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EXHIBIT 10.4
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
SECURITY AGREEMENT - PLEDGE OF SUBSIDIARY STOCK
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. PERFECTION OF SECURITY INTEREST . . . . . . . . . . . . . 4
SECTION 4. COVENANTS WITH RESPECT TO COLLATERAL . . . . . . . . . . 4
SECTION 5. RIGHTS WITH RESPECT TO COLLATERAL . . . . . . . . . . . . 5
SECTION 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . 5
SECTION 7. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 8. SECURITY INTEREST ABSOLUTE . . . . . . . . . . . . . . . 7
SECTION 9. RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 10. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 8
SECTION 11. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 8
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SECURITY AGREEMENT - PLEDGE OF SUBSIDIARY STOCK
This is the SECURITY AGREEMENT - PLEDGE OF SUBSIDIARY STOCK dated as
of October 25, 1996, ("Agreement") by and between NDE ENVIRONMENTAL
CORPORATION ("NDE"), a Delaware corporation and BANC ONE CAPITAL PARTNERS, L.P.
("BOCP"), an Ohio limited partnership, provided for in and entered into
pursuant to the NOTE AND WARRANT PURCHASE AGREEMENT, as amended, restated,
supplemented or otherwise modified from time to time ("Purchase Agreement") by
and among BOCP, as purchaser, and NDE, TANKNOLOGY/NDE CORPORATION ("TCI"),
USTMAN INDUSTRIES, INC. ("USTMAN"), PROECO, INC. ("PROECO"), and TANKNOLOGY
CANADA (1988), INC. ("CANADA").
NDE, TCI, USTMAN, PROECO and CANADA, together with their respective
successors and assigns, are referred to collectively as the "Debtors," and
individually as a "Debtor." NDE, together with its successors and assigns, is
referred to as the "Assignor" and BOCP, together with its successors and
assigns, is referred to as the "Secured Party" or "Assignee." The Assignor and
the Assignee are referred to collectively as the "Parties" and individually as
a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of their mutual promises set forth in this Agreement
and the Purchase Agreement, the Parties hereby agree as follows.
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Purchase Agreement. The terms defined in
the Purchase Agreement that are used with such definitions in this Agreement
include:
"Applicable Law"
"Capital Stock"
"Events of Default"
"Intercreditor Agreement"
"Notice"
"Related Documents"
"Security Agreement"
"Senior Lender"
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SECTION 2. Security Interest
(a) GRANT OF SECURITY INTEREST. As security for the prompt and
full payment and performance of the Secured Obligations (as defined bel
(i) the Assignor hereby pledges (and
shall cause to be pledged) to the Assignee and
grants (and shall cause to be granted) to the
Assignee a security interest in all of its
right, title and interest in all of the
Subsidiary Stock (as defined below) now or
hereafter owned beneficially or of record by
it, including all right, title and interest in
and to any distributions, dividends, cash,
instruments and other property or proceeds from
time to time received, receivable or otherwise
distributed in respect of or in exchange for
any or all of such Subsidiary Stock, and any
certificates now or hereafter evidencing such
Subsidiary Stock ("Share Interest
(ii) together in each case with
all Proceeds (as defined below). Such Share
Interests and Proceeds are referred to
collectively as "Collateral".
(b) DEFINITION - SECURED OBLIGATIONS. The term
"Secured Obligations" means (i) all obligations of the Debtors evidenced by the
Senior Subordinated Note due December 31, 2001, and dated October 25, 1996
("Note") made payable by the Debtors to the Secured Party in the principal
amount of $8,000,000, which note was purchased by the Secured Party for
$8,000,000 pursuant to the Purchase Agreement, together with all extensions,
renewals, amendments, modifications and notations thereof, and (ii) all
obligations of the Debtors to make payments or reimburse costs and expenses
under this Agreement or the Purchase Agreement.
(c) DEFINITION - SUBSIDIARY STOCK. The term "Subsidiary
Stock" means all of the Capital Stock of TCI, USTMAN, Proeco, and Canada
(collectively the "Debtor Subsidiaries" and individually a "Debtor Subsidiary")
and any other Subsidiary directly or indirectly owned beneficially or of record
by NDE, whether now or hereafter owned, acquired or existing, including those
shares of Capital Stock identified in Exhibit A.
(d) DEFINITION - PROCEEDS. The term "Proceeds" means any
"proceeds" as such term is defined in the Code, including the following at any
time whatsoever arising or receivable: (i) whatever is received upon any
collection, exchange, sale or other disposition, of any of the Collateral, and
any property into which any of the Collateral is converted, whether cash or
non-cash proceeds, (ii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Debtor from time to time with respect to any
of the Collateral, including claims paid and premium refunds, (iii) any and all
payments (in any form whatsoever) made or due and payable to any Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
authority, and (iv) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
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(e) DEFINITION - CODE. The term "Code" means the Uniform
Commercial Code of the State of Ohio, as amended from time-to-time, together
with any successor law.
SECTION 3. PERFECTION OF SECURITY INTEREST.
(a) The certificates evidencing the Share Interests have
been pledged and delivered by the Assignor to the Senior Lender pursuant to the
Pledge and Security Agreement dated as of October 25, 1996. Pursuant to the
Intercreditor Agreement, the Senior Lender has agreed to hold such certificates
as agent for the Secured Party and upon its release of its pledge under such
agreement to deliver such certificates to the Secured Party in pledge under
this Agreement. The Assignor hereby consents to such delivery by the Senior
Lender to the Assignee. In addition, with respect to the Share Interests, the
Assignor has (i) caused the security interest created by this Agreement to be
noted on the stock register of each Debtor Subsidiary; and (iii) delivered to
the Assignee, and, upon request of the Assignee, shall deliver to the Assignee,
financing statements (form UCC-1) in proper form for filing under the Code in
each jurisdiction as may be necessary or, in the reasonable opinion of
Assignee, desirable to perfect the security interest created herein. Assignor
hereby authorizes Assignee to file, and appoints Assignee its attorney-in-fact
for the purpose of executing and filing, such financing statements or any
additional financing statement or any continuation statement without the
signature of the Assignor to the extent permitted by Applicable Law.
(b) Any certificates now or hereafter issued to the
Assignor representing or evidencing all or any part of the Collateral, together
with duly executed instruments of transfer or assignment in blank, in a form
reasonably satisfactory to the Assignee, shall be delivered in pledge as
additional Collateral.
SECTION 4. COVENANTS WITH RESPECT TO COLLATERAL.
Assignor covenants to the Assignee as follows.
(a) Without the prior written consent of the Assignee,
the Assignor will not sell, assign, transfer, pledge, or otherwise encumber any
of its rights in or to the Collateral or any distributions or payments with
respect thereto or xxxxx x xxxx, security interest or encumbrance thereon,
except to the extent permitted by the Purchase Agreement.
(b) The Assignor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such action as the
Assignee from time to time may reasonably request in order to ensure to the
Assignee the benefits of the liens and security interest in and to the
Collateral intended to be created by this Agreement.
(c) The Assignor has and will defend the title to the
Collateral and the liens and security interest of the Assignee thereon against
the claim of any person and will maintain and preserve such
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liens and security interest until such time as the Secured Obligations have
been paid or performed in full.
(d) The Assignor will not change its name or identity in
any manner which is reasonably likely to make any financing or continuation
statement filed in connection herewith seriously misleading within the meaning
of the Code unless it shall have given the Assignee at least 30 days' prior
written notice thereof and shall have taken all action (or made arrangements to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested by
the Assignee to amend such financing statement or continuation statement so
that it is not seriously misleading. The Assignor will not change its
principal place of business unless it shall have given the Assignee prior
written notice of its intent to do so.
SECTION 5. RIGHTS WITH RESPECT TO COLLATERAL.
As long as no Event of Default shall have occurred and be continuing
and until written notice shall be given to the Assignor by the Assignee, the
Assignor shall have the right, from time to time, to receive distributions and
to vote and give consents with respect to the Collateral or any part thereof
for all purposes not inconsistent with the provisions of this Agreement and any
other agreement; provided, however, that no vote shall be cast, and no consent
shall be given or action taken, which would have the effect of materially
impairing the position or interest of the Assignee in respect of the Collateral
(except the declaration and payment of distributions to the Assignor as
contemplated in the Purchase Agreement) or which would authorize or effect
(except as and to the extent expressly consented to by the Assignee or as
contemplated in the Purchase Agreement) (i) the dissolution or liquidation, in
whole or in part, of any Debtor Subsidiary, (ii) the consolidation or merger of
any Debtor Subsidiary with any other entity or person, (iii) the sale,
disposition or encumbrance of all or substantially all of the assets of any
Debtor Subsidiary, or (iv) the issuance of any additional Capital Stock of any
Debtor Subsidiary.
SECTION 6. DEFAULTS AND REMEDIES.
(a) Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and following ten Business Days written
notice to Assignor, the Assignee may cause the transfer and register in its
name or in the name of its designee the whole or any part of the Collateral,
exercise any voting rights with respect thereto, collect and receive all
distributions made thereon, sell in one or more sales after ten Business Days'
notice of the time and place of any public sale or of the time after which a
private sale is to take place (which notice the Assignor agrees is commercially
reasonable), but without any previous notice or advertisement, the whole or any
part of the Collateral and to otherwise act with respect to the Collateral as
though the Assignee was the outright owner thereof, the Assignor hereby
irrevocably constituting and appointing the Assignee, as the proxy and
attorney-in-fact of the Assignor, with full power of substitution, to sign any
document or take any act in order to do so; provided, however, that the
Assignee shall not have any duty to exercise any such right or to preserve the
same and shall not be liable for any failure to do so or for
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any delay in doing so. Any sale shall be made at a public or private sale at
the Assignee's place of business, or elsewhere to be named in the notice of
sale, either for cash or upon credit or for future delivery at such price as
the Assignee may deem commercially reasonable, and the Assignee may be the
purchaser of the whole or any part of the Collateral so sold and hold the same
thereafter in its own right free from any claim of the Assignors as applicable.
Each sale shall be made to the highest bidder, but the Assignee reserves the
right to reject any and all bids at such sale which, in its absolute
discretion, it shall deem inadequate. Demands of performance, except as
otherwise herein specifically provided for, notices of sale, (except as
otherwise herein specifically provided for), advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by
an auctioneer or any officer or agent of the Assignee.
(b) Assignor agrees that following the occurrence and during the
continuance of an Event of Default, (i) it will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
the Collateral or the possession thereof by any purchaser at any sale
hereunder, and Assignor waives the benefit of all such laws to the extent it
lawfully may do so or (ii) it will not interfere with any right, power and
remedy of the Assignee provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by the Assignee of any one or more of such rights,
powers or remedies. No failure or delay on the part of the Assignee to
exercise any such right, power or remedy and no notice or demand which may be
given to or made upon the Assignor by the Assignee with respect to any such
remedies shall operate as a waiver thereof, or limit or impair the Assignee's
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against the Assignor in any
respect.
(c) Assignor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the Assignee, that
the Assignee has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section
shall be specifically enforceable against the Assignor and Assignor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that the Secured Obligations
are not then due and payable in accordance with the agreements and instruments
governing and evidencing such obligations.
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SECTION 7. WAIVER.
Assignor waives demand, presentment and protest. No delay or omission
or forbearance by the Assignee in exercising any rights under this Agreement,
the Note, the Subordinated Security Agreement or the Purchase Agreement shall
operate as a waiver of the rights of the Assignee under this Agreement, the
Note, the Subordinated Security Agreement or the Purchase Agreement or of any
other rights and shall not affect, discharge, diminish or impair the Assignor's
obligations hereunder or the Secured Obligations. Waiver on any one occasion
shall not be construed as a bar to or waiver of any rights or remedy on any
future occasion. All the Assignee's rights and remedies, whether evidenced
hereby or by any other agreement or note, shall be cumulative and may be
exercised singularly or concurrently.
SECTION 8. SECURITY INTEREST ABSOLUTE.
All rights of the Assignee and all obligations of the Assignor
hereunder shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Note, the
Purchase Agreement, the Subordinated Security Agreement or any other agreement
or instrument governing or evidencing any Secured Obligations;
(b) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(c) any other circumstance which might otherwise constitute a
defense available to, or a discharge of the Assignor or Debtors.
SECTION 9. RELEASE.
Assignor consents and agrees that the Assignee may at any time, or
from time to time, in its discretion exchange, release and/or surrender all of
the Collateral, or any part thereof, by whomsoever deposited, which is now or
may hereafter be held by the Assignee in connection with all or any of the
Secured Obligations, all in such manner and upon such terms as the Assignee may
deem proper, and without notice to or further assent from the Assignor; it
being hereby agreed that the Assignor shall be and remain bound upon this
Agreement, irrespective of the existence, value or condition of any of the
Collateral, and notwithstanding any such exchange, surrender or release.
Assignor hereby waives notice of acceptance of this Agreement, and promptness
in commencing suit hereunder, and in giving any notice to or of making any
claim or demand hereunder upon the Assignor. No act or omission of any kind on
the Assignee's part shall in any event affect or impair this Agreement.
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SECTION 10. INDEMNIFICATION.
The Assignor agrees to indemnify and hold the Assignee harmless from
and against any taxes, liabilities, claims and damages, including reasonable
attorney's fees and disbursements, and other expenses incurred or arising by
reason of the taking or the failure to take action by the Assignee, in good
faith, in respect of any transaction effected under this Agreement or in
connection with the lien provided for herein, including, without limitation,
any taxes payable in connection with the delivery or registration of any of the
Collateral as provided herein; provided, however, the Assignor shall not be
liable for such indemnification to the Assignee to the extent that such
indemnified liability results from the Assignee's gross negligence or willful
misconduct. The Assignor agrees to pay to the Assignee all reasonable
out-of-pocket costs and expenses, including reasonable fees and disbursements
of counsel, reasonably incurred by the Assignee in connection with the
performance by the Assignee of the provisions of this Agreement and of any
transactions effected pursuant to this Agreement. The obligations of the
Assignor under this Section shall survive the termination of this Agreement.
SECTION 11. TERMINATION.
This Agreement shall be terminated upon the payment in full of the
Note in accordance with its terms. Until terminated, the security interest
created hereby shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by the Secured Party to the
Debtors. Upon termination, the Assignee shall cooperate with the Assignor to
secure the release of the security interest, assignment and pledge created
hereby, including release and return of all pledged items of Collateral and the
execution of any releases of financing statements reasonably requested by the
Assignor.
SECTION 12. MISCELLANEOUS.
(a) RULES OF CONSTRUCTION. The rules of construction set forth in
Section 12(i) of the Purchase Agreement are applicable to this Agreement.
(b) NOTICES. The notice provisions set forth in Section 12(j) of
the Purchase Agreement are applicable to this Agreement.
(c) SEVERABILITY. In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
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(d) AMENDMENTS. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by duly
authorized representatives of the Parties hereto. Any waiver by a Party of its
rights hereunder shall be effective only if evidenced by a written instrument
executed by a duly authorized representative of such Party. In no event shall
such waiver of any rights hereunder constitute the waiver of such rights in any
future instance unless the waiver so specifies in writing.
(e) SUCCESSORS AND ASSIGNS. Whenever any of the Parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such Party; and all the covenants, promises and agreements in this
Agreement contained by or on behalf of the Assignor shall bind and inure to the
benefit of the successors and assigns of such Parties whether so expressed or
not.
(f) FURTHER ACTS AND DOCUMENTS. Each of the Parties hereby agrees
to execute and deliver such further instruments and to do such further acts and
things as may be necessary or desirable to carry out the purposes of this
Security Agreement.
(g) COUNTERPARTS. This Agreement may be executed, acknowledged
and delivered in any number of counterparts, each of such counterparts
constituting an original but all together constituting only one Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO.
(i) WAIVER OF JURY TRIAL. THE ASSIGNEE AND THE ASSIGNOR, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTE OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
PURCHASE AGREEMENT OR THE NOTE, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM ("LITIGATION"). NEITHER
THE ASSIGNEE NOR THE ASSIGNOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR
OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY
EITHER THE ASSIGNEE OR THE ASSIGNOR EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY
BOTH OF THEM.
(j) CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
THE ASSIGNEE AND THE ASSIGNOR, EACH AFTER HAVING CONSULTED OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY: (I) CONSENTS TO THE JURISDICTION OF THE COMMON PLEAS COURT OF
FRANKLIN COUNTY, OHIO AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF OHIO, EASTERN DIVISION WITH RESPECT TO ANY LITIGATION; (II) WAIVES
ANY OBJECTIONS TO THE VENUE OF ANY LITIGATION IN EITHER SUCH COURT; (III)
AGREES NOT TO COMMENCE ANY LITIGATION EXCEPT IN ONE OR THE OTHER OF SUCH
COURTS AND AGREES NOT TO CONTEST THE REMOVAL OF ANY LITIGATION COMMENCED IN ANY
OTHER COURT TO ONE OR THE OTHER OF SUCH COURTS; (IV) AGREES NOT TO
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SEEK TO REMOVE, BY CONSOLIDATION OR OTHERWISE, ANY LITIGATION COMMENCED IN
EITHER OF SUCH COURTS TO ANY OTHER COURT; AND (V) WAIVES PERSONAL SERVICE OF
PROCESS IN CONNECTION WITH ANY LITIGATION AND CONSENTS TO SERVICE OF PROCESS BY
REGISTERED OR CERTIFIED MAIL IN ACCORDANCE WITH APPLICABLE LAW. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY EITHER THE ASSIGNEE OR THE ASSIGNOR EXCEPT BY WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM.
THE PARTIES HAVE EXECUTED AND DELIVERED THIS AGREEMENT EFFECTIVE AS OF
THE DAY AND YEAR FIRST ABOVE WRITTEN.
ASSIGNOR: ASSIGNEE:
NDE ENVIRONMENTAL BANC ONE CAPITAL PARTNERS, L.P.
CORPORATION BY: BOCP CORPORATION
GENERAL PARTNER
By: /s/ XXX XXXXX XXXXXXX
--------------------------
Its: Chairman of the Board By: /s/ XXXXX X. XXXXX
------------------------- ----------------------------
Xxxxx X. Xxxxx
----------------------,
Authorized Signer
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EXHIBIT A
SUBSIDIARY STOCK
Number of
Shares Owned
by NDE Stock
Par Value Environmental Certificate
Name of Corporation Class Per Share Corporation Numbers
------------------- ------ --------- ----------- -----------
ProEco, Inc. Common $0.01 8,850,000 26
Tankology/NDE Corporation* Common $0.01 1,000 001
USTMAN Industries, Inc. Common $0.01 1,000 1
Tankology Canada (1988), Inc. Common $0.10 10,000 1
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* Formerly known as "Tanknology Corporation International."
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