it to
Bank to be held by Bank hereunder in the same manner as the Collateral
originally delivered hereunder.
2. Indebtedness. Debtor agrees that the Collateral is and shall be
security for the timely payment and performance of all obligations under all
Indebtedness to Bank. "Indebtedness" means all debts, obligations and
liabilities of Debtor to Bank currently existing or now or hereafter made,
incurred or created, whether voluntary or involuntary and however arising or
evidenced, whether direct or acquired by Bank by assignment or succession,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, whether under this Agreement or otherwise and
whether Debtor may be liable individually or jointly, or whether recovery upon
such debt may be or become barred by any statute of limitations or otherwise
unenforceable; and all renewals, extensions and modifications thereof; and all
attorneys' fees and costs incurred by Bank in connection with the collection and
enforcement thereof. Any writing which evidences or is an agreement in respect
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to all or any portion of the Indebtedness is a "Loan Document". 3. Debtor's
Covenants. Debtor hereby represents, warrants and agrees that:
(a) Debtor has acquired, or forthwith will acquire and maintain, all
portions of the marketable title to the Collateral described herein and
will at all times keep the Collateral free of all Liens except those
permitted under Section 6.2 of the Credit Agreement;
(b) Debtor will not sell, transfer, lease or otherwise dispose of any
of the Collateral or any interest therein to any individual or entity,
including without limitation Bank where the context so permits and in
Bank's sole discretion ("Person");
(c) The Pledged Shares have been duly and validly issued and are fully
paid and non-assessable. Except as may be specifically stated to Bank
in writing prior to the date hereof and as provided by law, the Pledged
Shares are transferable without prior notice to, or approval or consent
from, any Person or governmental or regulatory authority, and there
exists no condition or restriction to or affecting the transfer of the
Pledged Shares;
(d) Debtor will pay when due and prior to delinquency all taxes,
levies, assessments or other claims which are or may become liens
against the Collateral;
(e) Debtor will neither make nor permit any material change in the
Collateral without the prior written consent of the Bank;
(f) Except as otherwise provided herein, Debtor will deliver to Bank
promptly (i) all Collateral, (ii) all proceeds of the Collateral,
(iii) such specific acknowledgments, assignments, or other agreements
or writings as Bank may request relating to the Collateral, and (iv)
such records and other reports in such form and detail and at such
times as Bank may require relating to the Collateral; notwithstanding
anything to the contrary herein contained, Debtor may receive and
retain distributions from a Subsidiary in the form of personal
property other than cash or securities in connection with a business
reorganization involving Borrower and such Subsidiary;
(g) Debtor will give prompt notice to Bank of any threatened or
asserted dispute or claim with respect to the Collateral, any decrease
in the value of any Collateral and the amount of such decrease (other
than as reflected on any securities exchange or other market
publication), any litigation or administrative or regulatory
proceeding which may have a material adverse effect on Debtor or its
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business, and the occurrence of any Event of Default or of any other
development, financial or otherwise, which might materially adversely
affect the Collateral or Debtor's ability to perform its obligations
to Bank; and
(h) Debtor will execute and deliver to Bank, and file or record at
Debtor's expense, all notices and other documents from time to time
requested by Bank to maintain a first perfected security interest in
the Collateral in favor of Bank, all in form and substance
satisfactory to Bank, and perform such other acts, and execute and
deliver to Bank such additional assignments, agreements and
instruments, as Bank may at any time request in connection with the
administration and enforcement of this Agreement or Bank's rights,
powers and remedies hereunder.
4. Events of Default. The occurrence of any Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this
Agreement.
5. Rights on Default.
(a) Upon the occurrence of an Event of Default, all Indebtedness shall,
at the option of Bank, without demand or notice, become immediately due
and payable. Bank shall have all other rights and remedies available
under contract or applicable law, which include those of a secured
party under the Uniform Commercial Code, at law, or in equity, and the
right to take possession of the Collateral (if not then in Bank's
possession), and sell and dispose of the same, or any part thereof, at
public or private sale.
(b) The proceeds of any sale or disposition shall be applied first to
the reasonable expenses of retaking, holding, preparing for sale,
discharging all liens, selling and the like, then to the attorneys'
fees and legal expenses incurred by Bank, and then to the Indebtedness
in such order as Bank may determine. Notwithstanding the rights given
to Debtor pursuant to California Civil Code sections 1479 and 2822 or
equivalent provisions in the laws of the state specified in the
governing law clause of this document (and any amendments or
successors thereto), to designate how payments will be applied, Debtor
hereby waives such rights and Bank shall have the right in its sole
discretion to determine the order and method of the application of
payments received from Debtor or from the sale or disposition of the
Collateral and to revise such application prospectively or
retroactively at its discretion.
(c) Person(s) liable for all or any portion of Indebtedness shall
remain liable for the unsatisfied portion of such Indebtedness, and
shall promptly pay the same to Bank immediately and without demand,
with interest thereon at the rate provided in the Loan Document
applicable thereto, or, if no rate is otherwise provided, at the rate
of interest applicable to the unsatisfied amount of a money judgment
of a court of the state whose laws govern this Agreement. Should the
net proceeds resulting from any such sale or disposition exceed the
amount owing to Bank, Bank shall pay such surplus to the Person(s)
legally entitled thereto.
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(d) So long as no Event of Default shall have occurred:
(i) Debtor shall be entitled to receive and retain
all cash dividends payable in connection with any the Pledged
Shares and to exercise any and all voting or consensual rights
and powers relating to or pertaining to any Pledged Shares for
any purpose not inconsistent with the terms of this Agreement.
(ii) Upon the occurrence and during the continuance
of an Event of Default, all rights of Debtor to receive
payment of cash dividends or to exercise the voting or
consensual rights and powers with respect to the Collateral,
shall cease, and all such rights and authority to exercise
such voting or consensual rights and powers or to receive and
retain such dividends shall inure to Bank. Any and all money
and other property paid over to or received by Bank pursuant
to the provisions of this Section may be retained by Bank as
additional Collateral or in Bank's sole discretion may be
applied toward the satisfaction of the Indebtedness. In such
event, Bank shall have the right and power to receive, endorse
and collect all checks and other orders for the payment of
money made payable to Debtor representing any dividend or
other distribution payable or distributable in respect of any
Pledged Shares.
(e) The obligations of Debtor under this Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time any
payment of any Indebtedness is rescinded or must otherwise be returned
by Bank upon, on account of, or in connection with, the insolvency,
bankruptcy or reorganization of Debtor or otherwise, all as though
such payment had not been made.
6. Costs and Expenses. Debtor promises, to the extent permitted by
applicable law, to reimburse Bank promptly for all costs and expenses incurred
by Bank in performing any agreement of Debtor which Debtor shall fail to
perform, or in taking any other action which Bank deems necessary for the
maintenance or preservation of any Collateral or its interest therein, which
costs and expenses shall constitute Indebtedness under this Agreement.
7. Power of Attorney.
(a) Debtor hereby irrevocably appoints Bank, or any officer thereof, as
Debtor's true and lawful attorney-in-fact coupled with an interest,
with full power of substitution, to sign or endorse any instrument,
document, or other writing necessary or desirable to transfer title or
other rights to or in any of the Collateral; and to do all acts
necessary or incidental to assert, protect and enforce Bank's rights in
the Collateral and under this Agreement. Debtor agrees that Debtor will
reimburse Bank promptly upon demand for any expenses Bank may incur
while acting as Debtor's attorney-in-fact, which expenses shall
constitute Indebtedness under this Agreement.
(b) Following the occurrence of an Event of Default (except as
otherwise provided), without notice, and at the expense of Debtor, Bank
in its name or in the name of Debtor may, but shall not be obligated to
(i) collect by legal proceedings or otherwise, endorse, receive and
receipt for all dividends, interest, principal payments and other sums
now or hereafter payable upon or on account of the Collateral; (ii)
make any compromise or settlement it deems desirable or proper with
reference to the Collateral; (iii) at any time, insure, process and
preserve the Collateral; (iv) at any time, participate in any
recapitalization, reclassification, reorganization, consolidation,
redemption, stock split, merger or liquidation of any issuer of
securities which constitute Collateral, and in connection therewith may
deposit or surrender control of the Collateral, accept money or other
property in exchange for the Collateral, and take such action as it
deems proper in connection therewith, and any other money or property
received in exchange for the Collateral shall be applied to the
Indebtedness or held by Bank thereafter as Collateral pursuant to the
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provisions hereof; (v) cause Collateral to be transferred to its name
or to the name of its nominee; (vi) at any time, exercise as to the
Collateral all the rights, powers and remedies of an owner necessary to
exercise its rights, subject to Section 5(d).
8. Waivers of Debtor. Debtor waives any right to require Bank to
proceed against any Person, or to exhaust any Collateral or to pursue any remedy
in Bank's power whatsoever. Bank shall not be required to make presentment,
demand or protest, or give any notices thereof, or take any action to preserve
rights against prior parties with respect to any of the Collateral. Debtor
waives the right to plead any statute of limitations or any defense to the
personal liability of Debtor as a defense to Bank's exercise of any right or
remedy hereunder.
9. Non-Waiver. Bank may, in the exercise of its sole discretion, waive
an Event of Default, or cure an Event of Default at Debtor's expense. Any such
waiver shall be subject to Section 11(c) below.
10. Bank's Duties.
(a) Bank's sole duty with respect to the Collateral in its possession
shall be to use reasonable care in the custody and preservation
thereof. Bank shall be deemed to have exercised reasonable care in the
custody and preservation of such Collateral if such Collateral is
accorded treatment substantially equal to that which Bank accords its
own property, it being understood that Bank shall not have any
responsibility for ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, declining value, tenders or other
matters relative to any Collateral, regardless of whether Bank has or
is deemed to have knowledge of such matters; or taking any necessary
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steps to preserve any rights against any Person with respect to any
Collateral. Under no circumstances shall Bank be responsible for any
injury or loss to the Collateral, or any part thereof, arising from any
cause beyond the reasonable control of Bank.
(b) Bank may at any time deliver the Collateral or any part thereof to
Debtor and the receipt of Debtor shall be a complete and full
acquittance for the Collateral so delivered, and Bank shall thereafter
be discharged from any liability or responsibility therefor.
11. General Provisions.
(a) Notices. Any notices given or required under this Agreement shall
be given in the manner specified in the Credit Agreement.
(b) Binding Effect. This Agreement shall be binding upon Debtor,its
permitted successors, representatives and assigns, and shall inure to
the benefit of Bank and its successors, representatives and assigns;
provided however that Debtor may not assign or transfer's Debtor's
obligations under this Agreement without Bank's prior written consent.
Bank reserves the right to sell, assign, or transfer its rights and
powers under this Agreement, in whole or in part without notice to
Debtor. In that connection, Bank may disclose all documents and
information which Bank now or hereafter may have relating to this
Agreement, Debtor or Debtor's business, provided that any such
assignee or transferee executes a confidentiality agreement reasonably
satisfactory to Debtor.
(c) No Waiver. Any waiver, consent or approval by Bank of any Event of
Default or breach of any provision, condition or covenant of this
Agreement or any Loan Document must be in writing and shall be
effective only to the extent set forth in writing. No waiver of any
breach or default shall be deemed a waiver of any later breach or
default of the same or any other provision of this Agreement or any of
the Loan Documents. No failure or delay on the part of Bank in
exercising any power, right or privilege under this Agreement or any
Loan Document shall operate as a waiver thereof, and no single or
partial exercise of any such power, right or privilege shall preclude
any further exercise thereof, or the exercise of any further power,
right or privilege.
(d) Rights Cumulative. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any other rights or
remedies available under contract or applicable law.
(e) Unenforceable Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be so only as to
such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of this Agreement
shall remain valid and enforceable.
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(f) Governing Law/Waiver of Notice. Except as may be otherwise
provided by the Uniform Commercial Code or in any addendum hereto,
this Agreement shall be governed by and construed in accordance with
the laws of the State of California. To the fullest extent permitted
by law, Debtor hereby waives presentment, demand, protest, notice of
dishonor and all other notices and demands, as well as any applicable
statute of limitations.
(g) Indemnification. Debtor shall pay and protect, defend and
indemnify Bank and Bank's employees, officers, directors,
shareholders, affiliates, correspondents, agents and representatives
(other than Bank, collectively "Agents") against, and hold Bank and
each such Agent harmless from, all claims, actions, proceedings,
liabilities, damages, losses, and related expenses (including, without
limitation, attorneys' fees and costs) and other amounts incurred by
Bank and each such Agent, arising from the matters contemplated by
this Agreement; provided, however, that this indemnification shall not
apply to any of the foregoing incurred solely as the result of Bank's
or any Agent's gross negligence or willful misconduct. This
indemnification shall survive the payment and satisfaction of all of
Debtor's obligations and liabilities to Bank.
(h) Reimbursement. Debtor shall reimburse Bank for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements (and fees and disbursements of Bank's in-house counsel)
expended or incurred by Bank in any arbitration, mediation, judicial
reference, legal action or otherwise in connection with (a) the
negotiation, preparation, amendment, interpretation and enforcement of
this Agreement, including without limitation during any workout,
attempted workout, and/or in connection with the rendering of legal
advice as to Bank's rights, remedies and obligations under this
Agreement, (b) collecting any sum which becomes due Bank under this
Agreement, (c) any proceeding for declaratory relief, any counterclaim
to any proceeding, or any appeal, or (d) the protection, preservation
or enforcement of any rights of Bank. For the purposes of this
section, attorneys' fees shall include, without limitation, fees
incurred in connection with the following: (1) contempt proceedings;
(2) discovery; (3) any motion, proceeding or other activity of any
kind in connection with a bankruptcy proceeding or case arising out of
or relating to any petition under Title 11 of the United States Code,
as the same shall be in effect from time to time, or any similar law;
(4) garnishment, levy, and debtor and third party examinations; and
(5) postjudgment motions and proceedings of any kind, including
without limitation any activity taken to collect or enforce any
judgment.
(i) Entire Agreement. This Agreement is intended by Debtor and Bank as
the final expression of Debtor's obligations to Bank in connection
with the Collateral and supersedes all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be
amended only by a writing signed by Debtor and accepted by Bank in
writing.
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IN WITNESS WHEREOF, Debtor has executed this Agreement as of the date
of the preamble.
EMCON
By: /s/
---------------------
Name: R. Xxxxxxx Xxxxxxxxx
Title: CFO & V.P. - Legal
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