EXHIBIT 10.4
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT") is dated as of the 1st day of
September, 2004 by and between DYNAMICS RESEARCH CORPORATION, a Massachusetts
corporation (the "PLEDGOR"), and XXXXX BROTHERS XXXXXXXX & CO., a New York
general partnership with offices at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, for
itself and as Administrative Agent for each of the Lenders (defined below) which
are and which may become parties to the Loan Agreement (defined below) (the
"SECURED PARTY"). The Secured Party, in its capacity as Agent for the Lenders
hereunder, is sometimes hereinafter referred to as the "AGENT", which term shall
also be deemed to include any other party acting as agent for the Lenders
hereunder.
Preliminary Statement
WHEREAS, the Pledgor and certain of its affiliates (such affiliates,
together with the Pledgor, being referred to herein singly as a "BORROWER" or
collectively, the "BORROWERS") and the Agent, Banknorth, N.A., as Documentation
Agent, KeyBank National Association, as Co-Syndication Agent, and Fleet National
Bank, a Bank of America company, as Co-Syndication Agent (collectively, the
"LENDERS" and each a "LENDER") have entered into that certain Second Amended and
Restated Loan Agreement of even date herewith (as amended, modified, extended
and/or supplemented from time to time, the "LOAN AGREEMENT"; capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Loan Agreement) pursuant to which the Lenders have agreed, subject to the terms
and conditions set forth therein, to make certain loans to the Borrowers
(collectively, the "LOANS"); such Loans are evidenced by the Borrowers'
Revolving Credit Notes, Term Notes, and Acquisition Term Notes of even date
herewith payable to the Lenders (as such Notes may be amended, modified,
supplemented and/or extended from time to time, singly and collectively, the
"NOTE"); and
WHEREAS, the obligation of the Agent and the Lenders to enter into the
Loan Agreement and make the Loans described therein is subject to the
conditions, among others, that the Pledgor shall execute and deliver this
Agreement and grant to the Secured Party the pledge and security interest
hereinafter described;
NOW, THEREFORE, in consideration of the willingness of the Secured
Party and the Lenders to enter into the Loan Agreement and, subject to the terms
and conditions set forth therein, to make Loans to the Borrowers pursuant to the
Loan Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. Security Interest. The Pledgor hereby deposits with and
pledges to the Secured Party, for the benefit of the Lenders, the shares of
capital stock (the "PLEDGED STOCK") listed in Schedule I attached hereto. The
Pledgor hereby pledges to the Secured Party, for the benefit of the Lenders, any
and all promissory notes in excess of $250,000.00 made payable to the Pledgor
(each, a "PLEDGED NOTE", and collectively, with the Pledged Stock and any
additional securities or collateral now or hereafter pledged hereunder, the
"PLEDGED COLLATERAL"). The Pledgor hereby grants to the Secured Party, for the
benefit of the Lenders, a security interest in and lien on all of the Pledged
Collateral as security for the due and punctual payment and performance of the
Secured Obligations described in Section 2 hereof. Simultaneously with the
execution of this Agreement, the Pledgor shall deliver to the Secured Party the
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original certificates evidencing the Pledged Stock and executed Stock Powers.
Notwithstanding any provision contained in this Agreement to the contrary, upon
the occurrence of any Collateral Release Event, this Agreement and the security
interest granted hereunder shall immediately and automatically terminate and
have no further force or effect.
2. Secured Obligations. The security interest hereby granted
shall secure the due and punctual payment and performance of the Liabilities (as
defined in the Loan Agreement) of the Pledgor (herein called the "SECURED
OBLIGATIONS").
3. Special Warranties and Covenants of the Pledgor. The Pledgor
hereby warrants and covenants to the Secured Party and each Lender that:
a. The Pledged Collateral is duly and validly pledged with the
Secured Party, for the benefit of the Lenders, in accordance
with law and the Pledgor warrants and will defend the Secured
Party's right, title and security interest in and to the
Pledged Collateral against the claims and demands of all
persons whomsoever.
b. The Pledgor has good title to the Pledged Collateral, free and
clear of all claims, mortgages, pledges, liens, security
interests and other encumbrances of every nature whatsoever
except as may be expressly set forth and permitted under the
Loan Agreement.
c. To the knowledge of the Pledgor, all of the Pledged Stock has
been duly and validly issued and is fully paid and
nonassessable.
d. The Pledged Stock includes all of the presently issued and
outstanding capital stock of each subsidiary of the Pledgor.
e. If Pledgor acquires any additional shares of capital stock
(including, without limitation, from the issuance of any
additional shares of capital stock of any subsidiary of the
Pledgor) or any other investment property or securities,
and/or if the Pledgor becomes the payee on any promissory note
or other instrument, after the date hereof, the same shall
constitute Pledged Collateral and shall be deposited and
pledged with the Secured Party, for the benefit of the
Lenders, as provided in Section 1 hereof simultaneously with
such acquisition.
f. So long as the Collateral Release Event has not occurred, in
the event that the Pledgor obtains a promissory note which
would constitute a Pledged Note hereunder, the Pledgor shall
promptly deliver such Pledged Note to the Administrative Agent
with such endorsements as the Administrative Agent shall
reasonably require.
g. The Pledgor will not sell, convey or otherwise dispose of any
of the Pledged Collateral except to the extent permitted in
the Loan Agreement, nor will the Pledgor create, incur or
permit to exist any pledge, mortgage, lien, charge,
encumbrance or any security interest whatsoever with respect
to any of the Pledged Collateral or the proceeds thereof,
other than liens on and security interests in the Pledged
Collateral created hereby or which are otherwise expressly
permitted under the Loan Agreement.
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h. The statements contained in the Preliminary Statement of this
Agreement are true and correct.
4. Distributions. Upon the dissolution, winding up, liquidation
or reorganization of any company whose capital stock or notes are included in
the Pledged Collateral, whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
marshaling of the assets and liabilities of any such company or otherwise, if
any sum shall be paid or any property shall be distributed upon or with respect
to any of the Pledged Collateral and an Event of Default shall have occurred and
be continuing, then such sum shall be paid over to the Secured Party to be held
as collateral security for the Secured Obligations. In case any stock dividend
shall be declared on any of the Pledged Collateral, or any share of stock or
fraction thereof shall be issued pursuant to any stock split involving any of
the Pledged Collateral, or any distribution of capital (including cash
dividends) shall be made on any of the Pledged Collateral, or any property shall
be distributed upon or with respect to the Pledged Collateral pursuant to a
recapitalization or reclassification, the shares or other property so
distributed shall be delivered to the Secured Party to be held as collateral
security for the Secured Obligations.
5. [Reserved].
6. Rights and Remedies of Secured Party. Upon the occurrence and
continuance of any Event of Default, such default not having previously been
remedied or cured within any applicable grace or cure periods, the Secured Party
shall have the following rights and remedies:
a. All rights and remedies provided by law, including, without
limitation, those provided by the Massachusetts Uniform
Commercial Code;
b. All rights and remedies provided in this Agreement; and
c. All rights and remedies provided in the Loan Agreement, the
Note, or in any other Loan Document, and any other agreement,
document or instrument pertaining to the Secured Obligations.
7. Right to Transfer into Name of Secured Party, etc. In case
there shall exist an Event of Default that shall be continuing after applicable
grace and cure periods, but subject to the provisions of the Uniform Commercial
Code or other applicable law, the Secured Party may cause all or any of the
Pledged Collateral to be transferred into its name or into the name of its
nominee or nominees. So long as no Event of Default shall exist and be
continuing, the Pledgor shall be entitled to exercise as the Pledgor shall deem
fit, but in a manner not inconsistent with the terms hereof or of the Secured
Obligations, the voting power with respect to the Pledged Collateral.
8. Right of Secured Party to Exercise Voting Power, etc. In case
there shall exist an Event of Default, which shall not have been remedied or
cured, the Secured Party, until such Event of Default has been remedied or cured
in accordance with the Loan Agreement, shall be entitled to exercise the voting
power with respect to the Pledged Collateral, to receive and retain, as
collateral security for the Secured Obligations any and all dividends or other
distributions at any time and from time to time declared or made upon any of the
Pledged Collateral, and to exercise any and all rights of payment, conversion,
exchange, subscription or any other rights, privileges or options pertaining to
the Pledged
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Collateral as if it were the absolute owner thereof, including, without
limitation, the right to exchange, at its discretion, any and all of the
Pledged Collateral upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the Pledgor or, upon the exercise of
any such right, privilege or option pertaining to the Pledged Collateral, and
in connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Secured Party may
determine, all without liability except to account for property actually
received, but the Secured Party shall have no 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.
9. Right of Secured Party to Dispose of Collateral, etc. Upon the
occurrence and during the continuance of an Event of Default, such Event of
Default not having previously been remedied or cured within any applicable grace
or cure periods, the Secured Party shall have the right, unless the Event of
Default shall have been remedied or cured in accordance with the Loan Agreement
prior to taking any such actions, at any time or times thereafter to sell,
resell, assign and deliver all or any of the Pledged Collateral in one or more
parcels at any exchange or broker's board or at public or private sale. The
Secured Party will give the Pledgor at least ten (10) days' prior written notice
in accordance with Section 17 hereof of the time and place of any public sale
thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. Any such notice shall be deemed to meet any
requirement hereunder or under any applicable law (including the Uniform
Commercial Code) that reasonable notification be given of the time and place of
such sale or other disposition. Such notice may be given without any demand of
performance or other demand, all such demands being hereby expressly waived by
the Pledgor. All such sales shall be conducted in a commercially reasonable
manner and shall be at such commercially reasonable price or prices as the
Secured Party shall deem best and either for cash or on credit or for future
delivery (without assuming any responsibility for credit risk). At any such sale
or sales the Secured Party may purchase any or all of the Pledged Collateral to
be sold thereat upon such terms as the Secured Party may deem best. Upon any
such sale or sales the Pledged Collateral so purchased shall be held by the
purchaser absolutely free from any claims or rights of whatsoever kind or
nature, including any equity of redemption and any similar rights, all such
equity of redemption and any similar rights being hereby expressly waived and
released by the Pledgor. In the event any consent, approval or authorization of
any governmental agency will be necessary to effectuate any such sale or sales,
the Pledgor shall execute, and hereby agree to cause the Pledgor to execute, all
such applications or other instruments as may be required. The proceeds of any
such sale or sales, together with any other additional collateral security at
the time received and held hereunder, shall be received and applied pursuant to
Section 13-3 of the Loan Agreement.
The Pledgor recognizes that the Secured Party may be unable to effect a
public sale of all or a part of the Pledged Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, but may be compelled to
resort to one or more private sales to a restricted group of purchasers, each of
whom will be obligated to agree, among other things, to acquire such Pledged
Collateral for its own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges that private sales so
made may be at prices and upon other terms less favorable to the seller than if
such Pledged Collateral were sold at public sales, and that the Secured Party
has no obligation to delay sale of any such Pledged Collateral for the period of
time necessary to permit such Pledged Collateral to be registered for public
sale under the Securities Act of 1933. The Pledgor agrees that any
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such private sales shall not be deemed to have been made in a commercially
unreasonable manner solely because they shall have been made under the
foregoing circumstances.
10. Collection of Amounts Payable on Account of Pledged
Collateral, etc. Upon the occurrence and during the continuance of any Event of
Default, the Secured Party may, but without obligation to do so, demand, xxx for
and/or collect any money or property at any time due, payable or receivable, to
which it may be entitled hereunder, on account of or in exchange for any of the
Pledged Collateral and shall have the right, for and in the name, place and
stead of the Pledgor, to execute endorsements, assignments or other instruments
of conveyance or transfer with respect to all or any of the Pledged Collateral.
11. Care of Pledged Collateral in Secured Party's Possession.
Beyond the exercise of reasonable care to assure the safe custody of the Pledged
Collateral while held hereunder, the Secured Party shall have no duty or
liability to collect any sums due in respect thereof or to protect or preserve
rights pertaining thereto, and shall be relieved of all responsibility for the
Pledged Collateral upon surrendering the same to the Pledgor.
12. Waivers, etc. The Pledgor hereby waives presentment, demand,
notice, protest and, except as is otherwise provided herein, in the Loan
Agreement or in any other Loan Document, all other demands and notices in
connection with this Agreement or the enforcement of the Secured Party's rights
hereunder or in connection with any Secured Obligations or any Pledged
Collateral; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to the Pledgor, any other
Borrower, or to any third party, or substitution, release or surrender of any
collateral security for any Secured Obligation, the addition or release of
persons primarily or secondarily liable on any Secured Obligation or on any
collateral security for any Secured Obligation, the acceptance of partial
payments on any Secured Obligation or on any collateral security for any Secured
Obligation and/or the settlement or compromise thereof. No delay or omission on
the part of the Secured Party in exercising any right hereunder shall operate as
a waiver of such right or of any other right hereunder. Any waiver of any such
right on any one occasion shall not be construed as a bar to or waiver of any
such right on any future occasion. The Pledgor further waives any right it may
have under the constitution of The Commonwealth of Massachusetts (or under the
constitution of any other state in which any of the Pledged Collateral may be
located), or under the Constitution of the United States of America, to notice
(other than any requirement of notice provided herein) or to a judicial hearing
prior to the exercise of any right or remedy provided by this Agreement to the
Secured Party and waives its right, if any, to set aside or invalidate any sale
duly consummated in accordance with the foregoing provisions hereof on the
grounds (if such be the case) that the sale was consummated without a prior
judicial hearing. The Pledgor's waivers under this Section have been made
voluntarily, intelligently and knowingly and after the Pledgor has been apprised
and counseled by its attorneys as to the nature thereof and its possible
alternative rights.
13. Termination; Assignment, etc. This Agreement and the security
interest in the Pledged Collateral created hereby shall terminate upon the
earlier to occur of either of the following events (x) when all of the Secured
Obligations have been paid and finally discharged in full in cash (provided that
the Lenders are no longer obligated to make Loans under the Loan Agreement), or
(y) upon the occurrence of the Collateral Release Event. For all purposes of
this Agreement, no Event of Default shall be deemed to have been cured or waived
except as expressly provided in the Loan Agreement. No waiver by the Secured
Party or any Lender or by any other holder of Secured Obligations of any default
shall be
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effective unless in writing nor operate as a waiver of any other default or of
the same default on a future occasion.
14. Reinstatement. Notwithstanding the provisions of Section 13,
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Lenders or the Secured Party in
respect of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Lenders or the Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Pledgor or any other Borrower
or upon the appointment of any intervenor or conservator of, or trustee or
similar official for, the Pledgor or any other Borrower or any substantial part
of their respective properties, or otherwise, all as though such payments had
not been made.
15. Governmental Approvals, etc. Upon the exercise by the Secured
Party of any power, right, privilege or remedy pursuant to this Agreement which
requires any consent, approval, qualification or authorization of any
governmental authority or instrumentality, the Pledgor will execute and deliver,
or will cause the execution and delivery of, all applications, certificates,
instruments and other documents and papers that the Secured Party may be
required to obtain for such governmental consent, approval, qualification or
authorization.
16. Reserved.
17. Notices. Except as otherwise provided herein, all notices to
the Pledgor or to the Secured Party shall be in writing and shall be deemed to
have been sufficiently given or served for all purposes hereof if given or
served in the manner provided for in the Loan Agreement.
18. Miscellaneous.
a. This Agreement shall inure to the benefit of and be binding
upon the Secured Party, the Lenders and the Pledgor and their
respective successors and assigns permitted under the Loan
Agreement (provided that the Pledgor shall have no right to
assign its rights and duties hereunder), and the term
"Lenders" shall be deemed to include any other holder or
holders of any of the Secured Obligations and the term
"Secured Party" shall be deemed to include any successor agent
for the Lenders. In case any provision in this Agreement shall
be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which shall
be an original, but all of which together shall constitute one
instrument.
b. This Agreement is intended to be supplemental of the Security
Agreement (as defined in the Loan Agreement). All provisions
of the Security Agreement (as defined in the Loan Agreement)
shall apply to the Pledged Collateral and the Secured Party
shall have the same rights with respect to any and all
security interests in the Pledged Collateral granted the Agent
to secure the Liabilities hereunder as thereunder.
Notwithstanding the foregoing, in the event of a conflict
between this Agreement and the Security Agreement (as defined
in the Loan Agreement), the terms of this Agreement shall
control with
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respect to the Pledged Collateral and the Security Agreement
(as defined in the Loan Agreement) with respect to all other
collateral.
19. Governing Law; Jurisdiction, Waiver of Jury Trial.
a. This Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance,
shall be governed by the law of The Commonwealth of
Massachusetts.
b. Consent to Jurisdiction.
i. The Pledgor agrees that any legal action, proceeding,
case, or controversy against the Pledgor with respect
to this Agreement or any other Loan Document may be
brought in the Superior Court of Suffolk County
Massachusetts or in the United States District Court,
District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's
sole discretion. By execution and delivery of this
Agreement, the Pledgor, for itself and in respect of
its property, accepts, submits, and consents
generally and unconditionally, to the jurisdiction of
the aforesaid courts.
ii. The Pledgor WAIVES personal service of any and all
process upon it, and 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 certified mail, postage
prepaid, to the Pledgor at the Pledgor's address for
notices as specified herein, such service to become
effective five (5) Business Days after such mailing.
iii. The Pledgor WAIVES any objection based on forum non
conveniens and any objection to venue of any action
or proceeding instituted under this Agreement and
consents to the granting of such legal or equitable
remedy as is deemed appropriate by the Court.
iv. Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other
competent jurisdiction.
v. The Pledgor agrees that any action commenced by the
Pledgor asserting any claim arising under or in
connection with this Agreement or any other Loan
Document shall be brought solely in the Superior
Court of Suffolk County Massachusetts or in the
United States District Court, District of
Massachusetts, sitting in Boston, Massachusetts, and
that such Courts shall have exclusive jurisdiction
with respect to any such action.
c. The Pledgor makes the following waiver knowingly, voluntarily,
and intentionally, and understands that the Agent and the
Lenders in the establishment and maintenance of their
respective relationships with the Pledgor contemplated by the
within Agreement, is relying thereon. THE PLEDGOR, TO THE
EXTENT ENTITLED THERETO, WAIVES ANY PRESENT OR FUTURE RIGHT OF
THE PLEDGOR, OR OF ANY GUARANTOR OR ENDORSER OF THE PLEDGOR OR
OF ANY OTHER PERSON
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LIABLE TO THE AGENT OR THE LENDERS ON ACCOUNT OF OR IN RESPECT
TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR THE LENDERS IS OR BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR
AGAINST THE AGENT OR ANY LENDER OR IN WHICH THE AGENT OR ANY
LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR
CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY
RELATIONSHIP AMONGST OR BETWEEN THE PLEDGOR, ANY SUCH PERSON,
THE AGENT AND ANY LENDER (AND THE AGENT AND THE LENDERS
LIKEWISE WAIVE THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH
CASE OR CONTROVERSY).
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IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date first above written.
XXXXX BROTHERS XXXXXXXX & CO.,
for itself and as Agent for all Lenders
By: ___________________________________
Name:
Title:
DYNAMICS RESEARCH CORPORATION
By: ___________________________________
Name:
Title:
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SCHEDULE I
(to Pledge Agreement)
PLEDGED STOCK
Description No. of Shares Certificate No(s).
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