Pledge Agreement Dated October 14, 1998

Exhibit 10.5
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PLEDGE AGREEMENT


This PLEDGE AGREEMENT, dated as of October 14, 1998, between ACT MANUFACTURING, INC. (the "Pledgor"), and THE CHASE MANHATTAN BANK ("Chase"),
------- ----- individually and as collateral agent for the Lenders under the Credit Agreement defined below, having an address at One Chase Square, Rochester, New York 14643 (the "Collateral Agent" and together with the Lenders, the "Secured Parties").
---------------- ---------------


W I T N E S S E T H:


WHEREAS, the Pledgor and its subsidiary, ACT Manufacturing Securities Corporation, are entering into a Credit Agreement of even date herewith (as the same may be modified, amended, supplemented or restated from time to time, the "Credit Agreement"), with Chase, as administrative, documentation, collateral ---------------- and syndication agent, and the Lenders from time to time parties thereto; and


WHEREAS, in connection with the execution and delivery of the Credit Agreement, the Collateral Agent has requested that the Pledgor, and the Pledgor has agreed to, enter into this Pledge Agreement (this "Pledge Agreement"),
---------------- pursuant to which the Pledgor is pledging and granting a security interest in the Pledged Collateral (as hereinafter defined) in favor of the Collateral Agent for the benefit of the Secured Parties.


NOW, THEREFORE, in consideration of the willingness of the Secured Parties to enter into the Credit Agreement and of the Lenders to agree, subject to the terms and conditions set forth therein, to make the Loans and issue Letters of Credit to the Borrower pursuant thereto, and for other good and valuable consideration, receipt of which is hereby acknowledged, it is hereby agreed as follows:


1. Defined Terms. Except as otherwise expressly defined herein, all
------------- capitalized terms shall have the meanings ascribed to them in the Credit Agreement.


2. Security Interest. The Pledgor hereby deposits with, and pledges to,
----------------- the Collateral Agent for itself and for the benefit of the other Secured Parties: (a) the shares of capital stock listed on Schedule I hereto (the
---------- "Pledged Stock") of the companies listed on Schedule I hereto (the "Companies"), ------------- ---------- --------- (b) the instruments, agreements and other documents in favor of the Pledgor listed on Schedule II hereto (the "Pledged Debt Documents"), and (c) any and all
----------- ---------------------- other additional investment property, securities, instruments and chattel paper which may from time to time be pledged by the Pledgor to the Collateral Agent for the benefit of the Secured Parties (the Pledged Stock, the Pledged Debt Documents and all other additional investment property, securities, instruments and chattel paper are sometimes herein referred to collectively as the "Pledged
------- Collateral"), and the Pledgor hereby grants to the Collateral Agent for itself - ---------- and for the benefit of the other Secured Parties a security interest in all of the Pledged Collateral as security for the due and punctual payment and performance of the Secured Obligations described in Section 3 hereof.


3. Secured Obligations. The security interest hereby granted shall secure
------------------- the due and punctual payment and performance of the following liabilities and obligations of the Pledgor (herein called the "Secured Obligations"):
-------------------


(a) Principal of and premium, if any, and interest on, and fees, charges and other amounts due in respect of the Loans;


(b) Any and all other obligations of the Pledgor to the Secured Parties under the Credit Agreement or under any agreement or instrument relating thereto, all as amended from time to time, including without limitation any Interest Rate Protection Agreements; and


(c) Any and all other obligations and Indebtedness of the Pledgor to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter arising, including without limitation any and all other fees, premiums, and penalties owing by the Pledgor to the Secured Parties or any of them.


4. Special Warranties and Covenants of the Pledgor. The Pledgor hereby
----------------------------------------------- warrants and covenants to the Secured Parties that:


(a) The Pledged Collateral is duly and validly pledged to the Secured Parties in accordance with law, and the Pledgor warrants and will defend the Secured Parties' 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 Liens of every nature whatsoever except as expressly set forth or permitted under the Credit Agreement.


(c) All of the Pledged Stock has been duly and validly issued and is fully paid and nonassessable.


(d) If any additional shares of capital stock of any class of the Companies or if any promissory notes of the Companies or other securities of the Companies are acquired by the Pledgor after the date hereof, the same shall constitute Pledged Collateral and shall be deposited with and pledged to the Collateral Agent for itself and for the benefit of the other Secured Parties as provided in Section 2 hereof simultaneously with such acquisition. The Pledgor will promptly notify the Collateral Agent of the date and amount of any loans made from time to time by the Pledgor to the Companies as permitted by the Credit Agreement.


(e) The Pledgor will not sell, convey or otherwise dispose of any of the Pledged Collateral, nor will the Pledgor create, incur or permit to exist any Lien whatsoever with respect to any of the Pledged Collateral or the proceeds thereof, other than Liens on or in the Pledged Collateral created hereby or which are otherwise required or permitted under the Credit Agreement.


(f) The Pledgor will not consent to or approve the issuance of any additional shares of capital stock of any class of the Companies, except for the issuance of additional shares of capital stock to the Pledgor as permitted by and in accordance with the terms of the Credit


2


Agreement, provided that any such additional shares of capital stock shall be deposited with and pledged to the Collateral Agent for itself and for the benefit of the other Secured Parties simultaneously with such issuance as provided in Section 2 hereof.


(g) The Pledged Debt Documents evidence the amount of outstanding indebtedness for money borrowed of the respective issuers thereof indicated on Schedule II hereto. - -----------


(h) If any additional instruments, agreements or other documents are acquired by the Pledgor evidencing any additional indebtedness owing to the Pledgor, the same shall constitute a part of the Pledged Debt Documents and Pledged Collateral and shall be deposited with and pledged to the Collateral Agent for itself and for the benefit of the other Secured Parties as provided in Section 2 hereof simultaneously with such acquisition. The Pledgor will promptly notify the Collateral Agent of any loans made from time to time by the Pledgor as permitted by the Credit Agreement.


5. Distributions. In case, upon the dissolution, winding up, liquidation
------------- or reorganization of the Companies 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 the Companies or otherwise, any sum shall be paid or any property shall be distributed upon or with respect to any of the Pledged Collateral, such sum shall be paid over to the Collateral Agent 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 (excluding ordinary 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 recapitalization or reclassification of the capital of the Companies, the shares or other property so distributed shall be delivered to the Collateral Agent to be held as collateral security for the Secured Obligations.


6. Events of Default. There shall exist a default under this Pledge
----------------- Agreement upon the happening of any of the following events or conditions (herein called "Events of Default"):
-----------------


(a) Default shall be made in the due and punctual payment of any principal of or premium, if any, or interest on any of the Secured Obligations as and when the same shall become due and payable (whether at maturity or at a date fixed for any prepayment or installment or by declaration or acceleration or otherwise) and such default shall conti ...