Exhibit 10.11
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STOCK PLEDGE AGREEMENT
among
PACIFIC AEROSPACE & ELECTRONICS, INC.
and
PA&E INTERNATIONAL, INC.,
each a Pledgor,
and
FIRST UNION NATIONAL BANK,
as Collateral Agent
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Dated as of March 25, 2002
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS.........................................................1
SECTION 2. THE PLEDGE..........................................................2
SECTION 3. SECURITY FOR OBLIGATIONS............................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES......................................3
SECTION 5. COVENANTS...........................................................4
SECTION 6. ADVANCES BY LENDERS.................................................5
SECTION 7. VOTING RIGHTS; DIVIDENDS............................................5
SECTION 8. CONTINUED PERFECTION OF SECURITY INTEREST...........................6
SECTION 9. OBLIGATIONS OF THE PLEDGORS AND RIGHTS OF THE COLLATERAL AGENT......6
SECTION 10. REMEDIES OF THE COLLATERAL AGENT....................................6
SECTION 11. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT.........................8
SECTION 12. SECURITY INTEREST ABSOLUTE..........................................9
SECTION 13. AMENDMENTS; ETC.....................................................9
SECTION 14. NOTICES.............................................................9
SECTION 15. CONTINUING ASSIGNMENT; PLEDGE AND SECURITY INTEREST; RELEASE.......10
SECTION 16. APPLICATION OF PROCEEDS............................................10
SECTION 17. SEVERABILITY.......................................................11
SECTION 18. HEADINGS...........................................................11
SECTION 19. GOVERNING LAW......................................................11
SECTION 20. CONSENT TO JURISDICTION............................................11
SECTION 21. WAIVER OF JURY TRIAL...............................................12
SECTION 22. EXECUTION IN COUNTERPARTS..........................................12
SECTION 23. APPLICABILITY OF NOTE PURCHASE AGREEMENT...........................12
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Annex 1-A - Certificates of Stock of the Domestic Subsidiaries
Annex 1-B - Certificates of Stock of the Foreign Subsidiaries
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of March 25, 2002 (this
"Agreement"), among PACIFIC AEROSPACE & ELECTRONICS, INC., a Washington
corporation (the "Company"), and PA&E INTERNATIONAL, INC. and each other
Subsidiary (as hereinafter defined) of the Company that may become a "pledgor"
hereunder (collectively, the "Pledgor Subsidiaries"; the Company and the Pledgor
Subsidiaries are referred to herein individually as a "Pledgor" and
collectively, as the "Pledgors"), and FIRST UNION NATIONAL BANK, acting in its
capacity as collateral agent (the "Collateral Agent") for the Holders (as
hereinafter defined),
W I T N E S S E T H:
WHEREAS, the Company, the Initial Purchaser (as hereinafter
defined) and the Collateral Agent have entered into that certain Note Purchase
Agreement, dated as of March 19, 2002 (as such agreement may be amended,
restated, modified or supplemented from time to time, the "Note Purchase
Agreement"); and
WHEREAS, it is a condition precedent to the obligations of the
Initial Purchaser under the Note Purchase Agreement, that the Pledgors execute
and deliver this Agreement pursuant to which, among other things, the Pledgors
shall grant to the Collateral Agent, for the benefit of the Holders, a
continuing security interest in all of the Collateral (as hereinafter defined)
to secure all of the Obligations (as hereinafter defined);
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Pledgor hereby makes the
following assignments, representations and warranties to the Collateral Agent
and hereby covenants and agrees with the Collateral Agent as follows:
SECTION 1. Definitions
Except as otherwise indicated herein, as used in this Agreement,
the following terms have the following meanings:
"Domestic Subsidiaries" means each Subsidiary that is a
corporation incorporated under the laws of the United States of America or any
State or territory thereof.
"Foreign Subsidiaries" means each Subsidiary that is a
corporation incorporated under the laws of any jurisdiction other than the
United State of America or any State or territory thereof.
"UCC" means the Uniform Commercial Code, as in effect in any
applicable jurisdiction.
(a) Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Note Purchase Agreement, and the principles
of construction set forth in the Note Purchase Agreement shall apply.
(b) Except for the terms defined in this Agreement or in the Note
Purchase Agreement, all terms defined in Article 8 or 9 of the UCC of the State
of New York which are used in this Agreement shall have the meanings specified
in such Articles.
SECTION 2. The Pledge.
Each Pledgor hereby pledges and hypothecates to the Collateral
Agent for the benefit of the Holders, and hereby grants to the Collateral Agent
for the benefit of the Holders a continuing security interest in and to, all of
its presently owned or hereafter acquired right, title and interest in and to
the following (the "Collateral"):
(a) (i) the shares of common stock of each of the Domestic
Subsidiaries, identified in Annex 1-A hereto, representing 100% of the issued
and outstanding common stock of each of the Domestic Subsidiaries, and all other
shares of Capital Stock of whatever class of each of the Domestic Subsidiaries
now or hereafter owned by such Pledgor, in each case together with the
certificates evidencing the same, and (ii) the shares of common stock of each of
the Foreign Subsidiaries, identified in Annex 1-B hereto, representing 65% (or,
if as a result of a change in applicable law, such Pledgor can pledge a greater
percentage without causing adverse tax consequences to the Pledgor, such greater
percentage) of the issued and outstanding voting stock (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) and 100% of any nonvoting classes of stock
(within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of each of the Foreign
Subsidiaries, and all other shares of Capital Stock of whatever class, now or
hereafter owned by such Pledgor, necessary to maintain the security interest
created hereby in 65% (or, if as a result of a change in applicable law, such
Pledgor can pledge a greater percentage without causing adverse tax consequences
to such Pledgor, such greater percentage) of the voting stock and 100% of the
nonvoting stock of each of the Foreign Subsidiaries, in each case together with
the certificates representing the same (the shares of stock referred to in
clauses (i) and (ii), collectively, the "Pledged Shares");
(b) all shares, securities, moneys or property 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
split-up, revision, reclassification or other like change of the Pledged Shares
or otherwise received in exchange therefor, and any Stock Equivalents issued to
the holders of, or otherwise in respect of, the Pledged Shares;
(c) all securities in substitution for or in addition to any of
the foregoing, any certificates representing or evidencing such securities, and
all cash, securities, distributions and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing; and
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(d) all Proceeds of and to any of the property of such Pledgor
described in the preceding clauses of this Section 2.
SECTION 3. Security for Obligations.
The Collateral secures the prompt and complete payment and
performance of all the Obligations.
SECTION 4. Representations and Warranties.
Each Pledgor represents and warrants as follows:
(a) No consent of any other Person and no authorization,
approval, or other action by, or notice to or filing with, any Person is
required (i) for the pledge and assignment by such Pledgor of the Collateral
pursuant to this Agreement, (ii) for the validity, perfection or maintenance of
the first priority security interest created hereby or (iii) for the exercise by
the Collateral Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of such Collateral pursuant to this
Agreement or as provided by law, except in each case for those which have been
duly obtained or made, which are in full force and effect and as may be required
in connection with any disposition of any portion of the Collateral by laws
affecting the offering and sale of securities generally.
(b) Each Pledgor is the legal and beneficial owner of, and has
good title to, the Collateral of such Pledgor free and clear of all Liens,
except for the security interest created by this Agreement and Liens for taxes,
assessments, governmental charges or levies not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Company and each of its
Subsidiaries, as the case may be, in accordance with GAAP (such Liens,
"Governmental Liens").
(c) Each Pledgor owns all of the issued and outstanding Capital
Stock of the Domestic Subsidiaries and the Foreign Subsidiaries of such Pledgor.
(d) This Agreement creates a valid security interest in and to
all of the Collateral securing the payment of all the Obligations. The Pledged
Shares pledged by each Pledgor hereunder are, and any securities pledged in
substitution therefor or in addition thereto will be duly and validly pledged
hereunder in accordance with all applicable Requirements of Law.
(e) Each Pledgor has the right to pledge the Pledged Shares owned
by it as herein provided.
(f) Any certificate evidencing the Pledged Shares pledged by a
Pledgor hereunder is, and any certificate pledged hereunder in substitution
therefor or in addition thereto will be, issued in the name of such Pledgor and
the form of transfer applicable to each such certificate has been, or when
issued will then have been duly executed in blank or is, or when issued will
then be, the subject of a duly executed
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transfer duly signed in blank by or under the authority of the appropriate
officer of such Pledgor. Each such transfer will give the Collateral Agent the
rights and authority it purports to give.
(g) Prior to or concurrently with the execution and delivery of
this Agreement, each Pledgor shall have delivered to the Collateral Agent or its
agent all certificates evidencing the Pledged Shares owned by it and any related
instrument of transfer, duly endorsed by such Pledgor, evidencing any pledge of
Pledged Shares made by such Pledgor to the Collateral Agent.
(h) None of the Collateral pledged by the Pledgors hereunder
constitutes margin stock, as defined in Regulation U of the Board of Governors
of the Federal Reserve System.
(i) No Pledgor owns any Capital Stock in any Subsidiary other
than as set forth on Annex 1-A and Annex 1-B attached hereto.
(j) No Pledgor is a party to any outstanding agreement, option or
contract to sell or otherwise transfer all or any portion of the Collateral. No
part of the Collateral is subject to the terms of any agreement restricting the
sale or transfer of such Collateral. No Person has any right to purchase or
terminate any or all of the interests of any Pledgor in the Pledged Shares of
the Subsidiaries.
SECTION 5. Covenants.
Each Pledgor agrees that so long as any of the Secured
Obligations remains outstanding:
(a) Books and Records. It will xxxx its books and records (and
cause the issuer of the Pledged Shares of such Pledgor to xxxx its books and
records) to reflect the security interest granted to the Collateral Agent
pursuant to this Agreement.
(b) Defense of Collateral. It will defend the Collateral against
all claims and demands of all Persons (other than the Collateral Agent, the
Holders claiming an interest in any of the Collateral and the holders of
Governmental Liens). It will discharge or cause to be discharged all Liens on
any or all of the Collateral, except for the security interest created by this
Agreement and Governmental Liens.
(c) Location of Office. It shall keep its principal place of
business and chief executive office and the office where it keeps its records
concerning the Collateral at the address specified in the Note Purchase
Agreement; or, upon thirty (30) days' prior written notice to the Collateral
Agent, at such other location in a jurisdiction where all action required by
Section 8 shall have been taken with respect to the Collateral.
(d) Disposition of Collateral. It shall not transfer, sell,
assign (by operation of law or otherwise) or otherwise dispose of any of the
Collateral owned by it or create or suffer to exist any Lien upon or with
respect to any of the Collateral owned
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by it, except for (i) the pledge, hypothecation and security interest created by
this Agreement and (ii) as otherwise expressly permitted by the Note Purchase
Agreement.
SECTION 6. Advances by Lenders.
On failure of any Pledgor to perform any of the covenants and
agreements contained herein, the Collateral Agent may, at its sole option and in
its sole discretion, perform the same and in so doing may expend such sums as
the Collateral Agent 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 Collateral Agent or the Holders 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 Secured Obligations and shall bear
interest from the date said amounts are expended at the default rate of 8.0%. No
such performance of any covenant or agreement by the Collateral Agent or the
Holders on behalf of any Pledgor, and no such advance or expenditure therefor,
shall relieve the Pledgors of any default under the terms of this Agreement, the
other Operative Agreements or any other documents relating to the Secured
Obligations. The Collateral Agent and the Holders 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.
SECTION 7. Voting Rights; Dividends.
So long as no Default or Event of Default shall have occurred and
be continuing, subject to applicable cure periods (or, in the case of clause (a)
of this Section, as long as no notice thereof shall have been given by the
Collateral Agent to the relevant Pledgor):
(a) Each Pledgor shall be entitled to exercise any and all
management, voting and other consensual rights pertaining to the Collateral in a
manner consistent with the terms of this Agreement and the other Operative
Agreements; provided, however, that such Pledgor shall not exercise, or refrain
from exercising, any such right if such action or inaction would have a Material
Adverse Effect;
(b) Each Pledgor shall be entitled to receive and retain any and
all dividends paid in respect of the Collateral owned by it (other than any and
all dividends paid or payable other than in cash in respect of, and instruments
and other property received, receivable or otherwise distributed in respect of,
or in exchange for, any Collateral, all of which shall be forthwith delivered to
the Collateral Agent to hold as Collateral and shall, if received by such
Pledgor, be received in trust for the benefit of the
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Collateral Agent, be segregated from the other property or funds of such
Pledgor, and be forthwith delivered to the Collateral Agent as Collateral in the
same form as so received (with any necessary indorsement)); provided that if any
of the Pledgors' Subsidiaries are dissolved or liquidated in accordance with the
terms and conditions of the Note Purchase Agreement, each such Pledgor shall be
entitled to receive and retain any and all dividends paid in respect of such
liquidation or dissolution.
(c) The Collateral Agent shall execute and deliver (or cause to
be executed and delivered) to the Pledgors all such proxies and other
instruments as any Pledgor may reasonably request for the purpose of enabling
such Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to paragraph (a) above and to receive the dividends which it
is authorized to receive and retain pursuant to paragraph (b) above.
SECTION 8. Continued Perfection of Security Interest.
Each Pledgor agrees that it will not take any actions or fail to
perform any of its duties or obligations under this Agreement so that after
giving effect to such action or inaction the Collateral Agent will not then, or
with the passage of time cease to have, a first priority perfected security
interest in and to any of the Collateral owned by it.
Each Pledgor agrees that from time to time, at the expense of
such Pledgor, it will promptly execute and deliver all further instruments and
documents, and take all further action that may be necessary or that the
Collateral Agent may reasonably request, in order to perfect and protect the
pledge, hypothecation and security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral owned by such Pledgor. In
connection with the foregoing, each Pledgor agrees to file, and further hereby
authorizes the Collateral Agent to file, at any time and from time to time
Financing Statements in any jurisdiction that may be necessary, or that the
Collateral Agent deems necessary to create, perfect and protect the pledge,
hypothecation and security interest granted or purported to be granted hereby.
SECTION 9. Obligations of the Pledgors and Rights of the
Collateral Agent.
The powers conferred on the Collateral Agent hereunder are solely
to protect the interest in the Collateral for the benefit of the Holders and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Collateral Agent shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral and no
such duties shall be implied as arising hereunder. The Collateral Agent shall
not be required to take steps necessary to preserve any rights against prior
parties to any of the Collateral.
SECTION 10. Remedies of the Collateral Agent.
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At any time after an Event of Default has occurred and so long as
it is continuing, subject to applicable cure periods, the Collateral Agent has
the right to do any or all of the following:
(a) The Collateral Agent may exercise any and all rights and
remedies of the Pledgors under or in connection with the Pledged Shares or
otherwise in respect of the Collateral.
(b) Subject to compliance with applicable law, the Collateral
Agent shall have the right in its discretion and without prior notice to the
relevant Pledgor, to transfer to or to register in the name of the Collateral
Agent or any of its nominees any or all of the Collateral owned by such Pledgor.
(c) Upon receipt of written notice of such Event of Default,
subject to applicable cure periods, from the Collateral Agent or any Holder, all
rights of the Pledgors to receive the dividends and distributions which they
would otherwise be authorized to receive and retain, shall cease for so long as
such Event of Default is continuing, and all such rights shall thereupon become
vested in the Collateral Agent who shall thereupon have the sole right to
receive and hold as Collateral such dividends and distributions. All dividends
and distributions which are received by any Pledgor contrary to the provisions
of this paragraph shall be received in trust for the benefit of the Collateral
Agent as security for the Obligations, shall be segregated from other funds of
the relevant Pledgor and shall be forthwith paid over to the Collateral Agent or
its agent as Collateral in the same form as so received (with any necessary
indorsement).
(d) The Collateral Agent may file any claims, commence, maintain,
settle or discontinue any actions, suits or other proceedings deemed by the
Collateral Agent in its sole discretion necessary or advisable for the purpose
of collecting upon the Collateral and execute any instrument and do all other
things deemed necessary and proper by the Collateral Agent in its sole
discretion to protect and preserve and permit the Collateral Agent to realize
upon the Collateral and the other rights contemplated thereby.
(e) The Collateral Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party upon
default under the UCC, and may also, without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Collateral
Agent's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Collateral Agent may deem commercially reasonable.
Each Pledgor agrees that, to the extent notice of sale shall be required by law,
at thirty (30) Business Days' notice to such Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
(subject to applicable law) constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent 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.
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(f) In view of the position of each Pledgor in relation to the
Collateral owned by it, or because of other current or future circumstances, a
question may arise under the Securities Act of 1933, as amended, as now or
hereafter in effect, any rules or regulations promulgated thereunder, or any
similar statute hereafter enacted analogous in purpose or effect (such Act, such
rules and regulations and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Collateral permitted hereunder. Each Pledgor understands that
compliance with the Federal Securities Laws may strictly limit the course of
conduct of the Collateral Agent if the Collateral Agent were to attempt to
dispose of all or any part of the Collateral owned by such Pledgor, and may also
limit the extent to which or the manner in which any subsequent transferee of
any Collateral could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Collateral Agent in any attempt to
dispose of all or part of the Collateral under applicable "Blue Sky" or other
state securities laws or the securities laws of countries other than the United
States or similar laws analogous in purpose or effect. Each Pledgor recognizes
that, in light of the foregoing restrictions and limitations, the Collateral
Agent may, with respect to any sale of Collateral owned by such Pledgor, to the
extent commercially reasonable, limit the purchasers to those who will agree,
among other things, to acquire Collateral for their own account, for investment,
and not with a view to the distribution or resale thereof. Each Pledgor
acknowledges and agrees that, in light of the foregoing restrictions and
limitations, the Collateral Agent, in a commercially reasonable manner, (i) may
proceed to make such a sale whether or not a registration statement for the
purpose of registering the Collateral or part thereof shall have been filed
under the Federal Securities Laws and (ii) may approach and negotiate with any
one or more possible purchasers to effect such sale. Each Pledgor acknowledges
and agrees that any such sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions. In the event of any such sale, the Collateral Agent shall incur no
responsibility or liability for selling all or any part of the Collateral at a
price that the Collateral Agent, in a commercially reasonable manner, may in
good xxxxx xxxx reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the
sale were deferred until after registration as aforesaid or if more purchasers
were approached. The provisions of this paragraph will apply notwithstanding the
existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells
the Pledged Shares. Each Pledgor agrees that sales made in accordance with this
paragraph in all respects will be made in a commercially reasonable manner.
(g) All payments made under or in connection with the Pledged
Shares or otherwise in respect of the Collateral and received by the Collateral
Agent as Collateral in accordance with the provisions hereof may, in the
discretion of the Collateral Agent, be held by the Collateral Agent as
collateral for, and then or as soon thereafter as is reasonably practicable
applied in whole or in part by the Collateral Agent for the benefit of the
Holders against all or any part of the Obligations in accordance with the terms
of the Note Purchase Agreement.
SECTION 11. Collateral Agent Appointed Attorney-in-Fact.
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Each Pledgor hereby appoints the Collateral Agent such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, upon the occurrence of and during the
continuance of an Event of Default in the Collateral Agent's discretion, to take
any and all actions authorized or permitted to be taken by the Collateral Agent
under this Agreement or by law, including but not limited to the power to take
any action and to execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, to ask for, demand, collect, xxx for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral, to receive, indorse, and collect any
drafts or other instruments, documents and chattel paper in connection
therewith, and to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem to be necessary or desirable for
the collection thereof. Such appointment of the Collateral Agent as the
Pledgors' attorney-in-fact is coupled with an interest and is irrevocable.
SECTION 12. Security Interest Absolute.
The obligations of each Pledgor under this Agreement shall be
absolute and unconditional, and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: (a) any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from, the Note Purchase Agreement or any
other Operative Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (b) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such instrument or agreement or this Agreement or any exercise or non-exercise
of any right, remedy, power or privilege under or in respect of this Agreement
or any other Operative Agreement; (c) any furnishing of any additional security
(including, without limitation, any assets, whether now owned or hereafter
acquired, upon which a Lien is created or granted from time to time pursuant to
the other Collateral Documents) to the Collateral Agent or any acceptance
thereof or any sale, exchange, release, surrender or realization of or upon any
security by the Collateral Agent; or (d) any invalidity, irregularity or
unenforceability of all or part of the Obligations or of any security therefor.
In the event of any inconsistency between this Agreement and the Note Purchase
Agreement, the Note Purchase Agreement shall govern.
SECTION 13. Amendments; Etc.
This Agreement may be amended, restated, changed, waived,
discharged or terminated only (i) by an instrument in writing executed by the
parties hereto and (ii) in accordance with Section 17 of the Note Purchase
Agreement.
SECTION 14. Notices.
All notices and other communications hereunder shall be given (in
the manner specified in the Note Purchase Agreement) to the parties hereto at
their respective
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addresses specified in the Note Purchase Agreement (or, if any party hereto is
not a party to the Note Purchase Agreement, at its address set forth under its
name on the signature page hereto).
SECTION 15. Continuing Assignment; Pledge and Security Interest;
Release.
This Agreement shall create a continuing pledge, assignment of,
hypothecation of and security interest in the Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Obligations
(other than contingent surviving obligations) and (b) inure to the benefit of,
and be enforceable by, the Collateral Agent, the Holders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (b), any Holder may assign or otherwise transfer all or any
portion of its rights in the Obligations to the extent and in the manner
provided in the Note Purchase Agreement, and such assignee shall thereupon
become vested with all the benefits in respect thereof granted to such Holder
herein or otherwise. Upon the indefeasible payment in full of the Obligations
(other than contingent surviving obligations), the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Pledgor. Upon any such termination, the Collateral Agent will, at the Pledgors'
expense, execute and deliver to the Pledgors such documents as the Pledgors
shall reasonably request to evidence such termination.
SECTION 16. Application of Proceeds.
Upon the occurrence and during the continuation of an Event of
Default, any payments in respect of the Obligations and any proceeds of the
Collateral, when received by the Collateral Agent or any of the Holders in cash
or its equivalent, will be applied in reduction of the Obligations in the
following order:
FIRST, to the payment of all reasonable out-of-pocket fees
and costs and expenses (including without limitation reasonable
attorneys' fees) of the Collateral Agent under the Operative Agreements,
including, but not limited to, those incurred in connection with
enforcing the rights of Collateral Agent and the Holders under the
Operative Agreements;
SECOND, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable attorneys'
fees) of each of the Holders in connection with enforcing its rights
under the Operative Agreements or otherwise with respect to the
Obligations owing to such Holder;
THIRD, to the payment of all accrued interest and fees on
or in respect of the Obligations;
FOURTH, to the payment of the outstanding principal amount
of the Obligations;
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FIFTH, to all other obligations which shall have become
due and payable under the Operative Agreements or otherwise and not
repaid pursuant to clauses "FIRST" through "FOURTH" above; and
SIXTH, to the payment of the surplus, if any, to whoever
may be lawfully entitled to receive such surplus.
Each Debtor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Collateral Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Collateral Agent's sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.
SECTION 17. Severability.
If any provision of this Agreement shall be held, or deemed to be
or shall, in fact, be illegal, inoperative or unenforceable, the same shall not
affect any other provision or provisions herein contained or render the same
invalid, inoperative or unenforceable to any extent whatever.
SECTION 18. Headings.
The headings of the various sections and paragraphs of this
Agreement are for convenience of reference only, do not constitute a part hereof
and shall not affect the meaning or construction of any provision hereof.
SECTION 19. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
SECTION 20. CONSENT TO JURISDICTION.
EACH PLEDGOR (I) IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE
SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION ARISING OUT OF THIS AGREEMENT, (II)
AGREES THAT ALL CLAIMS IN SUCH ACTION MAY BE DECIDED IN SUCH COURT, (III)
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM AND (IV) CONSENTS TO THE SERVICE OF PROCESS BY MAIL. A FINAL
JUDGMENT IN ANY SUCH ACTION SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS.
11
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT TO
SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT ITS RIGHT TO BRING
ANY ACTION IN ANY OTHER COURT.
SECTION 21. WAIVER OF JURY TRIAL.
EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
SECTION 22. Execution in Counterparts.
This Agreement may be executed in counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
SECTION 23. Applicability of Note Purchase Agreement.
In amplification of, and notwithstanding any other provisions of
this Agreement, in connection with its obligations hereunder, the Collateral
Agent has all of the rights, powers, privileges, exculpations, protections and
indemnities as are provided for or referred to in the Note Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their duly authorized officers as of the
date first above written.
PACIFIC AEROSPACE & ELECTRONICS, INC.,
as Pledgor
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer and
President
PA&E INTERNATIONAL, INC., as Pledgor
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Address:
c/o Pacific Aerospace & Electronics, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
FIRST UNION NATIONAL BANK, not in its
individual capacity, but solely as
Collateral Agent
By: /s/ Xxxx Xxxxxxxx
-----------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
ANNEX 1-A
CERTIFICATES OF DOMESTIC SUBSIDIARIES
Number of
Percentage Certificate Outstanding
Pledgor Issuing Corporation Ownership Number Shares
------- ------------------- --------- ----------- -----------
Pacific Aerospace & Aeromet America, Inc. 100.0% 3 100,000
Electronics, Inc.
Pacific Aerospace & Balo Precision Parts, Inc. 100.0% 3 100,000
Electronics, Inc.
Pacific Aerospace & Cashmere Manufacturing Co., Inc. 100.0% 38 1,000
Electronics, Inc.
Pacific Aerospace & Ceramic Devices, Inc. 100.0% 2 1,000
Electronics, Inc.
Pacific Aerospace & Electronic Specialty Corporation 100.0% 2 100,000
Electronics, Inc.
Pacific Aerospace & Northwest Technical Industries, 100.0% 2 100,000
Electronics, Inc. Inc.
Pacific Aerospace & Pacific Coast Technologies, Inc., 100.0% 67 10,714,726
Electronics, Inc.
Pacific Aerospace & PA&E International, Inc., 100.0% 1 100,000
Electronics, Inc.
Pacific Aerospace & Seismic Safety Products, Inc. 100.0% 3 100,000
Electronics, Inc.
Pacific Aerospace & Skagit Engineering & 100.0% 002 100
Electronics, Inc. Manufacturing, Inc.
Pacific Aerospace & PA&E Engineering, Inc. 100.0% 1 100,000
Electronics, Inc.
ANNEX 1-B
CERTIFICATES OF FOREIGN SUBSIDIARIES
Number of
Percentage Certificate Outstanding
Pledgor Issuing Corporation Ownership Number Shares
------- ------------------- --------- ----------- -----------
PA&E International, Inc. Pacific A & E Limited 100.0% 1 1
