Exhibit 10.4

 

PLEDGE AGREEMENT

 

This Pledge Agreement, as it may be amended, restated or otherwise modified from
time to time (this “Agreement”), is executed and delivered as of the 1st day of
May, 2019, by SOUTHWEST ELECTRONIC ENERGY CORPORATION, a Texas corporation
(“Pledgor”), to KEYBANK NATIONAL ASSOCIATION (together with its successors and
assigns in its capacity as agent, “Agent”), as agent for the financial
institutions which are now or which hereafter become a party to the Credit
Agreement, as hereinafter defined (collectively, “Lenders”).

 

RECITALS.

 

Pledgor, Ultralife Corporation, a Delaware corporation (“Ultralife”), CLB, Inc.,
a Texas corporation (“CLB”, and together with Pledgor and Ultralife,
collectively, the “Borrowers” and each individually a “Borrower”), Agent and
Lenders are entering into that certain First Amendment Agreement, dated as of
the date hereof (the “Amendment”), which such Amendment amends that certain
Credit and Security Agreement, dated as of May 31, 2017 (as amended, and as the
same may from time to time be further amended, restated or otherwise modified,
the “Credit Agreement”), by and among Borrowers, certain other Credit Parties
(as defined in the Credit Agreement) which from time to time become party to the
Credit Agreement, Agent and Lenders. Pledgor desires that Lenders continue to
grant to Borrowers the financial accommodations as described in the Credit
Agreement.

 

Pledgor deems it to be in Borrowers’ direct pecuniary and business interests
that Borrowers continue to obtain from Lenders the Loans (as defined in the
Credit Agreement), and the other financial accommodations provided for in the
Credit Agreement.

 

Pledgor understands that Agent and Lenders are willing to enter into the
Amendment and to continue to grant to Borrowers the Loans and Letters of Credit
and such financial accommodations only upon certain terms and conditions, one of
which is that Pledgor grants to Agent, for the benefit of Lenders, a security
interest in, and an assignment of, the Pledged Collateral (as hereinafter
defined) and this Agreement is being executed and delivered in consideration of
Agent and Lenders entering into the Amendment, continuing to grant to Borrowers
the Loans and Letters of Credit and such other financial accommodations and for
other valuable consideration.

 

NOW, THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

 

1.           DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

 

1.1.     “Debt” shall mean the Secured Debt as such term is defined in the
Credit Agreement.

 

 

--------------------------------------------------------------------------------

 

 

1.2.     “Distributable Proceeds” shall mean all proceeds, income, fees,
profits, surplus, dividends, distributions, cash, instruments and other
property, from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Collateral.

 

1.3     “Pledged Collateral” shall mean, collectively, (a) the Pledged
Securities and each addition, if any, thereto and each substitution, if any,
therefor, in whole or in part, including, without limitation, by reason of
splits, dividends and similar transactions with respect to the Pledged
Securities, (b) any certificates representing the Pledged Securities, and (c)
all Distributable Proceeds.

 

1.4.     “Pledged Entities” shall mean CLB and any Subsidiary of which Pledgor
owns the Equity Interests of after the date hereof.

 

1.5.     “Pledged Securities” shall mean (a) all of the Equity Interests of the
Pledged Entities listed on Exhibit A hereto; (b) all of the Equity Interests of
any other Credit Party which is not a Foreign Subsidiary (as defined in the
Credit Agreement) owned by Pledgor from time to time or acquired by Pledgor in
any manner and (c) 65% of the Equity Interests of any other Credit Party which
is a Foreign Subsidiary (as defined in the Credit Agreement) owned by Pledgor
from time to time or acquired by Pledgor in any manner.

 

Except as specifically defined in this Agreement, capitalized terms used in this
Agreement that are defined in the Credit Agreement shall have their respective
meanings ascribed to such terms in the Credit Agreement.

 

2.         SECURITY INTEREST. Pledgor hereby grants to Agent, for its benefit
and for the ratable benefit of each Lender, a security interest in the Pledged
Collateral as security for the Debt. For the better protection of Lenders
hereunder, Pledgor has executed appropriate transfer powers, in the form of
Exhibit B attached hereto, and is, concurrently herewith, depositing
certificates representing such Pledged Securities and the aforesaid transfer
powers with Agent for the benefit of Lenders. Pledgor authorizes Agent, at any
time after the occurrence and during the continuance of an Event of Default, to
transfer the Pledged Securities into the name of Agent or Agent’s nominee, for
the benefit of Lenders, but Agent shall be under no duty to do so.
Notwithstanding any provision in this Agreement to the contrary, Agent shall
have no right to vote the Pledged Securities at any time unless and until Agent
shall have given Pledgor written notice that an Event of Default has occurred.

 

3.          PLEDGOR’S REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants to Agent and Lenders, in the case of the Pledged Securities set forth
on Exhibit A to this Agreement as of the date hereof, and in the case of Pledged
Securities pledged pursuant to this Agreement after the date hereof, as of the
date of such pledge, as follows:

 

3.1.    Pledgor is the legal record and beneficial owner of, and has good title
to, the Pledged Securities, and the Pledged Securities are not subject to any
Lien, nor to any other agreement purporting to grant to any third party a
security interest in the property or assets of Pledgor that would include the
Pledged Collateral, except (a) as otherwise permitted pursuant to the Credit
Agreement and (b) for the security interest created by this Agreement or
otherwise securing only Agent and Lenders.

 

2

--------------------------------------------------------------------------------

 

 

3.2.     All of the Pledged Securities have been duly authorized and validly
issued, and are fully paid and non-assessable.

 

3.3.     Pledgor has the legal power to pledge all of the Pledged Securities
pursuant to the terms of this Agreement.

 

3.4.     No consent, license, permit, approval or authorization, filing or
declaration with any Governmental Authority, and no consent of any other party,
is required to be obtained by Pledgor in connection with the pledge of the
Pledged Securities hereunder, in each case that has not been obtained or made,
and is not in full force and effect.

 

3.5.     The pledge, assignment and delivery of the Pledged Securities hereunder
create a valid first lien on, and a first perfected security interest in, the
Pledged Securities and the proceeds thereof.

 

3.6.     Pledgor fully anticipates that the Debt will be repaid without the
necessity of selling the Pledged Securities.

 

3.7.     Pledgor has received consideration that is the reasonable equivalent
value of the obligations and liabilities that Pledgor has incurred to Agent and
Lenders.

 

3.8.     All of the Pledged Securities are represented by a certificate or
instrument, which such certificate or instrument has been deposited with Agent
for the benefit of Lenders.

 

3.9.     The Pledged Securities are “securities” as such term is defined in
Article 8 of the UCC.

 

3.10.  None of the Pledged Securities are subject to any right of first refusal
or other restriction that could restrict the transfer of any such interest to
Agent or any Lender or any nominee thereof or the ability of any purchaser of
any such interest to transfer such interest, except for restrictions on transfer
under applicable law.

 

4.         REMEDIES. If an Event of Default shall occur and be continuing,
Agent, in Agent’s discretion and upon such terms and in such manner as Agent
shall deem advisable, sell, assign, transfer and deliver the Pledged Collateral,
or any part thereof, and, in each case, Agent shall apply the net proceeds of
the sale thereof to the Debt, as provided in the Credit Agreement. Agent shall
give Pledgor not fewer than ten (10) days prior notice of the date after which
any intended private sale may be made or the time and place of any intended
public sale. Pledgor waives advertisement of sale and, except to the extent
required by the preceding sentence, waives notice of any kind in respect of any
sale. At any public sale, Agent or any Lender may purchase the Pledged
Collateral, or any part thereof, free from any rights of redemption, which
rights are hereby waived and released. In addition to other rights and remedies
provided for herein or otherwise available to Agent following the occurrence and
during the continuance of an Event of Default, Agent shall have all rights and
remedies of a secured party under UCC.

 

3

--------------------------------------------------------------------------------

 

 

5.          TERMINATION. At such time as the Debt has been paid in full, the
commitment of Lenders under the Credit Agreement terminated, and the Credit
Agreement terminated and not replaced by any other credit facility with Lenders,
this Agreement shall terminate and Agent shall, upon Pledgor’s written request,
execute and deliver to Pledgor the certificates representing the Pledged
Securities, the stock power and any other Pledged Collateral held by Agent, and,
at Pledgor’s expense, appropriate termination statements; provided, however,
that the provisions of Sections 8 through 18, all inclusive, shall survive the
payment in full of the Debt.

 

6.           ADDITIONAL COVENANTS OF PLEDGOR.

 

6.1.     Pledgor covenants and agrees to defend the right, title and security
interest of Agent in and to the Pledged Collateral and the proceeds thereof, and
to maintain and preserve the Lien and security interest provided for by this
Agreement against the claim and demands of all Persons, so long as this
Agreement shall remain in effect.

 

6.2.     Pledgor covenants and agrees not to sell, assign, transfer, exchange,
or otherwise dispose of, or grant any option with respect to, or create, incur
or permit to exist, any Lien with respect to any of the Pledged Collateral, or
any interest therein, or any proceeds thereof, except as otherwise permitted by
the Credit Agreement and except for the Lien provided for by this Agreement and
any security agreement securing Lenders.

 

6.3.     Pledgor covenants and agrees (a) to cooperate, in good faith, with
Agent and Lenders and to do or cause to be done all such other acts as may be
reasonably necessary to enforce the rights of Agent and Lenders under this
Agreement, (b) not to take any action, nor fail to take any action that would be
adverse to the interest of Agent or Lenders in the Pledged Collateral or under
this Agreement or both, and (c) to make any sale or sales of any portion or all
of the Pledged Securities valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales at Pledgor’s expense.

 

7.          ATTORNEY-IN-FACT; INSTRUCTIONS TO ISSUERS. Pledgor hereby authorizes
and empowers Agent, on behalf of Lenders, to make, constitute and appoint any
officer or agent of Agent as Agent may select, in its exclusive discretion, as
Pledgor’s true and lawful attorney-in-fact, with the power to endorse Pledgor’s
name on all applications, documents, papers and instruments necessary for Agent,
on behalf of Lenders, to take actions with respect to the Pledged Collateral
during the existence of an Event of Default, including, without limitation,
actions reasonably necessary for Agent to assign, pledge, convey or otherwise
transfer title in or dispose of the Pledged Collateral to any Person. Pledgor
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney shall be irrevocable for the life of this
Agreement. Pledgor hereby authorizes and instructs each issuer of the Pledged
Collateral to comply with any instruction received by it from Agent or any
officer or agent thereof that states that an Event of Default has occurred and
without any other or further instructions from Pledgor, and Pledgor agrees that
each such issuer shall be fully protected in so complying.

 

4

--------------------------------------------------------------------------------

 

 

8.         COSTS AND EXPENSES. If Pledgor fails to comply with any of its
obligations under this Agreement, Agent may do so in Pledgor’s name or in
Agent’s name, but at Pledgor’s expense, and Pledgor hereby agrees to reimburse
Agent and Lenders in full for all expenses, including reasonable attorney fees,
incurred by Agent and Lenders in protecting, defending and maintaining the
Pledged Collateral to the extent provided in the Credit Agreement.

 

9.         NOTICE. All notices, requests, demands and other communications
provided for hereunder shall be in writing and mailed to the applicable party in
accordance with the terms of Section 11.4 of the Credit Agreement.

 

10.       INTERPRETATION. Each right, power or privilege specified or referred
to in this Agreement is in addition to any other rights, powers and privileges
that Agent or Lenders may have or acquire by operation of law, by other contract
or otherwise. No course of dealing in respect of, nor any omission or delay in
the exercise of, any right, power or privilege by Agent or Lenders shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any further or other exercise thereof or of any other, as each right, power or
privilege may be exercised by Agent or Lenders either independently or
concurrently with other rights, powers and privileges and as often and in such
order as Agent or Lenders may deem expedient. No waiver or consent granted by
Agent or Lenders in respect of this Agreement shall be binding upon Agent or
Lenders unless specifically granted in writing, which writing shall be strictly
construed.

 

11.        ASSIGNMENT AND SUCCESSORS. This Agreement shall not be assigned by
Pledgor without the prior written consent of Agent. This Agreement shall bind
the permitted successors and permitted assigns of Pledgor and shall benefit the
respective successors and assigns of Agent and Lenders.

 

12.        SEVERABILITY. If, at any time, one or more provisions of this
Agreement is or becomes invalid, illegal or unenforceable in whole or in part,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

 

13.        GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applied to contracts to be performed wholly within the State of New York. Any
judicial proceeding brought by or against Pledgor with respect to this Agreement
shall be brought as provided in the Credit Agreement. Pledgor hereby waives
personal service of any and all process upon Pledgor and consents that all such
service of process may be made by registered mail (return receipt requested)
directed to Pledgor at Pledgor’s address set forth in the signature pages of the
Credit Agreement and service so made shall be deemed completed as provided in
the Credit Agreement.

 

14.        INDEMNITY; ADMINISTRATION AND ENFORCEMENT. Pledgor shall reimburse
each Lender, on that Lender’s demand from time to time, and Agent, on Agent’s
demand from time to time, for any and all reasonable fees, costs, and reasonable
expenses (including, without limitation, the reasonable fees and disbursements
of legal counsel) incurred by that Lender or Agent, as the case may be, as the
case may be, in administering this Agreement and in protecting, enforcing, or
attempting to protect or enforce its rights under this Agreement, to the extent
provided in the Credit Agreement.

 

5

--------------------------------------------------------------------------------

 

 

15.        UNCONDITIONAL AND CONTINUING SECURITY INTEREST. Pledgor’s obligations
under this Agreement and the granting of a security interest to Agent, for the
benefit of Lenders, pursuant to this Agreement are unconditional and effective
immediately, and (except for obligations surviving indefinitely pursuant to
Section 5) those obligations and the security interest so granted shall continue
in full effect until the Debt shall have been paid in full, regardless of the
lapse of time, regardless of the fact that there may be a time or times when no
Debt is outstanding, regardless of any act, omission, or course of dealing
whatever on the part of Agent and Lenders, and regardless of any other event,
condition, or thing. Without limiting the generality of the foregoing, neither
the amount of the Debt for purposes of this Agreement, nor Pledgor’s obligations
under this Agreement, nor the security interest granted pursuant to this
Agreement shall be diminished or impaired by:

 

 

(a)

the granting by Agent or any Lender of any credit to any Person, whether or not
liability therefor constitutes Debt, or any failure or refusal of Agent or any
Lender to grant any other credit to any Person even if Agent or such Lender
thereby breaches any duty or commitment to Pledgor or any other Person;

 

 

(b)

the application by Agent or any Lender of credits, payments, or proceeds to any
portion of the Debt;

 

 

(c)

any extension, renewal, or refinancing of the Debt in whole or in part;

 

 

(d)

any amendment, restatement, or other modification of any kind in, to, or of any
Related Writing, or any consent or other indulgence granted to any Person, or
any waiver of any Event of Default (under this Agreement, the Credit Agreement
or any other agreement, document or writing);

 

 

(e)

any acceptance of security for or any other Person on the Debt or any part
thereof, or any release of any security or other Person, whether or not Agent or
any Lender receives consideration for the release;

 

 

(f)

any discharge of the Debt in whole or in part under any bankruptcy or insolvency
law or otherwise;

 

 

(g)

the failure of Agent or any Lender to make any presentment or demand for
payment, to assert or perfect any claim, demand, or interest, or to enforce any
right or remedy, or any delay or neglect by Agent or any Lender in respect of
the Debt or any part thereof or any security therefor;

 

 

(h)

any failure to give Pledgor notice of (i) the making of any loan or other credit
extension or the terms, conditions, and other provisions applicable thereto,
(ii) any dishonor by Pledgor or any other Person, or (iii) the inaccuracy or
incompleteness of any representation, warranty, or other statement made by any
Person; or

 

6

--------------------------------------------------------------------------------

 

 

 

(i)

any defense that may now or hereafter be available to any Person, whether based
on suretyship, impairment of Pledged Collateral, accord and satisfaction, breach
of warranty, breach of contract, failure of consideration, tort, lack of
capacity, usury or otherwise, or any illegality, invalidity, or unenforceability
of the Debt or any part thereof or of any Related Writing.

 

16.        NO SETOFF; RIGHTS AGAINST OTHER OBLIGORS. Pledgor hereby (a) waives
all now existing or hereafter arising rights to recoup or offset any obligation
of Pledgor under this Agreement against any claim or right of Pledgor against
Agent or any Lender, (b) waives all rights of exoneration now or hereafter
arising out of or in connection with this Agreement, and (c) agrees that unless
and until all of the Debt shall have been paid in full, Pledgor will not assert
against any other Person obligated on the Debt or against any such Person’s
property any rights (including, without limitation, contribution,
indemnification, reimbursement and subrogation) now or hereafter arising
(whether by contract, operation of law or otherwise) out of or in connection
with this Agreement or any Related Writing.

 

17.         MAXIMUM LIABILITY OF PLEDGOR. Anything in this Agreement to the
contrary notwithstanding, the security interest and lien granted pursuant to
this Agreement shall secure payment of the Debt only to the extent that the
granting of such security interest and lien would not be void, voidable or
avoidable under any applicable fraudulent transfer law.

 

 

 

[The remainder of this page intentionally left blank.]

 

7

--------------------------------------------------------------------------------

 

 

18.       JURY TRIAL WAIVER. PLEDGOR WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
PLEDGOR ON THE ONE HAND AND AGENT AND/OR LENDERS ON THE OTHER HAND, ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT,
LIMIT, AMEND OR MODIFY THE ABILITY OF AGENT AND/OR LENDERS TO PURSUE REMEDIES
PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION, OR ANY OTHER
PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG
PLEDGOR ON THE ONE HAND AND AGENT AND/OR LENDERS ON THE OTHER HAND.

 

 

 

SOUTHWEST ELECTRONIC ENERGY

CORPORATION

          By: /s/ Linda S. Saunders                                 Print Name:
Linda S. Saunders   Title: Vice President of Finance

 

 

 

 

[Signature Page to Pledge Agreement (Southwest) – KeyBank/Ultralife]

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT A

 

PLEDGED SECURITIES

 

 

Name of Entity

Ownership Percentage

Certificate Number

Class of Equity

       

CLB, Inc.

100%

_____

_____

       

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT B

 

IRREVocable Power to TRANSFER security

 

FOR VALUE RECEIVED, the undersigned, SOUTHWEST ELECTRONIC ENERGY CORPORATION, a
Texas corporation, does hereby sell, assign and transfer unto                  
                                                            all interest(s) in  
                                            , a/n                              
         , standing in the name of the undersigned on the books of said entity
and does hereby irrevocably constitute and appoint                             
                     attorney to transfer said interest(s) on the books of the
within named entity with full power of substitution in the premises.

 

 

 

SOUTHWEST ELECTRONIC ENERGY

CORPORATION

            Date:                                                              
                          By: /s/ Linda S. Saunders                           
     Print Name: Linda S. Saunders   Title: Vice President of Finance

 

 

 

         

 

 

--------------------------------------------------------------------------------

 

 

PLEDGE AGREEMENT (SOUTHWEST OF CLB) – KEYBANK/ULTRALIFE