EXHIBIT 10.31
SECOND AMENDED AND RESTATED SECURITY AGREEMENT, dated December 31, 1997
("Security Agreement"), made by FiberMark Office Products, LLC, a Vermont
limited liability company ("Lessee") to The CIT Group/Equipment Financing, Inc.
("Lessor").
PRELIMINARY STATEMENTS
1. Reference is made to the Amended and Restated Security Agreement,
dated as of December 31, 1996, made by Specialty Paperboard, Inc., a Delaware
corporation ("Specialty Paperboard") to Lessor (the "December 1996 Agreement").
2. To the extent this Security Agreement amends the December 1996
Agreement, the December 1996 Agreement is amended, and to the extent this
Security Agreement restates the December 1996 Agreement, the December 1996
Agreement is restated.
3. Reference is made to each of (a) the Lease Agreement, dated as of
April 29, 1994, between Specialty Paperboard, as Lessee, and the Lessor, as
Lessor, as supplemented and amended by that certain Lease Supplement No. 1,
dated as of April 29, 1994, that certain First Amendment to Lease Agreement,
dated as of September 29, 1995, that certain Second Amendment to Lease
Agreement, dated as of December 29, 1995, as otherwise amended, modified or
supplemented from time to time, and as assigned and assumed pursuant to the
Assignment and Assumption Agreement--NY, dated December 31, 1997, by and between
FiberMark, Inc. ("FiberMark") and Lessee, (the "Lease Agreement") and (b) the
Third Amended and Restated Financing Agreement and Guaranty, dated December 31,
1997, among FiberMark, FiberMark Durable Specialties, Inc., FiberMark Filter and
Technical Products, Inc., and Lessor, The CIT Group/Business Credit, Inc.
("CITBC"), the other lenders that may, subsequent to the date hereof, purchase
from CITBC a portion of its rights and obligations under such Financing
Agreement pursuant to, and in accordance with the terms and provisions thereof
(CITBC and such other lenders each individually a "Lender" and collectively the
"Lenders"), and CITBC as agent for the Lenders (the "Agent") (as it may
hereafter be amended, modified or supplemented from time to time, being the
"Financing Agreement"). The terms defined in the Lease Agreement and not
otherwise defined in this Security Agreement which are used in this Security
Agreement shall have the meanings set forth in the Lease Agreement. All other
capitalized terms shall have the meanings as set forth in Annex I attached
hereto.
4. As an inducement for the Lessor to maintain its obligations under
the Lease Agreement, Lessee shall have granted the security interests
contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the mutual obligations contained
in the Lease Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Lessee hereby agrees as
follows:
ARTICLE XVI. Grant of Security. The Lessee hereby grants to the
Lessor a security interest in and on all of the Lessee's right, title and
interest in and to all of the following, whether now owned or hereafter acquired
or existing (the "Collateral"):
Section 16.01. All present and hereafter acquired machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, located on the Brattleboro, Vermont property owned by
Lessee, together with
all attachments, components, parts, equipment and accessories installed thereon
or affixed thereto and all proceeds of whatever sort (any and all such
equipment, parts and accessions being the "Equipment");
Section 16.02. All present and hereafter acquired merchandise,
inventory and goods held for sale or lease or to be furnished under contracts of
service, and all additions, substitutions and replacements thereof, wherever
located, together with all goods and materials used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production- from raw
materials through work-in-process to finished goods - and all proceeds thereof
of whatever sort (any and all such inventory, accessions, products being the
"Inventory");
Section 16.03. All of the now existing and future: (i) right to
payment for goods sold by or services rendered by the Lessee, including all
accounts arising from sales or rendition of services made under any of the
Lessee's trade names or styles, or through any of the Lessee's divisions;
regardless of how such right is evidenced, whether secured or unsecured, or now
existing or hereafter arising (whether or not specifically listed on schedules
furnished to the Lessor) (the "Accounts Receivables"), and any and all
instruments, documents, contract rights, chattel paper, general intangibles,
including, without limitation, all accounts created by or arising from all of
the Lessee's sales of goods or rendition of services to its customers, (ii)
unpaid seller's rights (including rescission, replevin, reclamation and stoppage
in transit) relating to the foregoing or arising therefrom; (iii) rights to any
goods represented by any of the foregoing, including rights to returned or
repossessed goods; (iv) reserves and credit balances arising hereunder; (v)
guarantees or collateral for any of the foregoing; (vi) insurance policies or
rights relating to any of the foregoing; and (vii) cash and non-cash proceeds of
any and all the foregoing;
Section 16.04. The Lessee's fee and/or leasehold interests in the
real property of the Lessee located at Brattleboro, Vermont which has been
encumbered, mortgaged, pledged or assigned to the Lessor or to the Lessor's
designee, pursuant to the Mortgage (Brattleboro, Vermont);
Section 16.05. and all Proceeds of the foregoing.
The security interests granted hereunder shall extend and attach to:
1. All Collateral which is presently in existence and which is owned
by the Lessee or in which the Lessee has any interest, whether held by the
Lessee or others for its account, and, if any Collateral is Equipment, whether
the Lessee's interest in such Equipment is as owner or lessee or conditional
vendee;
2. All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
3. All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Lessor or the Lessee from the
Lessee's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Lessee,
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or to the sale, promotion or shipment thereof.
ARTICLE XVII. Security for Lease Obligations. The Collateral secures
the prompt and complete payment when due and performance of all the Lease
Obligations.
ARTICLE XVIII. The Lessee Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Lessee shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed, (b) the exercise by the Lessor of
any of the rights hereunder shall not release the Lessee from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (c) the Lessor shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this Security
Agreement, nor shall the Lessor be obligated to perform any of the obligations
or duties of the Lessee thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
ARTICLE XIX. Representations and Warranties. The Lessee represents
and warrants to the Lessor as follows:
Section 19.01. All of the Inventory is located at the places
specified in Schedule I hereto. The chief place of business and chief executive
office of the Lessee and the office where the Lessee keeps its records
concerning Accounts Receivable are located at the address specified on Schedule
I hereto. All originals of all chattel paper which evidence Accounts Receivable
have been delivered to the Lessor. None of the Accounts Receivable are evidenced
by a promissory note or other instrument.
Section 19.02. This Security Agreement has been duly executed and
delivered by the Lessee and constitutes a legal, valid and binding obligation of
the Lessee enforceable in accordance with its terms and will not: (i) require
any consent or approval of its members; (ii) contravene its articles of
organization or operating agreement; (iii) violate any provision of, or require
any filing (other than the filing of the financing statements contemplated by
the Security Documents), registration, consent or approval under any Law
(including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to such limited liability company; or (iv) result in a breach of
or constitute a default under or require any consent under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Lessee is a party or by which it or its properties may be bound or affected.
Section 19.03. The Lessee owns the Collateral free and clear of any
Lien, except for (i) the security interest created by this Security Agreement
and (ii) Liens granted in connection with or permitted pursuant to the Financing
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except (i) such as may have been filed in favor of the Lessor relating
to this Security Agreement and (ii) such as may have been filed in favor of the
Agent relating to the Financing Agreement.
Section 19.04. The Lessee conducts no business under any name or
trade name other than its proper limited liability company name.
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Section 19.05. The Lessee has exclusive possession and control of
the Equipment and Inventory.
Section 19.06. As of the date of this Security Agreement, this
Security Agreement creates a continuing Lien in the Collateral, securing the
payment of the Lease Obligations, all other actions necessary or desirable to
perfect and protect such security interest have been duly taken.
Section 19.07. No authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority is required either (i) for
the grant by the Lessee of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by the Lessee or
(ii) for the perfection of or the exercise by the Lessor of their respective
rights and remedies hereunder.
Section 19.08. The Taxpayer Identification Number of the Lessee is
_________.
ARTICLE XX. Further Assurances.
Section 20.01. The Lessee agrees that from time to time, at the
expense of the Lessee, the Lessee will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Lessor may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Lessor to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, the Lessee
will: (i) xxxx conspicuously each document and agreement included in the
Collateral and, at the request of the Lessor, each of its records pertaining to
the Collateral with a legend, in form and substance satisfactory to the Lessor
indicating that such Collateral is subject to the security interest granted
hereby; (ii) if any Account Receivable shall be evidenced by a promissory note
or other instrument or chattel paper deliver such to the Lessor duly endorsed
and accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to the Lessor; and (iii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Lessor may
request, in order to perfect and preserve the security interest granted or
purported to be granted hereby.
Section 20.02. The Lessee hereby authorizes the Lessor to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of the Lessee where
permitted by law. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
Section 20.03. The Lessee will furnish to the Lessor from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Lessor may
request, all in reasonable detail.
Section 20.04. The Lessee will defend the Collateral against all
claims and demands of all Persons (other than the Lessor) claiming an interest
therein. The Lessee will pay promptly when due all property and other taxes,
assessments and
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governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
where there is a Good Faith Contest to the validity thereof. In connection with
any such Good Faith Contest the Lessee will, at the request of the Lessor,
promptly provide a bond, cash deposit or other security reasonably satisfactory
to protect the security interest of the Lessor should such Good Faith Contest be
unsuccessful.
Section 20.05. In furtherance of the continuing assignment and
security interest in the Lessee's Accounts, the Lessee will, upon the creation
of Accounts, execute and deliver to the Lessor in such form and manner as the
Lessor may reasonably require, solely for the Lessor's convenience in
maintaining records of collateral, such confirmatory schedules of Accounts as
the Lessor may reasonably request, and such other appropriate reports
designating, identifying and describing the Accounts as the Lessor may
reasonably require. In addition, upon the Lessor's request, the Lessee shall
provide the Lessor with copies of agreements with, or purchase orders from, the
Lessee's customers, and copies of invoices to customers, proof of shipment or
delivery and such other documentation and information relating to said Accounts
and other collateral as the Lessor may reasonably require. Failure to provide
the Lessor with any of the foregoing shall in no way affect, diminish, modify or
otherwise limit the security interests granted herein. The Lessee hereby
authorizes the Lessor to regard its printed name or rubber stamp signature on
assignment schedules or invoices as the equivalent of a manual signature by one
of the Lessee's authorized officers or agents.
Section 20.06. The Lessee hereby represents and warrants that (i)
each Account is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by the Lessee in the ordinary course of
its business; (ii) the goods and inventory being sold and the Accounts created
are the exclusive property of the Lessee and are not and shall not be subject to
any lien, consignment arrangement, encumbrance, security interest or financing
statement whatsoever, other than the Permitted Encumbrances; (iii) the invoices
evidencing such Accounts are in the name of the Lessee; and (iv) the customers
of the Lessee have accepted the goods or services, owe and are obligated to pay
the full amounts stated in the invoices according to their terms, without
dispute, offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business of which the Lessee has
advised the Lessor pursuant to Section 5(h) of this Security Agreement. The
Lessee confirms to the Lessor that any and all taxes or fees relating to its
business, its sales, the Accounts or goods relating thereto, are its sole
responsibility and that same will be paid by the Lessee or when due and than
none of said taxes or fees represent a lien on or claim against the Accounts.
The Lessee also warrants and represents that it is a duly and validly existing
corporation and is qualified in all states and provinces where the failure to so
qualify would have an adverse effect on the business of the Lessee or the
ability of the Lessee to enforce collection of Accounts due from customers
residing in such locations. The Lessee agrees to maintain such books and records
regarding Accounts as the Lessor may reasonably require and agrees that the
books and records of the Lessee will reflect the Lessor's interest in the
Accounts. All of the books and records of the Lessee will be available to the
Lessor at normal business
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hours, including any records handled or maintained for the Lessee by any other
company or entity.
Section 20.07. Until the Lessor has advised the Lessee to the
contrary after the occurrence of an Event of Default, the Lessee may and will
enforce, collect and receive all amounts owing on the Accounts for the Lessor's
benefit and on the Lessor's behalf, but at the Lessee's expense; such privilege
shall terminate automatically upon the institution by or against the Lessee of
any proceeding under any bankruptcy or insolvency law or, at the election of the
Lessor, upon the occurrence of any other Event of Default and until such Event
of Default is waived. Any checks, cash, notes or other instruments or property
received by the Lessee with respect to any Accounts shall be held by the Lessee
in trust for the Lessor, separate from the Lessee's own property and funds, and
immediately turned over to the Lessor with proper assignments or endorsements by
deposit to the Depository Accounts. All amounts received by the Lessor in
payment of Accounts will be credited to the Lessee's accounts upon the Lessor's
receipt of "collected funds" at the Lessor's bank account in New York, New York
on the Business Day of receipt if received no later than 1:00 p.m. (New York
time) or on the next succeeding Business Day if received no later than 1:00 p.m.
(New York time). No checks, drafts or other instrument received by the Lessor
shall constitute final payment to the Lessor unless and until such instruments
have actually been collected.
Section 20.08. The Lessee agrees to notify the Lessor promptly of
any matters materially affecting the value, enforceability or collectibility of
any Account and of all material customer disputes, offsets, defenses,
counterclaims, returns, rejections and all reclaimed or repossessed merchandise
or goods. The Lessee agrees that it shall issue credit memoranda promptly (with
duplicates to the Lessor upon request after the occurrence of an Event of
Default) upon accepting returns or granting allowances, and may continue to do
so until the Lessor has notified the Lessee that an Event of Default has
occurred and that all future credits or allowances are to be made only after the
Lessor's prior written approval. Upon the occurrence of an Event of Default and
until such time as such Event of Default is waived and on notice from Lessor,
the Lessee agrees that all returned, reclaimed or repossessed merchandise or
goods shall be set aside by the Lessee, marked with the Lessor's name and held
by the Lessee for the Lessor's account as owner.
Section 20.09. The Lessee will be credited with all amounts received
by the Lessor from the Lessee or from others for the Lessee's account,
including, as set forth above, all amounts received by the Lessor in payment of
assigned Accounts and such amounts will be applied to payment of the Lease
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Lessee be a prerequisite to the Lessor's right to demand
payment of any Lease Obligation. Further, it is understood that the Lessor shall
have no obligation whatsoever to perform in any respect any of the Lessee's
contracts or obligations relating to the Accounts. After the end of each month,
the Lessor shall promptly send the Lessee a statement showing the accounting for
the charges and other transactions occurring between the Lessor and the Lessee
during that month. The monthly statements shall be deemed
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correct and binding upon the Lessee and shall constitute an account stated
between the Lessee and the Lessor unless the Lessor receives a written statement
of the exceptions within thirty (30) days of the date of the monthly statement.
ARTICLE XXI. As to Equipment and Inventory. The Lessee shall:
Section 21.01. Keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Schedule I hereto or, upon 30 days' prior written notice to the
Lessor, at such other places in jurisdictions where all action required by
Section 5 shall have been taken with respect to the Inventory;
Section 21.02. Cause the Equipment necessary for the conduct of its
business to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted, and shall forthwith,
or in the case of any loss or damage to any of the Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are necessary
or desirable to such end;
Section 21.03. Safeguard, protect and hold all Inventory for the
Lessor's account and make no disposition thereof except in the regular course of
the business of the Lessee as herein provided. Until the Lessor has given the
Lessee notice to the contrary, as provided for below, any Inventory may be sold
and shipped by the Lessee to its customers in the ordinary course of the
Lessee's business, on open account and on terms currently being extended by the
Lessee to its customers, provided that all proceeds of all sales (including
cash, accounts receivable, checks, notes, instruments for the payment of money
and similar proceeds) are forthwith transferred, endorsed, and turned over and
delivered to the Lessor in accordance with Section 5(g) of this Security
Agreement. The Lessor shall have the right to withdraw this permission at any
time upon the occurrence of an Event of Default and until such time as such
Event of Default is waived, in which event no further disposition shall be made
of the Inventory by the Lessee without the Lessor's prior written approval. Cash
sales or sales of Inventory in which a Lien upon, or security interest in,
Inventory is retained by the Lessee shall be made by the Lessee only with the
approval of the Lessor, and the proceeds of such sales or sales of Inventory for
cash shall not be commingled with the Lessee's other property, but shall be
segregated, held by the Lessee in trust for the Lessor as the Lessor's exclusive
property, and shall be delivered immediately by the Lessee to the Lessor in the
identical form received by the Lessee by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of Inventory, as herein provided,
the security interest in the Lessee's Inventory provided for herein shall,
without break in continuity and without further formality or act, continue in,
and attach to, all proceeds, including any instruments for the payment of money,
accounts receivable, contract rights, documents of title, shipping documents,
chattel paper and all other cash and non-cash proceeds of such sale, exchange or
disposition. As to any such sale, exchange or other disposition, the Lessor
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation;
Section 21.04. Limit use of the Equipment only to the Lessee in its
business and not hold the Equipment for sale or lease (except as provided for in
the
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Lease Agreement), or remove the Equipment from its premises, or otherwise
dispose of the Equipment without the prior written approval of the Lessor. The
Lessee will not sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so, except for sales of assets
permitted by this Security Agreement and as otherwise permitted under the Lease
Agreement. Concurrently with any such permitted disposition, the property
acquired by a transferee in such disposition shall automatically be released
from the security interest created by this Security Agreement (the "Security
Interest"). It is acknowledged and agreed that notwithstanding any release of
property from the Security Interest in accordance with the foregoing provisions
of this Section, the Security Interest shall in any event continue in the
proceeds of Collateral. The Lessor shall promptly execute and deliver (and, when
appropriate, shall cause any separate agent, co-agent or trustee to execute and
deliver) any releases, instruments or documents reasonably requested by the
Lessee to accomplish or confirm the release of Collateral provided by this
Section. Any such release of Collateral provided by the Lessor shall
specifically describe that portion of the Collateral to be released, shall be
expressed to be unconditional and shall be without recourse or warranty (other
than a warranty that the Lessor has not assigned its rights and interests to any
other Person). The Lessee shall pay all of the Lessor's out-of-pocket expenses
in connection with any release of Collateral.
The Lessee agrees at its own cost and expense to keep the Equipment
in as good and substantial repair and condition as the same is now or at the
time the Lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Lessee also agrees to safeguard, protect and hold
all Equipment for the Lessor's account and make no disposition thereof unless
the Lessee first obtains the prior written approval of the Lessor. Any sale,
exchange or other disposition of any Equipment shall only be made by the Lessee
with the prior written approval of the Lessor, and the proceeds of any such
sales shall not be commingled with the Lessee's other property, but shall be
segregated, held by the Lessee in trust for the Lessor as the Lessor's exclusive
property, and shall be delivered immediately by the Lessee to the Lessor in the
identical form received by the Lessee by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, accounts
receivable, contract rights, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, the Lessor
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything hereinabove
contained to the contrary, the Lessee may sell, exchange or otherwise dispose of
obsolete Equipment or Equipment no longer needed in the Lessee's operations,
provided, however, that (i) the then book value of the Equipment so disposed of
does not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
in any Fiscal Year and (ii) the proceeds of such sales or dispositions are
delivered to the
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Lessor in accordance with the foregoing provisions of this paragraph, except
that the Lessee may retain and use such proceeds to purchase forthwith
replacement Equipment which the Lessee determines in its reasonable business
judgment to have a collateral value at least equal to the Equipment so disposed
of or sold, provided, however, that the aforesaid right shall automatically
cease upon the occurrence of an Event of Default which is not waived;
Section 21.05. Covenant that, except for the Permitted Encumbrances,
and in the case of general intangibles, the rights of third parties from which
such general intangibles are derived, the Lessee is or will be at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or Liens in favor of
others other than the Liens in favor of the Agent; that the Lessee will at its
expense forever warrant and, at the Lessor's request, defend the same from any
and all claims and demands of any other person other than the Permitted
Encumbrances. The Lessee will not grant, create or permit to exist, any Lien
upon or security interest in the Collateral, or any proceeds thereof, in favor
of any other Person other than the holders of the Permitted Encumbrances.
The Lessee will not (i) change the location of its chief executive
office/chief place of business from that specified in Schedule I attached
hereto, or remove its books and records from the location specified in Schedule
I, (ii) permit any of the Inventory or Equipment to be kept at a location other
than those listed on such Schedule I hereto or (iii) change its name (including
the adoption of any new trade name), identity or corporate structure unless it
shall have provided at least thirty (30) days prior written notice to the Lessor
of any such change. The Lessee will from time to time notify the Lessor of each
location at which any amount of the Collateral or such books and records are to
be kept including for temporary processing, storage or similar purposes. The
Lessee shall not remove any amount of Collateral or such books or record to a
location not set forth on Schedule I or otherwise keep any amount of Collateral
(other than Real Estate, to the extent described in Schedule II hereto) at a
location not set forth on Schedule I unless, not less than thirty (30) days
prior to the day such removal or other change occurs the Lessee shall give
written notice to the Lessor of such removal or other change and the new
location of such Collateral or such books and records. No action requiring
notice to the Lessor under this paragraph shall be effected until such filings
and other measures required under applicable Law to continue uninterrupted the
perfected security interest and Lien of the Lessor in the Collateral affected
thereby shall have been taken, and until the Lessor shall have received such
opinions of counsel with respect thereto as it shall have reasonably requested.
The Lessee also agrees to advise the Lessor promptly, in sufficient detail, of
any Material Adverse Change relating to the type, quantity or quality of the
Collateral or to the security interests granted to the Lessor therein. The
Lessee as to itself hereby authorizes the Lessor to regard its printed name or
rubber stamp signature on assignment schedules or invoices as the equivalent of
a manual signature by one of its authorized officers or agents;
Section 21.06. Permit the Lessor or any agent thereof to have access
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to the Inventory and Equipment for purposes of inspection during normal business
hours and upon reasonable notice to the Lessee;
Section 21.07. Promptly notify the Lessor in writing of any material
loss or damage to the Inventory or Equipment;
Section 21.08. Not sell, assign, lease, mortgage, transfer or
otherwise dispose of any interest in the Inventory or Equipment, except as
permitted in the Financing Agreement;
Section 21.09. Not use or permit the Inventory or Equipment to be
used for any unlawful purpose or in violation of any applicable Law or for hire;
and
Section 21.10. Not permit the Equipment to become a part of or to be
affixed to any real property of any Person.
ARTICLE XXII. Insurance.
Section 22.01. The Lessee shall, at its own expense, maintain
insurance with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with such insurers, as shall be satisfactory to the
Lessor from time to time. Each policy for: (i) liability insurance shall provide
for all losses to be paid on behalf of the Lessor and the Lessee as their
respective interests may appear; and (ii) property damage insurance shall
provide for all losses to be paid directly to the Lessor. Each such policy shall
in addition: (i) name the Lessor as an insured party thereunder (without any
representation or warranty by or obligation upon the Lessor) as their interests
may appear; (ii) contain the agreement by the insurer that any loss thereunder
shall be payable to the Lessor notwithstanding any action, inaction or breach of
representation and warranty by the Lessee; (iii) provide that there shall be no
recourse against the Lessor for payment of premiums or other amounts with
respect thereto; and (iv) provide that at least thirty (30) days' prior written
notice of amendment to, cancellation of or lapse shall be given to the Lessor by
the insurer. The Lessee shall, if so requested by the Lessor, deliver to the
Lessor original or duplicate policies of such insurance and, as often as the
Lessor may request, a report of a reputable insurance broker with respect to
such insurance. Further, the Lessee shall, at the request of the Lessor, duly
execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 5 and cause the respective insurers to
acknowledge notice of such assignment.
Section 22.02. Reimbursement under any liability insurance
maintained by the Lessee pursuant to this Section 7 may be paid directly to the
Person who shall have incurred liability covered by such insurance. In case of
any loss involving damage to Equipment or Inventory when subsection (a) of this
Section 7 is not applicable, the Lessee shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Lessee pursuant to this Section 7 shall
be paid to the Lessee as reimbursement for the costs of such repairs or
replacements.
ARTICLE XXIII. As to Accounts Receivable and Collateral Generally.
Section 23.01. The Lessee shall keep its chief place of business and
chief executive office and the office where it keeps its records concerning the
Accounts Receivable, at the location therefor specified in Schedule I hereto or,
upon 30 days' prior written notice to the Lessor, at such other locations in a
jurisdiction where all action required by Section 5
9
shall have been taken with respect to Accounts Receivable. The Lessee will hold
and preserve such records and will permit representatives of the Lessor to
inspect and make abstracts from such records.
Section 23.02. The Lessee will not (i) amend, modify, terminate or
waive any provision of any contract, license or agreement giving rise to an
Account in any manner which could reasonably be expected to materially adversely
affect the value of such contract, license or Account as Collateral, (ii) fail
to exercise promptly and diligently each and every material right which it may
have under each material contract, license or agreement giving rise to an
Account (other than any right of termination), except in a manner consistent
with the ordinary and customary conduct of its business or (iii) fail to deliver
to the Lessor upon its reasonable request a copy of each material demand, notice
or document received by it relating in any way to any material contract, license
or agreement giving rise to an Account.
Other than in the ordinary course of business as generally conducted
by the Lessee over a period of time, the Lessee will not grant any extension of
the time of payment of any of the Accounts, compromise, compound or settle the
same for less than the full amount thereof, release, wholly or partially, any
Person liable for the payment thereof, or allow any credit or discount
whatsoever thereon.
Section 23.03. Except as otherwise provided in this subsection (c),
the Lessee shall continue to collect, at its own expense, all amounts due or to
become due to the Lessee under the Accounts Receivable. In connection with such
collections, the Lessee may take (and, at the Lessor's discretion, shall take)
such action as the Lessee or the Lessor may deem necessary or advisable to
enforce collection of the Accounts Receivable; provided, however, that the
Lessor shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default upon written notice to the Lessee of its
intention to do so, to notify the account debtors or obligors under any Accounts
Receivable of the assignment of such Accounts Receivable to the Lessor and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to the Lessee thereunder directly to the Lessor and, upon such
notification and at the expense of the Lessee, to enforce collection of any such
Accounts Receivable, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Lessee might have
done. After receipt by the Lessee of the notice from the Lessor referred to in
the proviso to the preceding sentence and as long as there is an Event of
Default, (i) all amounts and proceeds (including instruments) received by the
Lessee in respect of the Accounts Receivable shall be received in trust for the
benefit of the Lessor, shall be segregated from other funds of the Lessee and
shall be forthwith paid over to the Lessor in the same form as so received (with
any necessary endorsement) to be held as Cash Collateral, or be applied as
provided by Section 14(b), as determined by the Lessor, and (ii) the Lessee
shall not adjust, settle or compromise the amount or payment of any Account
Receivable, or release wholly or partly any account debtor or obligor thereof,
or allow any credit or discount thereon, other than any discount allowed for
prompt payment.
Section 23.04. Upon the release of all Liens granted by Lessee to
the Agent under and pursuant to the Financing Agreement, and provided that no
Event of
10
Default has occurred and is continuing under the Lease Agreement, the Lessor
will release its Lien in all Inventory and Accounts Receivable and all Proceeds
thereof, but the Lessor will retain its Lien in all other Collateral, including
but not limited to, the Equipment and all Proceeds of the Equipment.
Section 23.05. Any delay, or omission by the Lessor to exercise any
right hereunder, shall not be deemed a waiver thereof, or be deemed a waiver of
any other right, unless such waiver be in writing and signed by the Lessor. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
Section 23.06. To the extent that the Lease Obligations are now or
hereafter secured by any assets or property other than the Collateral or by the
guarantee, endorsement, assets or property of any other Person, then the Lessor
shall have the right in its sole discretion to determine which rights, security,
Liens, security interests or remedies Lessor shall at any time pursue, foreclose
upon, relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Lessor's
rights hereunder.
Section 23.07. Upon the request of the Lessor, the Lessee will, at
the sole expense of the Lessee, promptly and duly execute and deliver such
further instruments and documents and take such further action as the Lessor may
reasonably request for the purpose of obtaining or preserving the full benefits
of the Lease Agreement and this Security Agreement and of the rights and powers
herein and therein granted for the benefit of the Lessor.
The Lessee will comply with the requirements of all state and
federal Laws in order to grant to the Lessor valid and continuing security
interests and Liens in the Collateral, subject only to the Permitted
Encumbrances. The Lessor is hereby authorized by the Lessee to file any
financing statements covering the Collateral whether or not the Lessee's
signature appears thereon. The Lessee agrees to do whatever the Lessor may
request, from time to time, by way of: filing notices of Liens, financing
statements, amendments, renewals and continuations thereof; cooperating with the
Lessor; keeping stock records; and performing such further acts as the Lessor
may reasonably require in order to perfect the Liens contemplated by this
Security Agreement in favor of the Lessor.
Any reserves or balances to the credit of the Lessee and any other
property or assets of the Lessee in the possession of the Lessor may be held by
such holder as security for any Lease Obligations and applied in whole or
partial satisfaction of such Lease Obligations when due. The Liens and security
interests granted herein and any other Lien or security interest the Lessor may
have in any other assets of the Lessee, shall secure payment and performance of
all now existing and future Lease Obligations. The Lessor may in its discretion
charge any or all of the Lease Obligations to the account of the Lessee when
due. The Lessee shall give to the Lessor and/or shall cause the appropriate
party to give to the Lessor, from time to time such pledge or security
agreements with respect to patents, trademarks, capital stock and general
intangibles of the Lessee, as the Lessor shall require to obtain valid and
continuing Liens thereon and/or collateral assignments thereof.
11
The Lease Agreement and the obligation of the Lessee to perform all
of its covenants and obligations thereunder are further secured by a mortgage,
deed of trust or assignment on the Real Estate. The Lessee has given to the
Lessor the Mortgage (Brattleboro, Vermont) in order for the Lessor to obtain a
valid and continuing Lien thereon subject only to those exceptions of title as
set forth in future title insurance policies that are satisfactory to the
Lessor.
ARTICLE XXIV. Transfer and Other Liens. The Lessee shall not:
Section 24.01. Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted in the Financing
Agreement.
Section 24.02. Create or suffer to exist any Lien upon or with
respect to any of the Collateral except Permitted Encumbrances.
ARTICLE XXV. Lessor Appointed Attorney-in-Fact . The Lessee hereby
irrevocably appoints the Lessor the Lessee's attorney-in-fact, with full
authority in the place and stead of the Lessee and in the name of the Lessee,
the Lessor or otherwise, to, after the occurrence and during the continuance of
an Event of Default, take any action and to execute any instrument which the
Lessor may deem necessary or advisable to accomplish the purposes of this
Security Agreement, including, without limitation:
Section 25.01. to obtain and adjust insurance required to be paid to
the Lessor pursuant to Section 7;
Section 25.02. to ask, demand, collect, xxx for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
Section 25.03. to receive, endorse, assign, and collect any and all
checks, notes, drafts and other negotiable and non-negotiable instruments,
documents and chattel paper, in connection with clause (a) or (b) above, and the
Lessee waives notice of presentment, protest and non-payment of any instrument,
document or chattel paper so endorsed or assigned;
Section 25.04. to file any claims or take any action or institute
any proceedings which the Lessor may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of Lessor
with respect to any of the Collateral;
Section 25.05. to sell, transfer, assign or otherwise deal in or
with the Collateral or the proceeds or avails thereof, as full and effectually
as if the Lessor were the absolute owner thereof;
Section 25.06. to receive, open and dispose of all mail addressed to
the Lessee and to notify postal authorities to change the address for delivery
thereof to such address as the Lessor may designate;
Section 25.07. to request from customers indebted on Accounts at any
time, in the name of the Lessor or the Lessee or that of the Lessor's designee,
information concerning the amounts owing on the Accounts;
Section 25.08. to transmit to customers indebted on Accounts notice
of the Lessor's interest therein and to notify customers indebted on Accounts to
make payment directly to the Lessor for the Lessee's account; and
12
Section 25.09. to take or bring, in the name of the Lessor or the
Lessee, all steps, actions, suits or proceedings deemed by the Lessor necessary
or desirable to enforce or effect collection of the Accounts. Notwithstanding
anything hereinabove contained to the contrary, the powers set forth in (f), (h)
and (i) above may only be exercised after the occurrence of an Event of Default
and until such time as such Event of Default is waived in writing.
The Lessee hereby ratifies and approves all acts other than those
which result from the Lessor's gross negligence or willful misconduct, of the
Lessor, as its attorney in-fact, pursuant to this Section 10, and the Lessor, as
its attorney in-fact, will not be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than those which
result from the Lessor's gross negligence or willful misconduct. This power,
being coupled with an interest, is irrevocable so long as this Security
Agreement remains in effect.
The Lessee also authorizes the Lessor, at any time and from time to
time, to communicate in its own name with any party to any contract, agreement
or instrument included in the Collateral with regard to the assignment of such
contract, agreement or instrument and other matters relating thereto.
ARTICLE XXVI. Lessor May Perform. If the Lessee fails to perform
any agreement contained herein, the Lessor may itself perform, or cause
performance of, such agreement, and the expenses of the Lessor incurred in
connection therewith shall be payable by the Lessee under Section 14(b).
ARTICLE XXVII. Lessor's Duties. The powers conferred on the Lessor
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lessor shall not have any 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.
ARTICLE XXVIII. Remedies. If any Event of Default as defined in the
Lease has occurred and is continuing:
Section 28.01. the Lessor may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") (whether or not the Code applies to the
affected Collateral) and also may (i) require the Lessee to, and the Lessee
hereby agrees that it will at its expense and upon the request of the Lessor
forthwith, assemble all or part of the Collateral as directed by the Lessor and
make it available to the Lessor at a place to be designated by the Lessor which
is reasonably convenient to both parties and (ii) to enter the premises where
any of the Collateral is located and take and carry away the same, by any of its
representatives, with or without legal process, to the Lessor's place of
storage, and (iii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Lessor's offices or elsewhere, for cash, on credit or for future delivery
and upon such other terms as the Lessor may deem commercially reasonable. The
Lessee agrees that, to the extent notice of sale shall be
13
required by law, at least ten (10) days' notice to the Lessee of the time and
place of any public or private sale is to be made shall constitute reasonable
notification. The Lessor shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lessor may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place it was so adjourned.
Section 28.02. All cash proceeds received by the Lessor in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Lessor, be held by the Lessor as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Lessor pursuant to Section 13) in whole or in part by
the Lessor against, all or any part of the Lease Obligations in such order as
the Lessor shall elect. Any surplus of such cash or cash proceeds held by the
Lessor and remaining after payment in full of all the Lease Obligations to the
Lessor shall be paid over to the Lessee. If the proceeds of the sale of the
Collateral are insufficient to pay all the Lease Obligations the Lessee agrees
to pay upon demand any deficiency to the Lessor.
Section 28.03. Immediately upon the occurrence of any Event of
Default and so long as such Event of Default is continuing, the Lessor may to
the extent permitted by Law: (i) remove from any premises where same may be
located any and all documents, instruments, files and records, and any
receptacles or cabinets containing same, relating to the Accounts, or the Lessor
may use, at the Lessee's expense, such of the Lessee's personnel, supplies or
space at the Lessee's places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (ii) bring suit, in the name of the Lessee or the Lessor,
and generally shall have all other rights respecting said Accounts, including
without limitation the right to accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Lessee or the Lessor; and (iii)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at the Lessor's sole option and
discretion, and the Lessor may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Lessee.
ARTICLE XXIX. Indemnity and Expenses.
Section 29.01. The Lessee agrees to indemnify the Lessor from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
Lessor's gross negligence or willful misconduct.
Section 29.02. The Lessee will upon demand pay to the Lessor the
amount of any and all expenses, including the fees and out of pocket
disbursements of its counsel and of any experts and agents, which the Lessor may
incur in connection with (i) filing or recording fees incurred in connection
with this Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the
14
rights of the Lessor hereunder, or (iv) the failure by the Lessee to perform or
observe any of the provisions hereof. The Lessor shall not be liable to the
Lessee for damages as a result of delays, temporary withdrawals of the Equipment
from service or other causes other than those caused by the Lessor's gross
negligence or willful misconduct.
ARTICLE XXX. Amendments; Etc. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by the Lessee
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Lessor, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
ARTICLE XXXI. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to the Lessee,
mailed or delivered by messenger or sent by facsimile, addressed to it at the
address of the Lessee specified in the Lease Agreement; and if to the Lessor,
mailed or delivered by messenger or sent by facsimile to it, addressed to it at
the address of the Lessor specified in the Lease Agreement; or as to any such
party at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section. All such notices and other communications shall, when mailed or
delivered by messenger or sent by facsimile, respectively, be effective when
received in the mails or delivered to the messenger or sent by facsimile,
respectively, addressed as aforesaid.
ARTICLE XXXII. Continuing Security Interest; Transfer of Lease.
This Security Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until payment in full
of the Lease Obligations (after the termination of the Lease Agreement), (ii) be
binding upon the Lessee, its successors and assigns, and (iii) inure to the
benefit of the Lessor and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), subject to the terms of
the Lease Agreement the Lessor may assign or otherwise transfer all or a portion
of its rights and obligations under the Lease Agreement to any other Person and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Lessor herein or otherwise. Upon the payment in full of
the Lease Obligations (after the termination of the Lease Agreement), the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Lessee. Upon any such termination, the Lessor
will, at the Lessee's expense, execute and deliver to the Lessee such documents
as the Lessee shall reasonably request to evidence such termination.
ARTICLE XXXIII. Governing Law; Terms. This Security Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
New York. Unless otherwise defined herein or in the Lease Agreement, terms used
in Article 9 of the Uniform Commercial Code in the State of New York are used
herein as therein defined.
ARTICLE XXXIV. Miscellaneous. This Security Agreement is in addition
to and not in limitation of any other rights and remedies the Lessor may have by
virtue of any other
15
instrument or agreement heretofore, contemporaneously herewith or hereafter
executed by the Lessee or by applicable Law or otherwise. If any provision of
this Security Agreement is contrary to applicable Law, such provision shall be
deemed ineffective without invalidating the remaining provisions hereof. If and
to the extent that applicable Law confers any rights in addition to any of the
provisions of this Security Agreement, the affected provision shall be
considered amended to conform thereto. The Lessor shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder. A waiver by the Lessor of any right or remedy hereunder on any one
occasion, shall not be construed as a bar to or waiver of any such right or
remedy which the Lessor would have had on any future occasion nor shall the
Lessor be liable for exercising or failing to exercise any such right or remedy.
Article XXXV. Waiver of Trial by Jury. THE PARTIES TO THIS SECURITY
AGREEMENT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND
DELAYS NOT OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS SECURITY AGREEMENT
AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE
IN A COURT LOCATED IN NEW YORK COUNTY BY MEANS OF A BENCH TRIAL WITHOUT A JURY.
IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS
SECURITY AGREEMENT, EACH PARTY TO THIS SECURITY AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS SECURITY
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
16
IN WITNESS WHEREOF, the Lessee has caused this Security Agreement to
be duly executed and delivered by its agent thereunto duly authorized as of the
date first above written.
FIBERMARK OFFICE PRODUCTS, LLC
By: FIBERMARK FILTER AND
TECHNICAL PRODUCTS, INC.,
its sole Member
By: _________________________
Name:
Title:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: _________________________
Name:
Title:
17
SCHEDULE I
to Security Agreement
Place of Business and Locations of Collateral
Chief Place of Business
and Chief Executive Office
FiberMark Office Products, LLC
000 Xxxxxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxxxx, Xxxxxxx 00000
Location of Inventory
FiberMark Office Products, LLC
S-I-1
SCHEDULE II
to Security Agreement
Real Estate
S-II-1
ANNEX I
to Security Agreement
Accounts shall mean all of the Lessee's now existing and future: (a)
Accounts Receivable (whether or not specifically listed on schedules furnished
to the Lessor), and any and all instruments, documents, contract rights, chattel
paper, general intangibles, to the extent they are payments due for goods sold
or services rendered including, without limitation, all accounts created by or
arising from all of the Lessee's sales of goods or rendition of services to its
customers, (b) unpaid seller's rights (including rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (c) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (d) reserves and credit
balances arising hereunder; (e) guarantees or collateral for any of the
foregoing; (f) insurance policies or rights relating to any of the foregoing;
and (g) cash and non-cash proceeds of any and all the foregoing.
Accounts Receivable means any right to payment for goods sold by or
services rendered by the Lessee, including all accounts arising from sales or
rendition of services made under any of the Lessee's trade names or styles, or
through any of the Lessee's divisions; regardless of how such right is
evidenced, whether secured or unsecured, or now existing or hereafter arising.
Depository Accounts shall mean those accounts owned by, and in the
name of, the Agent and designated by the Agent for the deposit of proceeds of
Collateral.
Good Faith Contest means the contest of an item if: (a) the item is
diligently contested in good faith by appropriate proceedings timely instituted;
(b) adequate reserves are established with respect to the contested item; (c)
during the period of such contest, the enforcement of the contested item is
effectively stayed; and (d) the failure to pay or comply with the contested item
during the period of such contest could not result in a Material Adverse Change.
Indebtedness shall mean at any date:
(a) indebtedness or liability for borrowed money, or for the deferred purchase
price of property or services (including trade obligations);
(b) obligations as lessee under Capital Leases;
(c) reimbursement obligations under letters of credit issued for the account of
any Person;
(d) all reimbursement obligations arising under bankers' or trade acceptances;
(e) all guarantees, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase any
of the items included in this definition, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor against
loss;
(f) all obligations secured by any Lien on property owned by such Person,
whether or not the obligations have been assumed; and
(g) all obligations under any agreement providing for a swap, ceiling rates,
ceiling and floor rates, contingent participation or other hedging mechanisms
with respect to
A-I-1
interest payable on any of the items described in this definition.
Law means any treaty, foreign, federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy, or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent decree or judgment.
Lease Obligations shall mean (i) the payment and performance of each
and every obligation, covenant and agreement of the Lessee now or hereafter
existing, and the observance by the Lessee of every condition contained in the
Lease Agreement, whether for Rent (including without limitation Supplemental
Rent payable to any Person), indemnification, fees, expenses or otherwise, and
notwithstanding that any such obligation, covenant, agreement or condition shall
be contained in an amendment or supplement to the Lease Agreement, or in any
extension or renewal of any thereof or replacement therefore, (ii) the payment
of all sums advanced or incurred in accordance herewith by or on behalf of the
Lessor to protect the Collateral with interest thereon, (iii) the performance of
every obligation, covenant and agreement of the Lessee and the observance by the
Lessee of every condition contained in any agreement now or hereafter executed
by the Lessee and the observance by the Lessee of every condition contained in
any agreement now or hereafter executed by the Lessee which recites that the
obligations thereunder are secured by this Security Agreement and (iv) the
payment of all sums, with interest thereon from the date any such payment is due
to the date of payment thereof, that may become due and payable to or for the
benefit of the Secured Party pursuant to the terms of this Security Agreement;
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, and including all indebtedness of the
Lessee under any instrument now or hereafter evidencing or securing any of the
foregoing.
Material Adverse Change means (a) a material adverse change in the
status of the business, results of operations, condition (financial or
otherwise), prospects, profitability, assets, operations, or property of Lessee,
or (b) any event or occurrence of whatever nature which could have a material
adverse effect on the Lessee's ability to perform its obligations under the
Lease Agreement.
Mortgage (Brattleboro, Vermont) means a Mortgage Deed, Assignment of
Leases and Rents and Security Agreement, dated as of April 29, 1994, from
Specialty Paperboard, as Mortgagor, to CITEF, as Mortgagee, which was recorded
in the Town Clerk's Office of Brattleboro, Vermont (the "Records") on May 4,
1994 in Book 242, Page 703, as modified by that certain Mortgage Modification
Agreement dated as of September 29, 1995, which was recorded in the Records on
October 10, 1995 in Book 250, Page 799, and as otherwise amended, modified or
supplemented from time to time.
Permitted Encumbrances shall mean:
(a) Liens expressly permitted, or consented to, by the Agent;
(b) Liens expressly permitted, or consented to, by the Lessor pursuant to the
Lease Agreement in the event that all Liens granted by Lessee to the Agent under
and pursuant to the Financing Agreement have been released;
(c) Purchase Money Liens;
A-I-2
(d) Permitted Liens;
(e) Liens granted the Agent by the Lessee or any Guarantor;
(f) Liens granted the Lessor by the Lessee in the event that all Liens granted
by Lessee to the Agent under and pursuant to the Financing Agreement have been
released;
(g) Liens of judgment creditors provided such Liens do not exceed, in the
aggregate, at any time, Two Hundred Fifty Thousand Dollars ($250,000) (other
than Liens bonded or insured to the reasonable satisfaction of the Agent or the
Lessor in the event that all Liens granted by Lessee to the Agent under and
pursuant to the Financing Agreement have been released);
(h) Liens for taxes not yet due and payable or which are the subject of a Good
Faith Contest and which Liens are not x) other than with respect to Real Estate,
senior to the Liens of the Agent or y) for taxes due the United States of
America; provided, however, that in no event shall any Environmental Lien be
deemed to be a Permitted Encumbrance;
(i) Liens granted to the Lessor securing its obligations under the Lease
Agreement; and
(j) Liens granted to the Lessee or any Guarantor on any of its assets other than
(i) the Lessee's Equipment, (ii) each Guarantor's and the Lessee's Accounts and
(iii) each Guarantor's and the Lessee's Inventory.
Permitted Liens shall mean:
i. Liens of local, provincial, or state authorities for franchise or
other like taxes provided the aggregate amounts secured by such Liens
shall not exceed One Hundred Thousand Dollars ($100,000) in the aggregate
outstanding at any one time;
ii. statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other like Liens imposed by Law,
created in the ordinary course of business and for amounts not yet due or
which are the subject of a Good Faith Contest;
iii. deposits made (and the Liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to
secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of Indebtedness), statutory obligations and other
similar obligations arising as a result of progress payments under
government contracts; and
iv. easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which
are listed in Schedule B of the title insurance policy delivered to the
Agent pursuant to the Financing Agreement and delivered to the Lessor;
provided, however, that in no event shall any Environmental Lien be deemed
to be a Permitted Lien.
Proceeds shall have the meaning assigned to it in the Uniform
Commercial Code, and in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
Lessor from time to time with respect to any of the Collateral; (ii) any and all
payments (in any form whatsoever) made or due and payable to Lessor from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any
A-I-3
part of the Collateral by any governmental body, authority, bureau or agency or
any other Person (whether or not acting under color of governmental authority);
(iii) any and all accounts arising out of, any chattel paper evidencing, any
lease of, and any and all other rents or profits or other amounts from time to
time paid or payable in connection with, any of the Collateral; and (iv) any and
all proceeds of any sale, transfer or other disposition of the Collateral.
Purchase Money Liens shall mean Liens on any item of equipment
acquired by the Lessee after the date of the Financing Agreement provided that
(a) each such Lien shall attach only to the property to be acquired, (b) a
description of the property so acquired is furnished to the Agent and the
Lessor, and (c) the debt incurred in connection with such acquisitions shall not
exceed, in the aggregate, Five Hundred Thousand Dollars ($500,000) in any Fiscal
Year.
Real Estate shall mean the Lessee's fee and/or leasehold interests
in the real property located at Brattleboro, Vermont which has been encumbered,
mortgaged, pledged or assigned to the Lessor.
Security Documents means this Security Agreement, the Mortgage
(Brattleboro, Vermont) and any other security agreement granting a Lien on any
assets of the Lessee to secure the Lease Obligations.
A-I-4
DRAFT 2/1/98
SECOND AMENDED AND RESTATED
SECURITY AGREEMENT
between
FIBERMARK OFFICE PRODUCTS, LLC
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.
Dated: December 31, 1997
Index
Page
----
PRELIMINARY STATEMENTS 10
SECTION 1. GRANT OF SECURITY 10
SECTION 2. SECURITY FOR LEASE OBLIGATIONS................................ 12
SECTION 3. THE LESSEE REMAINS LIABLE..................................... 12
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 12
SECTION 5. FURTHER ASSURANCES ........................................... 13
SECTION 6. AS TO EQUIPMENT AND INVENTORY................................. 16
SECTION 7. INSURANCE .................................................... 19
SECTION 8. AS TO ACCOUNTS RECEIVABLE..................................... 20
SECTION 9. TRANSFER AND OTHER LIENS...................................... 22
SECTION 10. LESSOR APPOINTED ATTORNEY-IN-FACT............................. 22
SECTION 11. LESSOR MAY PERFORM ........................................... 23
SECTION 12. LESSOR'S DUTIES .............................................. 23
SECTION 13. REMEDIES...................................................... 23
SECTION 14. INDEMNITY AND EXPENSES........................................ 24
SECTION 15. AMENDMENTS; ETC............................................... 25
SECTION 16. ADDRESSES FOR NOTICES......................................... 25
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LEASE............... 25
SECTION 18. GOVERNING LAW; TERMS ......................................... 25
SECTION 19. MISCELLANEOUS ................................................ 26
Schedule I.........................................................S-I-1
Schedule II.......................................................S-II-1
Annex I............................................................A-I-1
