Exhibit 10.10
PLEDGE
AGREEMENT
THIS PLEDGE AGREEMENT (this
“Agreement”), dated as of March 28, 2008, is made
by GSE
Systems, Inc., a Delaware corporation (“GSE”),
MSHI, Inc., a Virginia corporation (“MSHI”),
GSE Power Systems, Inc., a Delaware corporation
(“GSE Power”), and GSE Process Solutions, a
Delaware corporation, (“GSE Process”) (GSE, MSHI,
GSE Power and GSE Process are individually referred to as
"Pledgor" and collectively referred to as
“Pledgors”), in favor of Bank of America, N.A., a
national banking association, in its capacity as Lender (the
“Lender”).
Reference
is made to that certain Loan Agreement (Ex-Im Bank-Guaranteed
Transaction Specific Revolving Line of Credit) (the
“Ex-Im Loan Agreement”) and that certain Loan
Agreement (Domestic Revolving Line of Credit) (the
“Domestic Loan Agreement,” and together with the
Ex-Im Loan Agreement, the “Loan Agreement”), each
dated as of March 28, 2008 among GSE and GSE Power (GSE and
GSE Power are individually referred to as
“Borrower” and collectively referred to as
“Borrowers”) and the Lender.
The
Lender has agreed to make a $3,500,000 Ex-Im Bank Guaranteed
Transaction Specific Revolving Line of Credit (the
“Ex-Im Loan”) and a $1,500,000 Domestic Revolving
Line of Credit (the “Domestic Loan,” and together
with the Ex-Im Loan, the “Loan”) to the Borrowers,
pursuant to, and upon the terms and subject to the conditions
specified in, the Loan Agreement. The obligations
of the Lender to make the Loan is conditioned on, among other
things, the execution and delivery by the Pledgor of a Stock
Pledge Agreement in the form hereof. As
consideration therefor and in order to induce the Lender to
make the Loan, the Pledgor is willing to execute this
Agreement.
ARTICLE
1
DEFINITIONS
SECTION
1.1
Certain
Terms . The following terms (whether or not
underscored) when used in this Agreement, including its
preamble and recitals, shall have the following meanings
(such definitions to be equally applicable to the singular
and plural forms thereof):
“ Additional
Pledged Shares ” shall mean the Capital Stock
more particularly described in Schedule
2 hereto, as amended and supplemented from time to
time.
“ Agreement
” shall mean this Pledge Agreement as originally in
effect on the Closing Date and as thereafter from time to
time amended, supplemented, restated or otherwise
modified.
“ Capital
Stock ” shall mean (a) in the case of a
corporation, capital stock, (b) in the case of an association
or business entity, any and all shares, interests,
participations, rights or other equivalents (however
designated) of capital stock, (c) in the case of a
partnership, partnership interests (whether general or
limited), (d) in the case of a limited liability company,
membership interests and (e) any other interest or
participation that confers on a person the right to receive a
share of the profits and losses of, or distributions of
assets of, the issuing Person.
“ Collateral
” shall mean, collectively, (a) the Pledged Shares; (b)
all other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Agreement;
and (c) all proceeds of any of the foregoing.
“ Distributions
” shall mean all dividends paid in stock, liquidating
dividends, shares of stock resulting from stock splits,
reclassifications, warrants, options, non-cash dividends and
other distributions (whether similar or dissimilar to the
foregoing) on or with respect to any Pledged Shares or other
shares of Capital Stock constituting Collateral, but shall
not mean Dividends.
“ Dividends
” shall mean cash dividends and cash distributions with
respect to any Pledged Shares made out of capital
surplus.
“ Event of
Default ” shall mean any event described in
Section
5.1 .
“ Initial Pledged
Shares ” shall mean the Capital Stock more
particularly described in Schedule
I hereto, as amended and supplemented from time to
time.
“ Loan
Documents ” shall means the Loan Agreement, each
promissory note (if any) and security agreement and guaranty
executed in connection therewith, this Agreement, and all
other documents or instruments executed and delivered by the
parties hereto or thereto, as the case may be.
“ Obligations
” shall mean (a) the due and punctual payment
of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of
any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loan when and as due, whether at
maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be
made by the Borrowers under the Loan Agreement, when and as
due, including payments in respect of reimbursement or
disbursements, interest thereon and obligations to provide
cash collateral, and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in
such proceeding), of the Borrowers to the Lender under the
Loan Agreement and the other Loan Documents, and (b) the due
and punctual performance of all covenants, agreements,
obligations and liabilities of the Borrowers under or
pursuant to the Loan Agreement and the other Loan
Documents.
" Person "
shall mean any individual, partnership, firm, corporation,
association, joint venture, limited liability company, trust
or other entity, or any governmental authority.
“ Pledged
Property ” shall mean all Pledged Shares and the
certificates evidencing the Pledged Shares, and all
Dividends, Distributions, securities, cash, instruments,
interest payments and other property and proceeds from time
to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged
Shares.
“ Pledged
Shares ” shall mean the Initial Pledged Shares,
the Additional Pledged Shares and all other shares of Capital
Stock which are pledged by the Pledgor to the Lender as
Pledged Property hereunder.
“ Secured
Obligations ” means, collectively, the
obligations of the Pledgor under this Agreement, and of the
Borrowers under the Loan Agreement and the other Loan
Documents, including, without limitation, the
Obligations.
“ U.C.C.
” means the Uniform Commercial Code as in effect in the
State of Maryland from time to time.
SECTION
1.2.
Loan Credit
Agreement Definitions, Cross-References
. Capitalized terms used herein and not otherwise
defined (including the preamble and recitals hereof) shall
have the meanings assigned to them in the Loan Agreement,
unless the context otherwise requires or unless otherwise
defined herein. References in this Agreement to
any Section, unless otherwise specified, are references to
such Section of this Agreement, and references in such
Section to any subsection or clause, unless otherwise
specified, are references to such subsection or clause of
such Section.
SECTION
1.3.
U.C.C.
Definitions . Unless otherwise defined
herein or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this
Agreement, including its preamble and recitals, with such
meanings.
ARTICLE
2
PLEDGE
SECTION
2.1.
Grant of
Security Interest . The Pledgor hereby
pledges, assigns, delivers, sets over, conveys and transfers
to the Lender, for its benefit, and hereby grants to the
Lender, for its benefit, a continuing security interest in
and to, all of the Collateral.
SECTION
2.2.
Security for
Secured Obligations . This Agreement and
the Collateral secure the payment in full and performance of
all Secured Obligations.
SECTION
2.3.
Delivery of
Pledged Property upon Event of Default; Stock Powers;
Registration of Pledge; Transfer . All
certificates and instruments representing or evidencing any
Collateral, including all Pledged Shares, shall be delivered
to the Lender and shall be held by the Lender, shall be in
suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or
assignment, duly executed in blank and, if the Lender shall
so request, with signatures guaranteed by a member of a
registered national securities exchange or the National
Association of Securities Dealers, Inc. or by a commercial
bank or trust company having an office or correspondent in
the United States. The Lender shall have the
right, upon the occurrence and during the continuation of an
Event of Default, and without notice to the Pledgor, to
transfer to, or to register in the name of, the Lender or any
of its nominees, any or all of the Pledged Shares, subject
only to Section
2.5(b) and Section
4.6 . The Lender will promptly give notice
to Pledgor of any such transfer or registration with respect
to the Pledged Shares, but in no event will the failure of
the Lender to give notice limit its rights to take possession
of the shares or otherwise result in liability
hereunder. In addition, the Lender shall have the
right at any time to request that the Pledgor exchange
certificates or instruments representing or evidencing any
Pledged Shares for certificates or instruments of smaller or
larger denominations.
SECTION
2.4.
No
Duty to Lender . The powers conferred on
the Lender hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon it to
exercise any such powers. Beyond reasonable care
in the custody of any Collateral in its possession from time
to time and the accounting for moneys actually received by it
hereunder, the Lender 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. The Lender shall not be liable or
responsible (a) for any diminution in the value of the
Collateral or (b) for any loss or damage to any of the
Collateral by reason of the act or omission of any carrier,
forwarding agency, or other agent selected by the Lender in
good faith.
SECTION
2.5.
Continuing
Security Interest; Transfer of Secured Obligation
. This Agreement shall:
(a) create
a continuing security interest in the
Collateral;
(b) remain
in full force and effect until the payment in full and
performance of all Secured Obligations;
(c) be
binding upon the Pledgor, its legal representatives,
successors, transferees and assigns, provided
, however
, that the Pledgor may not assign any of its rights or
obligations hereunder without the prior written consent of
the Lender; and
(d) inure
to the benefit of the Lender and its respective legal
representatives, successors, transferees and
assigns.
Without
limitation to the foregoing, Lender may assign or otherwise
transfer any note, Loan or other Secured Obligation, held by
it to any other Person, in accordance with the terms of the
Loan Agreement, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted herein
or otherwise. Upon the occurrence of the event
described in Section
2.5(b) above, the security interest granted herein
shall terminate and all rights to the Collateral shall revert
to the Pledgor. Upon any such termination, the
Lender will, at the Pledgor’s expense, execute and
deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination, without
recourse or warranty to the Lender.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
SECTION
3.1.
Representations
and Warranties . The Pledgor represents and
warrants as follows:
(a) The
Pledgor is and at all times will be the legal and beneficial
owner of, and has and will have at all times good and
marketable title to, all Collateral, free and clear of all
liens or other charges or encumbrances, except the lien
granted pursuant hereto in favor of the Lender.
(b) The
Pledgor has and will at all times have the requisite power
and authority to enter into this Agreement and to pledge and
assign the Collateral to the Lender in accordance with the
terms of this Agreement.
(c) The
delivery of the Collateral to the Lender is effective to
create a valid, perfected, first priority security interest
in such Collateral and all proceeds thereof, securing the
Secured Obligations, except that the filing of a financing
statement, the taking of possession or some other action may
be required under Section 9-306 of the former U.C.C. and
Section 9-315 of the revised U.C.C. to perfect a security
interest in certain proceeds of the Collateral that do not
constitute Pledged Shares or other securities or
instruments.
(d) The
Initial Pledged Shares have been duly authorized and validly
issued, and are fully paid, and nonassessable.
(e) As
of the date hereof, (i) the Initial Pledged Shares
constitute, and at all times hereafter the Pledged Shares
will constitute, 100% of all of the issued and outstanding
shares of Capital Stock of the entities whose Capital Stock
is pledged hereunder owned or controlled by the Pledgor, and
(ii) there are no outstanding warrants, stock options of any
nature or other instruments convertible into shares of any
class of stock of any of such entities.
(f) There
are no restrictions on transfer of the Initial Pledged Shares
contained in the certificate of incorporation or by-laws (or
equivalent organizational documents) of the entities whose
Capital Stock is pledged hereunder or otherwise which have
not otherwise been enforceably and legally waived by the
necessary parties.
(g) No
authorization, approval, or other action by, and no notice to
or filing with, any Governmental Authority not already taken
or made by the Pledgor is or will be required
either:
(i) for
the pledge by the Pledgor of any Collateral pursuant to this
Agreement or for the execution, delivery, or performance of
this Agreement by the Pledgor (except with respect to the
Pledged Shares, any amendments required to be made to
existing filed reports to disclose such pledge which will be
filed when due), or
(ii) for
the exercise by the Lender of the voting or other rights
provided for in and in accordance with the terms of this
Agreement or the remedies in respect of the Collateral
pursuant to this Agreement.
(h) The
Pledgor is incorporated in or organized under the laws of the
state specified on such signature page. The
Pledgor shall give the Bank at least thirty (30) days notice
before changing its state of incorporation or
organization.
SECTION 3.2.
Warranties upon
Pledge of Additional Collateral . The
Pledgor shall be deemed to restate each representation and
warranty set forth in Section
3.1 as at the date of each pledge hereunder by the
Pledgor to the Lender of any Collateral with respect to such
additional Collateral.
ARTI
