Exhibit 10.3
SECURITY AGREEMENT
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SECURITY AGREEMENT, dated as of November 10, 2003 (as amended,
modified or supplemented from time to time, this "Security Agreement"), among
GENTEK INC., a Delaware corporation ("GenTek"), the Domestic Subsidiaries
identified on the signature pages hereto as "Grantors" (together with GenTek,
each a "Grantor" and collectively, the "Grantors"), and BANK OF AMERICA, N.A.,
in its capacity as agent (in such capacity, together with any successor agent,
the "Agent") for the financial institutions (the "Lenders") from time to time
party to the Credit Agreement referred to below (the Lenders, together with the
Agent, are collectively referred to herein as the "Secured Parties").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof (as from time to time amended, restated, supplemented or
otherwise modified, the "Credit Agreement") by and among the Grantors, Noma
Company, the Lenders, the Agent, Bank of America, N.A., as syndication agent,
Fleet Capital Corporation, as documentation agent, and Banc of America
Securities LLC, as sole book runner and lead arranger, the Lenders have agreed
to make Revolving Loans and issue or cause the issuance of Letters of Credit on
behalf of the Borrowers;
WHEREAS, in order to induce the Agent and the Lenders to enter
into the Credit Agreement and the other Loan Documents and to induce the Lenders
to make Revolving Loans and issue or cause the issuance of Letters of Credit and
Credit Support as provided for in the Credit Agreement, the Grantors have agreed
to grant a continuing Lien on the Collateral in favor of the Agent, for the
benefit of the Secured Parties, to secure the Obligations;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. The following terms shall have the
following respective meanings:
"Accounts" means, with respect to a Grantor, all of such
Grantor's now owned or hereafter acquired or arising accounts, as defined in the
UCC, including any rights to payment for the sale or lease of goods or rendition
of services, whether or not they have been earned by performance.
"Chattel Paper" means, with respect to a Grantor, all of such
Grantor's now owned or hereafter acquired chattel paper, as defined in the UCC,
including electronic chattel paper.
"Collateral" has the meaning set forth in Section 2 hereof.
"Collection Accounts" has the meaning set forth in Section 11(a)
hereof.
"Contract" and "Contracts" have the respective meanings set
forth in Section 18(b) hereof.
"Copyrights" means, with respect to a Grantor, (i) all of such
Grantor's copyrights in all original works of authorship fixed in any tangible
medium of expression, all mask works fixed in a chip product, all such Grantor's
right, title and interest therein and thereto, and all of such Grantor's
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States or any other
country, or any political subdivision thereof, all whether now or hereafter
owned or licensable by such Grantor, including, but not limited to, those
registrations or applications for registrations described on Schedule III
annexed hereto and made a part hereof and (ii) all extensions or renewals
thereof.
"Documents" means, with respect to a Grantor, all documents as
such term is defined in the UCC, including bills of lading, warehouse receipts
or other documents of title, now owned or hereafter acquired by such Grantor.
"Equipment" means, with respect to a Grantor, all of such
Grantor's now owned and hereafter acquired machinery, equipment, furniture,
furnishings, fixtures and other tangible personal property (except Inventory),
including embedded software, motor vehicles with respect to which a certificate
of title has been issued, aircraft, dies, tools, jigs, molds and office
equipment, as well as all of such types of property leased by such Grantor and
all of such Grantor's rights and interests with respect thereto under such
leases (including, without limitation, options to purchase); together with all
present and future additions and accessions thereto, replacements therefor,
component and auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties and rights with respect thereto; wherever any
of the foregoing is located.
"General Intangibles" means, with respect to a Grantor, all of
such Grantor's now owned or hereafter acquired general intangibles, choses in
action and causes of action and all other intangible personal property of such
Grantor of every kind and nature (other than Accounts), including, without
limitation, all contract rights, payment intangibles, Proprietary Rights,
corporate or other business records, inventions, designs, blueprints, plans,
specifications, patents, patent applications, trademarks, service marks, trade
names, trade secrets, goodwill, copyrights, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, any funds which may
become due to such Grantor in connection with the termination of any Plan or
other employee benefit plan or any rights thereto and any other amounts payable
to such Grantor from any Plan or other employee benefit plan, rights and claims
against carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, property, casualty or any similar type of
insurance and any proceeds thereof, proceeds of insurance covering the lives of
key employees on which such Grantor is beneficiary, rights to receive dividends,
distributions, cash, Instruments and other property in respect of or in exchange
for pledged equity interests or Investment Property and any letter of credit,
guarantee, claim, security interest or other security held by or granted to such
Grantor.
"Instruments" means, with respect to a Grantor, all instruments
as such term is defined in the UCC, now owned or hereafter acquired by such
Grantor.
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"Inventory" means, with respect to a Grantor, all of such
Grantor's now owned and hereafter acquired inventory, goods and merchandise,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, work-in-process, finished goods
(including embedded software), other materials and supplies of any kind, nature
or description which are used or consumed in such Grantor's business or used in
connection with the packing, shipping, advertising, selling or finishing of such
goods, merchandise, and all documents of title or other Documents representing
them.
"Investment Property" means, with respect to a Grantor, all of
such Grantor's right, title and interest in and to any and all: (a) securities
whether certificated or uncertificated; (b) securities entitlements; (c)
securities accounts; (d) commodity contracts; or (e) commodity accounts.
"Patents" shall mean, with respect to a Grantor, (i) all of such
Grantor's patents (granted or pending) of the United States of America or any
other country, all right, title and interest of such Grantor therein and
thereto, and all of such Grantor's registrations and recordings thereof,
including, without limitation, applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States of America, any State thereof or any other country or any
political subdivision thereof, all whether now owned or hereafter acquired by
such Grantor, including, but not limited to, those described on Schedule III
annexed hereto and made a part hereof and (ii) all reissues, continuations,
continuations-in-part, extensions or divisionals thereof and all licenses
thereof.
"Patent Applications" shall mean, with respect to a Grantor, (i)
all of such Grantor's applications for Patents that have been filed in the
United States Patent and Trademark Office as of the effective date of this
Security Agreement, or in the future, that have not yet been issued as patents,
all whether now or hereafter owned or licensable by such Grantor, including, but
not limited to, those described on Schedule III annexed hereto and made a part
hereof and (ii) all reissues, continuations, continuations-in-part, divisionals
or term restorations and all extensions thereof and licenses thereof.
"Payment Account" means each bank account established pursuant
to this Security Agreement to which the proceeds of Accounts and other
Collateral are deposited or credited and which is maintained in the name of the
Agent or the applicable Grantor, as the Agent may determine, on terms acceptable
to the Agent.
"Proprietary Rights" means, with respect to a Grantor, all of
such Grantor's now owned and hereafter arising or acquired: licenses,
franchises, permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, service marks, trade names, trade
styles, patent, trademark and service xxxx applications, and all licenses and
rights related to any of the foregoing, and all other rights under any of the
foregoing, all extensions, renewals, reissues, divisions, continuations and
continuations-in-part of any of the foregoing, and all rights to xxx for past,
present and future infringement of any of the foregoing.
"Supporting Obligations" means all supporting obligations as
such term is defined in the UCC, including letters of credit and guaranties
issued in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments or Investment Property.
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"Trademarks" shall mean, with respect to a Grantor, (i) all of
such Grantor's trademarks, trade names, trade styles, service marks, prints and
labels on which said trademarks, trade names, trade styles and service marks
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all right, title and interest of such
Grantor therein and thereto, and all registrations and recordings thereof,
including, without limitation, applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States of America, any State thereof, or any other country or any
political subdivision thereof, all whether now owned or hereafter acquired by
such Grantor, including, but not limited to, those described on Schedule III
annexed hereto and made a part hereof and (ii) all reissues, extensions or
renewals thereof and all licenses thereof (including, without limitation, all
license agreements).
"UCC" means the Uniform Commercial Code, as in effect from time
to time, of the State of New York or of any other state the laws of which are
required as a result thereof to be applied in connection with the issue of
perfection of security interests.
All other capitalized terms used but not otherwise defined
herein have the meanings given to them in the Credit Agreement or in Annex A
thereto. All other undefined terms contained in this Security Agreement, unless
the context indicates otherwise, have the meanings provided for by the UCC to
the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) As security for all Obligations, each Grantor hereby
grants to the Agent, for the benefit of the Secured Parties, a continuing
security interest in and lien on all of the following property and assets of
such Grantor, whether now owned or existing or hereafter acquired or arising,
regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights;
(iv) all Chattel Paper;
(v) all Documents;
(vi) all Instruments;
(vii) all Supporting Obligations;
(viii) all General Intangibles;
(ix) all Equipment;
(x) all Investment Property;
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(xi) all money, cash, cash equivalents, securities
and other property of any kind of such Grantor held directly or indirectly by
the Agent or any Lender;
(xii) all of such Grantor's deposit accounts, credits
and balances with and other claims against the Agent or any Lender or any of
their Affiliates or any other financial institution with which such Grantor
maintains deposits, including any Payment Accounts;
(xiii) all Patents and Patent Applications listed on
Schedule III annexed hereto and made a part hereof;
(xiv) all Copyrights and each of the registrations
listed on Schedule III annexed hereto and made a part hereof;
(xv) all Trademarks, and the good-will of the
business symbolized by each such Trademark, and each of the registrations listed
on Schedule III annexed hereto and made a part hereof;
(xvi) all other assets and property of such Grantor;
(xvii) all books, records and other property related to
or referring to any of the foregoing, including books, records, account ledgers,
data processing records, computer software and other property and General
Intangibles at any time evidencing or relating to any of the foregoing; and
(xviii) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, all equity interests in Subsidiaries pledged or required
to be pledged to the Agent under the U.S. Pledge Agreement and all other
property of each of the Grantors in which the Agent or any Lender may at any
time be granted a Lien as collateral for any of the Obligations, is herein
collectively referred to as the "Collateral"; provided, however, "Collateral"
shall not include, and no Grantor shall be deemed to have granted a security
interest in any of such Grantor's rights or interests (a) in any lease, license,
contract, property rights or agreement to which any Grantor is a party or any of
its rights or interests thereunder if and for so long as the grant of such
security interest shall constitute or result in (i) the abandonment,
invalidation or unenforceability of any right, title or interest of any Grantor
therein or (ii) in a breach or termination pursuant to the terms of, or a
default under, any such lease, license, contract, property rights or agreement
(other than to the extent that any provision prohibiting such Grantor from
granting a security interest in its rights and interests thereunder in favor of
the Agent would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408
or 9-409 of the UCC (or any successor provision or provisions) of any relevant
jurisdiction or any other applicable law (including the Bankruptcy Code) or
principles of equity); provided, further, that such security interest shall
attach immediately at such time as the condition causing such abandonment,
invalidation or unenforceability shall be remedied and to the extent severable,
shall attach immediately to any portion of such lease, license, contract,
property rights or agreement that does not result in any of the consequences
specified in (i) or (ii) above; provided, further, that
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any Account or any money or other amounts due or to become due to such Grantor
under any such license, contract or agreement shall at no time be excluded from
the Collateral or the security interest granted by such Grantor hereunder in
favor of the Agent, (b) in any of the outstanding capital stock or other equity
interests of any of the entities identified on Schedule V annexed hereto and
made a part hereof (each entity identified on Schedule V and each Foreign
Subsidiary created after the date hereof in accordance with, and subject to the
express provisions of, Section 7.22 of the Credit Agreement, shall be referred
to herein as a "Specified Foreign Subsidiary" and, collectively as the
"Specified Foreign Subsidiaries"), in excess of 65% of the issued and
outstanding shares of voting stock or other voting equity interests of each such
Specified Foreign Subsidiary; provided that immediately upon the amendment of
the Code to allow the pledge of a greater percentage of the voting stock or
other voting equity interests in any such Specified Foreign Subsidiary without
adverse tax consequences, the Collateral shall include, and the security
interest granted by each Grantor shall attach to, such greater percentage of
capital stock of each such Specified Foreign Subsidiary; provided, further, that
the Grantors shall use their commercially reasonable efforts to obtain the
necessary consents to the pledge of 65% of the shares of PrettleNoma GmbH
hereunder, and upon the receipt thereof, shall take all necessary steps to
pledge such shares hereunder (and upon such pledge, PrettleNoma GmbH shall be a
"Specified Foreign Subsidiary" hereunder), (c) in any of the outstanding capital
stock or other equity interests of any of the entities identified on Schedule VI
annexed hereto and made a part hereof (each a "Specified Domestic Holding
Company" and, collectively, the "Specified Domestic Holding Companies"), in
excess of 65% of the issued and outstanding shares of voting stock or other
voting equity interests of each such Specified Domestic Holding Company;
provided that immediately upon any change in circumstances that would cause such
Specified Domestic Holding Company to no longer qualify as a Foreign Subsidiary
Holding Company (as defined below), the Collateral shall include, and the
security interest granted by each Grantor shall attach to, the remaining 35% of
the issued and outstanding shares of voting stock or other voting equity
interests of such Specified Domestic Holding Company or (d) Equipment financed
by a Grantor with purchase money Debt or Capital Leases expressly permitted
under the Credit Agreement; provided, that the foregoing exclusion shall only
apply to the extent that such Grantor is prohibited from granting a security
interest under the terms of such Debt or Capital Lease and only so long as such
Debt or Capital Lease remains outstanding. For purposes of this Security
Agreement, a "Foreign Subsidiary Holding Company" means any Domestic Subsidiary
that, for federal income tax purposes, is treated as the owner of no assets in
excess of $100,000 other than the stock or other equity interests of one or more
Specified Foreign Subsidiaries or other Foreign Subsidiary Holding Company and
intercompany loans made by it to its Foreign Subsidiaries. The Grantors and the
Agent agree that nothing in the Credit Agreement, the U.S. Pledge Agreement or
this Security Agreement will result in the direct or indirect pledge of (x) the
assets of a "controlled foreign corporation" or (y) more than 65% of the total
combined voting power of all classes of stock entitled to vote of a "controlled
foreign corporation."
(b) All of the Obligations shall be secured by all of the
Collateral.
3. PERFECTION AND PROTECTION OF SECURITY INTEREST.
(a) Each Grantor shall, at its expense, perform all steps
reasonably requested by the Agent at any time to perfect, maintain, protect and
enforce the Agent's Liens, including:
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(i) executing, delivering and/or filing and recording of the Grant of Security
in the form attached hereto and filing or authorizing the Agent to file
financing or continuation statements, and amendments thereof, in form and
substance reasonably satisfactory to the Agent; (ii) delivering to the Agent the
originals of all Instruments from any single obligor having a value in excess of
$500,000 and, upon the request of the Agent, Documents and Chattel Paper of such
Grantor from any single obligor having a value in excess of $500,000, and all
other Collateral of which the Agent reasonably determines it should have
physical possession in order to perfect and protect the Agent's security
interest therein, duly pledged, endorsed or assigned to the Agent without
restriction; (iii) delivering to the Agent, upon the Agent's request made after
the occurrence and during the continuance of an Event of Default, warehouse
receipts covering any portion of the Collateral located in warehouses and for
which warehouse receipts are issued and certificates of title covering any
portion of the Collateral for which certificates of title have been issued; (iv)
when an Event of Default has occurred and is continuing, transferring its
Inventory to warehouses or other locations designated by the Agent; (v) upon the
Agent's request made after the occurrence and during the continuance of an Event
of Default, placing notations on such Grantor's books of account to disclose the
Agent's security interest; (vi) obtaining control agreements from securities
intermediaries with respect to financial assets in the possession of securities
intermediaries (other than, so long as no Event of Default shall have occurred
and be continuing, with respect to securities accounts having assets of less
than (i) $100,000, on an individual basis, maintained therein and (ii) $200,000,
on an aggregate basis, maintained in all such securities accounts); (vii)
assigning and delivering to the Agent, upon the request of the Agent made after
the occurrence and during the continuance of an Event of Default, all Supporting
Obligations, including letters of credit on which such Grantor is named
beneficiary with the written consent of the issuer thereof and (viii) taking
such other steps as are deemed necessary or desirable by the Agent to maintain
and protect the Agent's Liens. To the extent permitted by applicable law, the
Agent may (and each Grantor hereby authorizes the Agent to) file, without the
applicable Grantor's signature, one or more financing statements continuation
statements or other documents and amendments thereto for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Agent's Liens.
Each Grantor hereby authorizes the Agent to file a Record or Records, including,
without limitation, financing or continuation statements and Grant of Security
in the forms attached hereto, and amendments thereto, in any jurisdictions and
with any filing offices as the Agent may determine (and signed only by the Agent
(if necessary)), in its sole reasonable discretion, are necessary or advisable
to perfect the security interest granted to the Agent herein. Such financing
statements may describe the Collateral in the same manner as described herein or
may contain an indication or description of collateral that describes such
property in any other manner as the Agent may determine, in its sole discretion,
is necessary, advisable or prudent to ensure the perfection of the security
interest in the Collateral granted to the Agent herein, including, without
limitation, describing such property as "all assets" or "all personal property,
whether now owned or hereafter acquired." Each Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this Security Agreement or of
a financing statement is sufficient as a financing statement.
(b) If any Collateral of a Grantor is at any time in the
possession or control of any warehouseman, bailee or any of a Grantor's agents
or processors, then such Grantor shall notify the Agent thereof and shall comply
with the provisions of Section 7.9 of the Credit Agreement with respect to such
location. If at any time any Collateral is located in any operating
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facility of a Grantor that is leased by such Grantor, then such Grantor shall
comply with the provisions of Section 7.9 of the Credit Agreement with respect
to such location.
(c) From time to time, each Grantor shall, upon the request
of the Agent, execute and deliver confirmatory written instruments pledging to
the Agent, for the ratable benefit of the Secured Parties, the Collateral in
which such Grantor has an interest, but a Grantor's failure to do so shall not
affect or limit any security interest or any other rights of the Agent or any
Lender in and to the Collateral with respect to such Grantor. So long as the
Credit Agreement is in effect and until all Obligations have been fully
satisfied, the Agent's Liens shall continue in full force and effect in all
Collateral (whether or not deemed eligible for the purpose of calculating the
Availability of a Borrower or as the basis for any advance, loan, extension of
credit or other financial accommodation).
4. LOCATION OF COLLATERAL. (a) Each Grantor represents and
warrants to the Agent and the Lenders that: (A) Schedule I hereto is a correct
and complete list of such Grantor's chief executive office, the location of its
books and records, the locations of the Collateral in which such Grantor has an
interest and the locations of all of its other places of business; and (b)
Schedule I hereto correctly identifies any of such facilities and locations that
are not owned by such Grantor and sets forth the names of the owners and lessors
or sublessors of such facilities and locations. Each Grantor covenants and
agrees that it will not (i) maintain any Collateral in which it has an interest
at any location other than those locations listed for such Grantor on Schedule I
hereto (ii) otherwise change or add to any of such locations, or (iii) change
the location of its chief executive office from the location identified in
Schedule I hereto, unless it gives the Agent at least thirty (30) days' (or such
lesser number of days agreed to by the Agent) prior written notice thereof and
executes any and all financing statements and other documents that the Agent
reasonably requests in connection therewith. Without limiting the foregoing,
each Grantor represents that all of its Inventory (other than Inventory in
transit) is, and covenants that all of its Inventory will be, located either (a)
on premises owned by such Grantor, (b) on premises leased by such Grantor,
provided that, to the extent (and only to such extent) required by the
provisions of the Credit Agreement or this Security Agreement, the Agent has
received an executed landlord waiver from the landlord of such premises in form
and substance reasonably satisfactory to the Agent or (c) in a warehouse or with
a bailee, provided that, to the extent (and only to such extent) required by the
provisions of the Credit Agreement or this Security Agreement, the Agent has
received an executed bailee letter from the applicable Person in form and
substance reasonably satisfactory to the Agent.
5. JURISDICTION OF ORGANIZATION. Schedule II hereto
identifies each Grantor's corporate name, its jurisdiction of incorporation or
organization, the type of entity it was organized as and the state organization
identification number of such Grantor (if the state of its incorporation or
organization provides such organization number).
6. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. Each
Grantor represents and warrants to the Agent and the Lenders and agrees with the
Agent and the Lenders that: (a) all of the Collateral in which such Grantor
granted a security interest hereunder in favor of the Agent is and will continue
to be owned by such Grantor free and clear of all Liens whatsoever, except for
Permitted Liens; (b) the Agent's Liens in the Collateral in which such Grantor
granted a security interest hereunder in favor of the Agent will not be subject
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to any prior Lien except for those Liens identified in clauses (c), (d), (e),
(h) and (i) of the definition of Permitted Liens; and (c) such Grantor will use,
store and maintain the Collateral in which it granted a security interest
hereunder in favor of the Agent with all reasonable care and will use such
Collateral for lawful purposes only.
7. INTENTIONALLY OMITTED.
8. ACCESS AND EXAMINATION. Subject to Section 7.4(b) of the
Credit Agreement, the Agent may at all reasonable times during regular business
hours, upon reasonable advance notice to the applicable Grantor (and at any time
and without advance notice when a Default or Event of Default exists and is
continuing) have access to, examine, audit, make extracts from or copies of and
inspect any or all of a Grantor's records, files and books of account and the
Collateral, and discuss a Grantor's affairs with such Grantor's officers and
management. Each Grantor will deliver to the Agent any instrument necessary for
the Agent to obtain records from any service bureau maintaining records for such
Grantor. At any time when a Default or Event of Default exists, the Agent may,
and at the direction of the Required Lenders shall, and at the Grantors'
expense, make copies of all of any Grantor's books and records, or require a
Grantor to deliver such copies to the Agent. At any time when an Event of
Default exists, the Agent may, without expense to the Agent, use such of a
Grantor's respective personnel, supplies and Real Estate as may be reasonably
necessary for maintaining or enforcing the Agent's Liens. The Agent shall have
the right, at any time, in the Agent's name or in the name of a nominee of the
Agent, to verify the validity, amount or any other matter relating to the
Accounts, Inventory or other Collateral of a Grantor, by mail, telephone, or
otherwise.
9. COLLATERAL REPORTING. Each Grantor shall provide the
Agent with the following documents at the following times in form satisfactory
to the Agent: (a) at the times specified in Section 5.2(l) of the Credit
Agreement, or more frequently if requested by the Agent at any time that
Borrowing Base Certificates are required to be delivered on a weekly basis
pursuant to the Credit Agreement, a schedule of such Grantor's Accounts created,
credits given, cash collected and other adjustments to Accounts of such Grantor
since the last such schedule, (b) at the times specified in Section 5.2(l) of
the Credit Agreement, an aging of such Grantor's Accounts, together with a
reconciliation to the corresponding Borrowing Base of such Grantor (if such
Grantor is a Borrower) and, upon the request of the Agent, to such Grantor's
general ledger; (c) upon the request of the Agent, an aging of such Grantor's
accounts payable; (d) on a monthly basis by the 20th day of the following month
(or more frequently if requested by the Agent), a detailed calculation of
Eligible Accounts and Eligible Inventory of such Grantor (if such Grantor is a
Borrower); (e) at the times specified in Section 5.2(l) of the Credit Agreement,
Inventory reports in a level of detail reasonably acceptable to the Agent,
together with a reconciliation to the corresponding Borrowing Base of such
Grantor (if such Grantor is a Borrower) and to such Grantor's general ledger;
(f) upon request, copies of invoices in connection with such Grantor's Accounts,
customer statements, credit memos, remittance advices and reports, deposit
slips, shipping and delivery documents in connection with such Grantor's
Accounts and for Inventory and Equipment acquired by such Grantor, purchase
orders and invoices; (g) upon request of the Agent, a statement of the balance
of any intercompany accounts; (h) such other reports as to the Collateral of
such Grantor as the Agent shall reasonably request from time to time; and (i)
with the delivery of each of the foregoing, a certificate of such Grantor or the
Parent executed by an officer thereof certifying as to the accuracy and
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completeness of the foregoing. If any of a Grantor's records or reports of any
of the Collateral are prepared by an accounting service or other agent, such
Grantor hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Agent for distribution to the Lenders.
10. ACCOUNTS.
(a) Each Grantor hereby represents and warrants to the Agent
and the Lenders, with respect to such Grantor's Accounts, that: (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by such Grantor, or rendition of services by
such Grantor, in the ordinary course of such Grantor's business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset,
deduction, defense or counterclaim except those known to such Grantor and
disclosed to the Agent and the Lenders pursuant to this Security Agreement in
respect of offsets, deductions, defenses or counterclaims involving an amount
greater than (x) $150,000, at any time that Borrower Base Certificates are
required to be delivered on a weekly basis pursuant to the Credit Agreement or
(y) $500,000, at any other time; (iii) no payment will be received with respect
to any Account of such Grantor, and no credit, discount or extension or
agreement therefor will be granted on any Account of such Grantor, except as
reported to the Agent and the Lenders in Borrowing Base Certificates delivered
by such Grantor in accordance with the Credit Agreement or otherwise reported by
such Grantor in accordance with this Security Agreement; (iv) each copy of an
invoice delivered to the Agent by such Grantor will be a genuine copy of the
original invoice sent to the Account Debtor named therein and (v) all goods
described in any invoice representing a sale of goods will have been delivered
to the Account Debtor and all services of such Grantor described in each invoice
will have been performed.
(b) No Grantor shall re-date any invoice or sale or make
sales on extended dating beyond that customary in such Grantor's business or
extend or modify any Account. If a Grantor becomes aware of any matter adversely
affecting the collectibility in any material respect of any of its Accounts or
the Account Debtor therefor involving an amount greater than (x) $150,000, at
any time that Borrowing Base Certificates are required to be delivered on a
weekly basis pursuant to the Credit Agreement or (y) $500,000, at any other
time, including information regarding the Account Debtor's creditworthiness,
such Grantor will promptly so advise the Agent.
(c) No Grantor shall, except to the extent done in the
ordinary course of its business and in accordance with sound business judgment
and provided that no Event of Default shall have occurred and be continuing,
accept any note or other instrument (except a check or other instrument for the
immediate payment of money) with respect to any of its Accounts without the
Agent's written consent; provided, however, such Accounts shall be excluded from
such Grantor's Eligible Accounts. If the Agent consents to the acceptance of any
such instrument, it shall be considered as evidence of the Account and not
payment thereof and the Grantor will promptly deliver such instrument to the
Agent, endorsed by such Grantor to the Agent in a manner satisfactory in form
and substance to the Agent. Regardless of the form of
10
presentment, demand or notice of protest with respect thereto, the applicable
Grantor shall remain liable thereon until such instrument is paid in full.
(d) Each Grantor shall notify the Agent promptly of all
disputes and claims in excess of (x) $150,000, at any time that Borrowing Base
Certificates are required to be delivered on a weekly basis pursuant to the
Credit Agreement or (y) $500,000, at any other time, with any Account Debtor,
and agrees to settle, contest or adjust such dispute or claim at no expense to
the Agent or any Lender. No discount, credit or allowance shall be granted to
any such Account Debtor without the Agent's prior written consent, except for
discounts, credits and allowances made or given in the ordinary course of the
applicable Grantor's business when no Event of Default exists. Each Grantor
shall send the Agent a copy of each credit memorandum in excess of (x) $150,000,
at any time that Borrowing Base Certificates are required to be delivered on a
weekly basis pursuant to the Credit Agreement or (y) $500,000, at any other
time, as soon as issued, and such Grantor, if a Borrower, shall promptly report
that credit on Borrowing Base Certificates submitted by it. The Agent may, at
all times when an Event of Default exists, settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which the Agent or the
Required Lenders, as applicable, shall consider advisable and, in all cases, the
Agent will credit the applicable Grantor's Loan Account with the net amounts
received by either of the Agent in payment of any such Grantor's Accounts.
(e) If an Account Debtor returns any Inventory to a Grantor
when no Event of Default exists, then such Grantor shall promptly determine the
reason for such return and shall issue a credit memorandum to the Account Debtor
in the appropriate amount. Each Grantor shall immediately report to the Agent
any return involving an amount in excess of (x) $100,000, at any time that
Borrowing Base Certificates are required to be delivered on a weekly basis
pursuant to the Credit Agreement or (y) $500,000, at any other time. Each such
report shall indicate the reasons for the returns and the locations and
condition of the returned Inventory. In the event any Account Debtor returns
Inventory to a Grantor when an Event of Default exists, such Grantor, upon the
request of the Agent, shall: (i) hold the returned Inventory in trust for the
Agent; (ii) segregate all returned Inventory from all of its other property;
(iii) dispose of the returned Inventory solely according to the Agent's written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Agent's prior written consent. All returned Inventory shall be
subject to the Agent's Liens thereon. Whenever any Inventory is returned, the
related Account shall be deemed ineligible to the extent of the amount owing by
the Account Debtor with respect to such returned Inventory and such returned
Inventory shall not be Eligible Inventory of the applicable Grantor.
11. COLLECTION OF ACCOUNTS; PAYMENTS.
(a) The Grantors shall maintain lock-box accounts and other
lock-box arrangements reasonably satisfactory to the Agent with such banks as
are acceptable to the Agent to which all Account Debtors shall be instructed to
make payments on Accounts. All funds in such lock-box accounts shall be
transferred on each Business Day to a Payment Account established for the
account of such Grantor at a Clearing Bank acceptable to the Agent, subject
(except for any Payment Accounts maintained by such Grantor at the Bank, in
which case the provisions of Section 11(e) shall apply) to a Blocked Account
Agreement. Upon the request of the Agent, each bank at which a lock-box account
is maintained shall execute and deliver to the
11
Agent such agreements, in form and substance satisfactory to the Agent, as the
Agent shall request with respect to such accounts, including, without
limitation, with respect to prohibitions of the applicable Grantor withdrawing
funds from such accounts or otherwise directing or modifying actions with
respect to such accounts. Until the Agent notifies a Grantor to the contrary
following the occurrence and during the continuance of an Event of Default or at
any time that the aggregate Availability of all Borrowers is less than
$25,000,000, each Grantor shall make collection of all of its Accounts and other
Collateral for the Agent, shall receive all payments as the Agent's trustee, and
shall immediately deliver all payments in their original form duly endorsed in
blank into (i) a Payment Account established for the account of such Grantor at
a Clearing Bank acceptable to the Agent, subject (except for any Payment
Accounts maintained by such Grantor at the Bank, in which case the provisions of
Section 11(e) shall apply) to a Blocked Account Agreement or (ii) one of the
accounts listed on Schedule IV hereto (such accounts being referred to herein as
"Collection Accounts"); provided, that (a) each Collection Account shall be
subject to an irrevocable standing instruction to the applicable bank
instructing such bank to transfer all amounts deposited in such Collection
Account to a Payment Account every Business Day and (b) upon the request of the
Agent, the applicable Grantor shall cause a Blocked Account Agreement to be
entered into with respect to any or all of the Collection Accounts. The Agent
may, and, at the direction of the Required Lenders, shall, at any time following
the occurrence and during the continuance of an Event of Default or at any time
that the aggregate Availability of all Borrowers is less than $25,000,000,
deliver to any Clearing Bank a "Notice of Sole Control" or similar instruction
with respect to any Payment Account. The Agent or the Agent's designee may, at
any time after the occurrence and during the continuance of an Event of Default,
notify Account Debtors of a Grantor that such Grantor's Accounts have been
assigned to the Agent and of the Agent's security interest therein, and may
collect them directly and the Agent shall charge the collection costs and
expenses to the Loan Account of such Grantor as a U.S. Base Rate Revolving Loan.
So long as an Event of Default has occurred and is continuing, each Grantor, at
the request of the Agent, shall execute and deliver to the Agent such documents
as the Agent shall require to grant the Agent access to any post office box in
which collections of Accounts of such Grantor are received.
(b) If sales of Inventory of a Grantor are made or services
are rendered for cash, the applicable Grantor shall promptly (and in any event
within one (1) Business Day) deliver to the Agent or deposit into a Payment
Account the cash which such Grantor receives.
(c) All payments, including immediately available funds
received by the Agent at a bank account designated by it, will be the Agent's
sole property for the benefit of the Secured Parties and will be credited to the
Loan Account of the applicable Grantor (conditional upon final collection) after
allowing one (1) Business Day for collection; provided, however, that such
payments shall be deemed to be credited to the Loan Account of the applicable
Grantor immediately upon receipt for purposes of (i) determining Availability of
such Grantor, (ii) calculating the Unused Line Fee pursuant to Section 2.5 of
the Credit Agreement, and (iii) calculating the amount of interest accrued
thereon solely for purposes of determining the amount of interest to be
distributed by the Agent to the Lenders (but not the amount of interest payable
by the applicable Grantor).
(d) In the event one or more of the Grantors repays all of
the Obligations upon the termination of the Credit Agreement or upon
acceleration of the Obligations, other than
12
through the Agent's receipt of payments on account of the Accounts of any of the
Grantors or proceeds of the other Collateral, such payment will be credited
(conditioned upon final collection) to the applicable Grantor's Loan Account one
(1) Business Day after the Agent's receipt of immediately available funds.
(e) With respect to each Payment Account and each lock-box
of a Grantor maintained at the Bank, such Grantor hereby acknowledges and agrees
as follows:
(i) The Bank shall have exclusive ownership and control of
such Payment Account or lock-box, as the case may be, and such Grantor has no
right to exercise authority of any kind with respect to withdrawals from such
Payment Account or lock-box or the funds deposited therein.
(ii) With respect to any lock-box maintained at the Bank,
such Grantor hereby authorizes the Bank to collect all monies, checks,
instruments and other items of payment mailed to such lock-box and to deposit
such monies, checks, instruments and other items of payment into an account
designated by the Agent to be applied by the Agent to the Obligations in
accordance with Section 3.7 of the Credit Agreement.
(iii) With respect to any Payment Account maintained at the
Bank, the Bank shall transfer at the close of each Business Day all of the
available funds in such Payment Account to an account designated by the Agent to
be applied by the Agent to the Obligations in accordance with Section 3.7 of the
Credit Agreement.
(iv) Without limiting any rights of the Bank, the Agent or
the Lenders under any of the other Loan Documents or applicable law, the Bank
may offset and charge such Grantor's other accounts maintained with the Bank for
any items deposited in such Payment Account or lock-box, as the case may be,
which are returned for any reason or otherwise not collected, and may offset and
charge such other accounts of such Grantor for all service charges, fees,
expenses and other items normally chargeable to such Payment Account or
lock-box, as applicable, including, but not limited to, the amount of items
deposited in such Payment Account or lock-box which are returned for any reason
or otherwise not collected.
(v) Such Grantor agrees to pay all other fees and charges
required to be paid with respect to such Payment Account or lock-box as set
forth in any other agreement entered into by such Grantor and the Bank with
respect thereto.
12. INVENTORY; PERPETUAL INVENTORY.
(a) Each Grantor represents and warrants to the Agent and
the Lenders and agrees with the Agent and the Lenders that all of the Inventory
owned by such Grantor is and will be held for sale or lease, or to be furnished
in connection with the rendition of services, in the ordinary course of such
Grantor's business, and is and will be fit for such purposes. Each Grantor will
keep its Inventory in good and marketable condition, except for damaged or
defective goods arising in the ordinary course of such Grantor's business. Each
Grantor will not, without the prior written consent of the Agent, acquire or
accept any Inventory on consignment or approval other than in the ordinary
course of business in a manner consistent with past practices and, upon the
request of the Agent, such Grantor will provide the Agent with the details
13
of any such arrangements. Each Grantor agrees that all Inventory produced by
such Grantor in the United States of America will be produced in accordance with
the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations, and orders thereunder. Each Grantor will conduct a physical count
of its Inventory at least once per Fiscal Year, and after and during the
continuation of an Event of Default, at such other times as the Agent requests.
Each Grantor will maintain a perpetual inventory reporting system at all times.
Each Grantor will not, without the Agent's written consent, sell any of its
Inventory on a xxxx-and-hold, guaranteed sale, sale and return, sale on
approval, consignment or other repurchase or return basis other than in the
ordinary course of business in a manner consistent with past practices and, upon
the request of the Agent, such Grantor will provide the Agent with the details
of any such arrangements.
(b) In connection with all Inventory of a Grantor financed
by Letters of Credit, such Grantor will, at the Agent's request made after the
occurrence and during the continuance of an Event of Default, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, Documents or Instruments of such Grantor in
which the Agent holds a security interest to deliver them to the Agent and/or
subject to the Agent's order, and if they shall come into such Grantor's
possession, to deliver them, upon request, to the Agent in their original form.
Each Grantor shall also, at the Agent's request made after the occurrence and
during the continuance of an Event of Default, designate the Agent as the
consignee on all bills of lading and other negotiable and non-negotiable
documents of such Grantor.
13. EQUIPMENT.
(a) Each Grantor represents and warrants to the Agent and
the Lenders and agrees with the Agent and the Lenders that all of the Equipment
owned by such Grantor is and will be used or held for use in such Grantor's
business, and is and will be fit for such purposes. Each Grantor shall keep and
maintain its Equipment in good operating condition and repair (ordinary wear and
tear excepted) and shall make all necessary replacements thereof.
(b) Each Grantor shall promptly inform the Agent of any
dispositions of its (x) Equipment that is not included in the Borrowing Base of
a Borrower in which there are aggregate cash proceeds of $250,000 and (y)
Equipment that is included in the Borrowing Base of a Borrower in which there
are cash proceeds of $25,000 upon the disposition of any individual item of such
Equipment or cash proceeds in the aggregate of $200,000 with respect to the
disposition of all items of such Equipment. No Grantor shall permit any of its
Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Agent does not have a Lien. No Grantor will, without the
Agent's prior written consent, alter or remove any identifying symbol or number
on any of such Grantor's Equipment constituting Collateral.
(c) Except as permitted in the Credit Agreement, no Grantor
shall, without the Agent's prior written consent, sell, lease as a lessor, or
otherwise dispose of any of such Grantor's Equipment.
14. INTENTIONALLY OMITTED.
14
15. DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER. Each Grantor
represents and warrants to the Agent and the Lenders that (a) all Documents,
Instruments and Chattel Paper of such Grantor describing, evidencing, or
constituting Collateral, and such Grantor's signature and endorsement thereon,
are and will be complete, valid, and genuine, and, to the best of such Grantor's
knowledge, all other signatures and endorsements thereon, are and will be
complete, valid and genuine, and (b) all goods evidenced by such Documents,
Instruments and Chattel Paper are and will be owned by such Grantor, free and
clear of all Liens other than Permitted Liens.
16. RIGHT TO CURE. The Agent may, in the discretion of the
Agent, and shall, at the direction of the Required Lenders, pay any amount or do
any act required of a Grantor hereunder or under any other Loan Document in
order to preserve, protect, maintain or enforce the Obligations, the Collateral
or the Agent's Liens therein, and with respect to which a Grantor fails to pay
or do, including payment of any judgment against a Grantor, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's or bailee's claim and any other Lien upon or with respect to any of
the Collateral. All payments that the Agent makes under this Section 16 and all
out-of-pocket costs and expenses that the Agent pays or incurs in connection
with any action taken by it hereunder shall be charged to the applicable
Grantor's Loan Account as a U.S. Base Rate Revolving Loan. Any payment made or
other action taken by the Agent under this Section 16 shall be without prejudice
to any right to assert an Event of Default hereunder and to proceed thereafter
as herein provided.
17. POWER OF ATTORNEY. Each Grantor hereby appoints the
Agent and the Agent's designee as such Grantor's attorney, with power: (a) to
endorse such Grantor's name on any checks, notes, acceptances, money orders or
other forms of payment or security that come into the Agent's or any Lender's
possession; (b) to sign such Grantor's name on any invoice, xxxx of lading,
warehouse receipt or other negotiable or non-negotiable Document constituting
Collateral in which such Grantor granted a security interest hereunder to the
Agent, on drafts against customers, on assignments of Accounts of such Grantor,
on notices of assignment, financing statements and other public records and to
file any such financing statements by electronic means with or without a
signature as authorized or required by applicable law or filing procedure; (c)
so long an any Event of Default has occurred and is continuing, to ask, demand,
collect, xxx for, recover, compound, receive and give acquittance and receipts
for moneys, due or to become due under or with respect to any of the Collateral;
(d) so long as any Event of Default has occurred and is continuing, to notify
the post office authorities to change the address for delivery of such Grantor's
mail to an address designated by the Agent and to receive, open and dispose of
all mail addressed to such Grantor; (e) to send requests for verification of
Accounts of such Grantor to customers or Account Debtors in the name of a
third-party or in a fictitious name; (f) so long as any Event of Default has
occurred and is continuing, to complete in such Grantor's name or the Agent's
name, any order, sale or transaction, obtain the necessary Documents in
connection therewith, and collect the proceeds thereof; (g) so long as any Event
of Default shall have occurred and be continuing, to clear Inventory of such
Grantor through customs in such Grantor's name, the Agent's name or the name of
the Agent's designee, and to sign and deliver to customs officials powers of
attorney in such Grantor's name for such purpose; and (h) to do all things
necessary to carry out the Credit Agreement and this Security Agreement. Each
Grantor ratifies and approves all acts of such attorney. None of the Lenders,
the Agent nor their attorneys will be liable for any acts or omissions or for
any error of
15
judgment or mistake of fact or law except for their willful misconduct or gross
negligence. This power, being coupled with an interest, is irrevocable until the
Credit Agreement has been terminated and the Obligations have been fully
satisfied. Further, concurrently with the execution and delivery hereof, each
Grantor is executing and delivering to the Agent, in the form of Exhibit A
hereto, five originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Trademarks, Patents and Copyrights of
such Grantor pursuant to the provisions hereof and each Grantor hereby releases
the Agent and each Lender from any claims, causes of action and demands at any
time arising out of or with respect to any actions taken or omitted to be taken
by the Agent under the powers of attorney granted herein, other than actions
taken or omitted to be taken through the gross negligence or willful misconduct
of the Agent.
18. THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES.
(a) Each Grantor assumes all responsibility and liability
arising from or relating to the use, sale or other disposition of the
Collateral. The Obligations shall not be affected by any failure of the Agent or
any Lender to take any steps to perfect the Agent's Liens or to collect or
realize upon any of the Collateral, nor shall loss of or damage to any of the
Collateral release any Grantor from any of the Obligations. Following the
occurrence and during the continuation of an Event of Default, the Agent may
(but shall not be required to), and at the direction of the Required Lenders
shall, without notice to or consent from any of the Grantors, xxx upon or
otherwise collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions or releases, and take or omit to
take any other action with respect to the Collateral, any security therefor, any
agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of the Grantors for the
Obligations or under the Credit Agreement or any other agreement now or
hereafter existing between the Agent and/or any Lender and any Grantor.
(b) It is expressly agreed by each Grantor that, anything
herein to the contrary notwithstanding, such Grantor shall remain liable under
each of its leases, agreements, contracts and licenses (each a "Contract" and
collectively, the "Contracts") to observe and perform all the conditions and
obligations to be observed and performed by it thereunder. Each Grantor further
agrees to enforce the terms and provisions of its Contracts in accordance with
their terms, and not to waive, amend or modify any provision thereof in any
manner other than in the ordinary course of business of such Grantor in
accordance with past practices and for a valid economic reason benefiting such
Grantor (provided that in no event may any waiver, amendment or modification be
made that could reasonably be expected to have a Material Adverse Effect). At
the request of the Agent, a Grantor will deliver copies of each material
Contract to which it is a party and each material amendment or modification
thereof to the Agent promptly upon the execution and delivery thereof. None of
the Agent nor any Lender shall have any obligation or liability under any
Contract by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by Agent or any Lender of any payment
relating to any Contract pursuant hereto. None of the Agent nor any Lender shall
be required or obligated in any manner to perform or fulfill any of the
obligations of a Grantor under or pursuant to any
16
Contract, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract, or to present or file any claims, or to take
any action to collect or enforce any performance or the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time or
times.
(c) The Agent may at any time after an Event of Default
shall have occurred and be continuing, without prior notice to the applicable
Grantor, notify Account Debtors, parties to the Contracts of such Grantor and
obligors in respect of Instruments and Chattel Paper of such Grantor, that the
Accounts of such Grantor and the right, title and interest of such Grantor in
and under such Contracts, Instruments and Chattel Paper have been assigned to
the Agent, and that payments shall be made directly to the Agent, for the
benefit of the Secured Parties. Upon the written request of the Agent, a Grantor
shall so notify Account Debtors, parties to Contracts of such Grantor and
obligors in respect of Instruments and Chattel Paper of such Grantor.
(d) The Agent may at any time in the Agent's own name or in
the name of the applicable Grantor communicate with Account Debtors, parties to
Contracts, obligors in respect of Instruments and obligors in respect of Chattel
Paper to verify with such Persons, to the Agent's satisfaction, the existence,
amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper.
The Agent will not exercise the rights provided for in the previous sentence
unless it deems it necessary to do so in the exercise of its reasonable credit
judgment and only after having given the Parent notice and an opportunity to
verify and reconcile outstanding balances and terms and, prior to any
communication with any such Account Debtor or other Person, the Agent shall give
the Parent notice thereof. Upon the Agent's notifying the Parent of its decision
to communicate directly with one or more of the Persons set forth above and
while the Parent is working to verify and reconcile the information with such
Persons the Agent may exclude all Accounts of the applicable Account Debtors
from the Borrowing Base of each applicable Grantor. If a Default or Event of
Default shall have occurred and be continuing, each Grantor, at its own expense,
shall cause the independent certified public accountants then engaged by such
Grantor to prepare and deliver to the Agent at any time and from time to time
promptly upon the request of the Agent the following reports with respect to
such Grantor: (i) a reconciliation of all Accounts of such Grantor; (ii) an
aging of all Accounts of such Grantor; (iii) trial balances; and (iv) a test
verification of such Accounts of such Grantor as the Agent may request. Each
Grantor, at its own expense, shall deliver to the Agent the results of each
physical verification, if any, which such Grantor may in its discretion have
made, or caused any other Person to have made on its behalf, of all or any
portion of its Inventory.
19. PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.
(a) No Grantor has any interest in, or title to, any
registered patent, trademark or copyright, or any patent, trademark or copyright
subject of pending applications in the United States Copyright Office, the
United States Patent and Trademark Office or any similar office or agency of the
United States of America, any State thereof, any other country or any political
subdivision thereof, except as set forth in Schedule III hereto. This Security
Agreement is effective to create a valid and continuing Lien on and, upon the
filing by the Agent of Uniform Commercial Code financing statements and filing
of the Grant of Security (Copyrights) in the form attached hereto as Exhibit B
with the United States Copyright Office and filing of the Grant
17
of Security (Patents) in the form attached hereto as Exhibit C, the filing of
the Grant of Security (Trademarks) in the form attached hereto as Exhibit D with
the United States Patent and Trademark Office and similar filings under Canadian
law, perfected Liens in favor of the Agent on each Grantor's registered patents,
trademarks and copyrights and such perfected Liens are enforceable as such as
against such Grantor and all third parties. Upon filing of the Grant of Security
(Copyrights) with the United States Copyright Office and filing of the Grant of
Security (Patents) and Grant of Security (Trademarks) with the United States
Patent and Trademark Office and the filing of appropriate financing statements,
all action necessary or desirable to protect and perfect the Agent's Lien on
each Grantor's patents, trademarks or copyrights shall have been duly taken
other than the registration of unregistered copyrights.
(b) Each Grantor has the sole ownership of all registered
Trademarks of such Grantor for the goods and services covered by the
registrations thereof and such registrations are valid and subsisting and in
full force and effect.
(c) Each Grantor (either itself or through licensees) will
continue to use its Trademarks on each and every trademark class of goods
applicable to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain its Trademarks in full force free from any
claim of abandonment for nonuse and such Grantor will not (and will not permit
any licensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark of such Grantor may become invalidated except to the extent such
Grantor shall determine in its reasonable business judgment that a Trademark has
negligible economic value or such Trademark is no longer utilized in the
ordinary course of such Grantor's business.
(d) Except as disclosed on Schedule III, each Grantor has
the sole ownership of each of the Patents of such Grantor shown on Schedule III
annexed hereto and made a part hereof. As of the date hereof, none of the
Patents or Patent Applications of such Grantor has been abandoned or dedicated
to the public, and, except to the extent that the Agent, upon prior written
notice by such Grantor, shall consent, such Grantor will not do any act, or
knowingly omit to do any act, whereby any of the Patents or Patent Applications
of such Grantor may become abandoned or dedicated to the public.
(e) Each Grantor has the sole ownership of the Copyrights of
such Grantor and each of said Copyrights is subsisting and in full force and
effect. None of such Grantor's registered Copyrights has been abandoned or
dedicated, and, except to the extent that (i) the Agent, upon prior written
notice by the applicable Grantor, shall consent in writing, or (ii) the
applicable Grantor determines in its reasonable business judgment that a
Copyright of such Grantor has negligible economic value or such Copyright is no
longer utilized in the ordinary course of such Grantor's business, such Grantor
will not do any act, or omit to do any act, whereby any of the Copyrights may
become abandoned or dedicated to the public, or the remedies available against
potential infringers weakened other than not registering unregistered
copyrights.
(f) Each Grantor shall notify the Agent promptly (and in no
event later than three (3) Business Days) if it knows or has reason to know that
any application or registration relating to any of its material Patents,
Trademarks or Copyrights (now or hereafter existing) may become abandoned or
dedicated to the public, or of any adverse determination or development
18
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court) regarding such Grantor's ownership of any such
Patent, Trademark or Copyright, its right to register the same, or to keep and
maintain the same.
(g) Each Grantor shall notify the Agent promptly (and in no
event later then thirty (30) days) after such Grantor, either directly or
through any agent, employee, licensee or designee, files an application for the
registration of any material patent, material trademark or material copyright
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency. Each Grantor shall quarterly, together
with the delivery of the financial statements pursuant to Section 5.2(b) of the
Credit Agreement, provide the Agent with a listing of all applications, if any,
for new Trademarks, Patents and Copyrights (together with a listing of the
issuance of registrations on presently pending applications for trademarks,
patents and copyrights), which new applications and registrations shall be
subject to the terms and conditions hereunder, and come within the terms
"Trademarks," "Patents" and "Copyrights" as used herein. Upon request of the
Agent, a Grantor shall execute and deliver any and all security agreements,
documents and assignments as the Agent may reasonably request to evidence the
Agent's Lien on the Patents, Trademarks or Copyrights of such Grantor, and the
General Intangibles of such Grantor relating thereto or represented thereby.
(h) Each Grantor shall take all actions necessary or
reasonably requested by the Agent to maintain and pursue each application, to
obtain the relevant registration and to maintain the registration of each of its
Patents, Trademarks and Copyrights (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings,
unless such Grantor shall determine in its reasonable business judgment that
such Patent, Trademark or Copyright is not material to the conduct of its
business.
(i) In the event that any of the Patent, Trademark or
Copyright Collateral is infringed upon, or misappropriated or diluted by a third
party, the applicable Grantor shall notify the Agent promptly after such Grantor
learns thereof. Such Grantor shall, unless it shall reasonably determine that
such Patent, Trademark or Copyright Collateral is in no way material to the
conduct of its business or operations, promptly xxx for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other actions as
the Agent shall deem appropriate under the circumstances to protect such Patent,
Trademark or Copyright Collateral.
20. INDEMNIFICATION. In any suit, proceeding or action
brought by the Agent or any Lender relating to any Account, Chattel Paper,
Contract, Document, General Intangible or Instrument of a Grantor for any sum
owing thereunder or to enforce any provision of any Account, Chattel Paper,
Contract, Document, General Intangible or Instrument of a Grantor, the
applicable Grantor will save, indemnify and keep the Agent and the Lenders
harmless from and against all expense (including reasonable attorneys' fees and
expenses), loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by such Grantor of any obligation thereunder
or arising out of any other agreement, indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from such Grantor,
except in the case of
19
the Agent or any Lender, to the extent such expense, loss or damage is
attributable to the gross negligence or willful misconduct of the Agent or such
Lender as finally determined by a court of competent jurisdiction. All such
obligations of the Grantors shall be and remain enforceable against and only
against the Grantors and shall not be enforceable against the Agent or any
Lender. Each Grantor assumes all responsibility and liability arising from the
use of the Collateral in which such Grantor granted a security interest
hereunder in favor of the Agent, and such Grantor hereby agrees to indemnify and
hold the Agent and the Lenders harmless from and against any claim, suit, loss,
damage or reasonable expense (including reasonable attorneys' fees) arising out
of any alleged defect in any product manufactured, promoted or sold by such
Grantor (or any Affiliate or Subsidiary thereof) in connection with any
Collateral of such Grantor or out of the manufacture, promotion, labeling, sale
or advertisement of any such product by such Grantor (or any Affiliate or
Subsidiary thereof). Each Grantor agrees that the Agent and the Lenders do not
assume, and shall have no responsibility for, the payment of any sums due or to
become due under any agreement or contract included in the Collateral in which
such Grantor has granted a security interest hereunder in favor of the Agent or
the performance of any obligations to be performed under or with respect to any
such agreement or contract by such Grantor, and such Grantor hereby agrees to
indemnify and hold the Agent and each Lender harmless with respect to any and
all claims by any Person relating thereto.
21. LIMITATION ON LIENS ON COLLATERAL. No Grantor will
create, permit or suffer to exist, and will defend the Collateral in which it
has an interest against, and take such other action as is necessary to remove,
any Lien on such Collateral except Permitted Liens, and will defend the right,
title and interest of the Agent and the Lenders in and to any of such Grantor's
rights under such Collateral against the claims and demands of all Persons
whomsoever.
22. NOTICE REGARDING COLLATERAL. Each Grantor will advise
the Agent promptly, in reasonable detail, of any Lien (other than Permitted
Liens) or material claim made or asserted against any of the Collateral.
23. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to
it under this Security Agreement, the Credit Agreement, the other Loan Documents
and under any other instrument or agreement securing, evidencing or relating to
any of the Obligations, if any Event of Default shall have occurred and be
continuing, the Agent may exercise all rights and remedies of a secured party
under the UCC. Without limiting the generality of the foregoing, each Grantor
expressly agrees that in any such event the Agent, without demand of performance
or other demand, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon the
applicable Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the UCC and other applicable law), may forthwith enter upon the
premises of such Grantor where any Collateral is located through self help,
without judicial process, without first obtaining a final judgment or giving
such Grantor or any other Person notice and opportunity for a hearing on the
Agent's claim or action and may collect, receive, assemble, process, appropriate
and realize upon the Collateral, or any part thereof, and may forthwith sell,
lease, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or
20
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. The Agent or any Lender shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales,
to purchase for the benefit of the Secured Parties, the whole or any part of
said Collateral so sold, free of any right or equity of redemption, which equity
of redemption each Grantor hereby releases. Such sales may be adjourned and
continued from time to time with or without notice. The Agent shall have the
right to conduct such sales on any Grantor's premises or elsewhere and shall
have the right to use any Grantor's premises without charge for such time or
times as the Agent deems necessary or advisable.
(b) Each Grantor further agrees, at the Agent's request
during an Event of Default, to assemble the Collateral in which it granted a
security interest hereunder to the Agent and make it available to the Agent at
places which the Agent shall select, whether at such Grantor's premises or
elsewhere. Until the Agent is able to effect a sale, lease or other disposition
of the Collateral, the Agent shall have the right to hold or use the Collateral,
or any part thereof, to the extent that it deems appropriate for the purpose of
preserving the Collateral or its value or for any other purpose deemed
appropriate by the Agent. The Agent shall have no obligation to any Grantor to
maintain or preserve the rights of such Grantor as against third parties with
respect to the Collateral in which it granted a security interest hereunder to
the Agent while such Collateral is in the possession of the Agent. The Agent
may, if the Agent so elects, seek the appointment of a receiver or keeper to
take possession of any of the Collateral and to enforce any of the Agent's
remedies (for the benefit of the Secured Parties), with respect to such
appointment without prior notice or hearing as to such appointment. The Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Obligations as provided in the Credit
Agreement, and only after so paying over such net proceeds, and after the
payment by the Agent of any other amount required by any provision of law, need
the Agent account for the surplus, if any, to the applicable Grantors. To the
maximum extent permitted by applicable law, each Grantor waives all claims,
damages and demands against the Agent or any Lender arising out of the
repossession, retention or sale of any of the Collateral except such as arise
out of the gross negligence or willful misconduct of the Agent or such Lender as
finally determined by a court of competent jurisdiction. Each Grantor agrees
that ten (10) days prior notice by the Agent of the time and place of any public
sale or of the time after which a private sale may take place is reasonable
notification of such matters. The Grantors shall, jointly and severally, remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all Obligations, including any reasonable
attorneys' fees or other expenses incurred by the Agent or any Lender to collect
such deficiency.
(c) Except as otherwise specifically provided herein, each
Grantor hereby waives presentment, demand, protest or any notice (to the maximum
extent permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral. Without limiting any of the foregoing, each
Grantor, to the maximum extent not prohibited by applicable law, hereby (i)
agrees that it will not invoke, claim or assert the benefit of any rule of law
or statute now or hereafter in effect (including, without limitation, any right
to prior notice or judicial hearing in connection with the Agent's possession,
custody or disposition of any Collateral or any appraisal, valuation, stay,
extension, moratorium or redemption law), or take or omit to take any other
action, that would or could reasonably be expected to have the effect of
21
delaying, impeding or preventing the exercise of any rights and remedies in
respect of the Collateral, the absolute sale of any of the Collateral or the
possession thereof by any purchaser at any sale thereof, and waives the benefit
of all such laws and further agrees that it will not hinder, delay or impede the
execution of any power granted hereunder to the Agent, but that it will permit
the execution of every such power as though no such laws were in effect, (ii)
waives all rights that it has or may have under any rule of law or statute now
existing or hereafter adopted to require the Agent to marshal any Collateral or
other assets in favor of such Grantor or any other party or against or in
payment of any or all of the Obligations, and (iii) waives all rights that it
has or may have under any rule of law or statute now existing or hereafter
adopted to require the Agent to pursue any third party for any of the
Obligations.
(d) Without limiting the foregoing, each Grantor further
agrees that the Agent shall have the following additional rights and remedies
upon the occurrence and during the continuance of an Event of Default: (i)
immediately upon the Agent's request, no Grantor shall make any further use of
its Patents, Trademarks or Copyrights or any xxxx similar thereto for any
purpose and (ii) the Agent may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of the
applicable Grantor in, to and under any one or more license agreements with
respect to the Collateral in which such Grantor has granted a security interest
hereunder in favor of the Agent, and take or refrain from taking any action
under any thereof, and each Grantor hereby releases the Agent and each Lender
from, and agrees to hold the Agent and each Lender free and harmless from and
against any claims arising out of, any action taken or omitted to be taken with
respect to any such license agreement.
(e) In the event of any license, assignment, sale or other
disposition of the Collateral, or any of it, after the occurrence and during the
continuance of an Event of Default, each Grantor shall supply its know-how and
expertise relating to the manufacture and sale of the products bearing or in
connection with the Trademarks, Patents or Copyrights of such Grantor, and its
customer lists and other records relating to the Trademarks, Patents or
Copyrights of such Grantor and to the distribution of said products, to the
Agent or its designee.
24. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the
purpose of enabling the Agent to exercise rights and remedies under Section 23
hereof (including, without limiting the terms of Section 23 hereof, in order to
take possession of, hold, preserve, process, assemble, prepare for sale, market
for sale, sell or otherwise dispose of Collateral) at such time as the Agent
shall be lawfully entitled to exercise such rights and remedies, each Grantor
hereby grants to the Agent, for the benefit of the Secured Parties, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to such Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof and,
to the extent expressly permitted by the Credit Agreement or otherwise approved
of by the Agent in its sole and absolute discretion, subject to any exclusive
license granted after the date hereof and, subject, in the case of trademarks
and any property of similar nature, to sufficient rights to quality control and
inspection in favor of the relevant Grantor required under applicable law to
avoid risk of invalidation of said trademarks and property of similar nature.
22
25. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF
COLLATERAL. The Agent and Lenders shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither the Agent nor any
Lender shall have any other duty as to any Collateral in its possession or
control or in the possession or control of any agent or nominee of the Agent or
such Lender, or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto.
26. MISCELLANEOUS.
(a) Reinstatement. This Security Agreement shall remain in
full force and effect and continue to be effective should any petition be filed
by or against any Grantor for liquidation or reorganization, should any Grantor
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Grantor's assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
(b) Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give and serve upon any other party any communication with respect to this
Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given in the
manner, and deemed received, as provided for in the Credit Agreement.
(c) Severability. Whenever possible, each provision of this
Security Agreement shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Loan Documents which, taken together,
set forth the complete understanding and agreement of the Agent, the Lenders and
the Grantors with respect to the matters referred to herein and therein.
(d) No Waiver; Cumulative Remedies. None of the Agent nor
any Lender shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing, signed by the Agent and then only to the extent therein set
forth. A waiver by the Agent of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
would otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of the Agent or any Lender, any right, power or
privilege hereunder, shall operate as a
23
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. No notice to or demand upon a
Grantor in any case shall entitle such Grantor to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
the Agent to exercise any right or remedy or take any other or further action in
any circumstances without notice or demand. The rights and remedies hereunder
provided are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law. None of the terms or
provisions of this Security Agreement may be waived, altered, modified or
amended except by an instrument in writing, duly executed by the Agent and the
Grantors.
(e) Limitation by Law. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be limited
to the extent necessary so that they shall not render this Security Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
(f) Termination of this Security Agreement. Subject to
Section 26(a) hereof, this Security Agreement shall terminate (and the security
interest created by this Security Agreement in and upon the Collateral shall be
automatically released) upon the indefeasible payment and performance in full in
cash of all Obligations and the cancellation and return of all Letters of Credit
(or, to the extent not so cancelled and returned, the deposit with the Agent of
Supporting Letters of Credit for such outstanding Letters of Credit (or related
Credit Support) in accordance with and as required by Section 1.3(g) of the
Credit Agreement), and termination of the Commitments and in connection with
such termination, the Agent, at the request and expense of the Grantors, will
authorize, execute and deliver to the Grantors such documents and instruments
evidencing such termination as the Grantors may reasonably request and will
assign, transfer and deliver to the Grantors, without recourse and without
representation or warranty, such of the Collateral as may then be in the
possession of the Agent. Notwithstanding anything in this Security Agreement to
the contrary, upon any sale, transfer (including, without limitation, by merger
or consolidation) or other disposition by any Grantor of any Collateral in a
transaction expressly permitted under the Credit Agreement and the receipt by
the Agent of the Net Proceeds of such sale or other disposition as required by
the Credit Agreement, the Lien and security interest created by this Security
Agreement in and upon such Collateral shall be automatically released, and in
connection with any such release, the Agent, at the request and expense of the
applicable Grantor, will authorize, execute and deliver to such Grantor such
documents and instruments evidencing such release or termination as such Grantor
may reasonably request and will assign, transfer and deliver to such Grantor,
without recourse and without representation or warranty, such of the Collateral
so being released as may then be in the possession of the Agent.
(g) Successors and Assigns. This Security Agreement and all
obligations of the Grantors hereunder shall be binding upon the successors and
assigns of each Grantor (including any debtor-in-possession on behalf of a
Grantor) and shall, together with the rights and remedies of the Agent, for the
benefit of the Secured Parties, hereunder, inure to the benefit of the Secured
Parties, all future holders of any instrument evidencing any of the Obligations
and
24
their respective successors and assigns. No sales of participations, other
sales, assignments, transfers or other dispositions of any agreement governing
or instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner affect the Lien granted to the Agent, for the
benefit of the Secured Parties, hereunder. No Grantor may assign, sell,
hypothecate or otherwise transfer any interest in or obligation under this
Security Agreement.
(h) Counterparts. This Security Agreement may be executed in
any number of separate counterparts, each of which shall collectively and
separately constitute one and the same agreement.
(i) Governing Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. EACH GRANTOR HEREBY CONSENTS AND AGREES THAT THE COURTS OF THE XXXXX
XX XXX XXXX, XX XX XXX XXXXXX XXXXXX FOR THE SOUTHERN DISTRICT OF NEW YORK,
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN ANY GRANTOR, THE AGENT AND THE LENDERS PERTAINING TO THIS SECURITY
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT THE AGENT, THE LENDERS AND THE GRANTORS ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY OR THE SOUTHERN DISTRICT OF NEW YORK, AND, PROVIDED, FURTHER,
NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT. EACH GRANTOR
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH GRANTOR HEREBY WAIVES ANY OBJECTION
WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
GRANTOR AT THE ADDRESS SET FORTH IN SECTION 14.8 OF THE CREDIT AGREEMENT AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
25
(j) Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG THE AGENT, THE
LENDERS AND ANY GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO
OR THERETO.
(k) Section Titles. The Section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
(l) No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Security Agreement.
In the event an ambiguity or question of intent or interpretation arises, this
Security Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Security
Agreement.
(m) Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Security Agreement and,
specifically, the provisions of Section 26(i) and Section 26(j) hereto, with its
counsel.
(n) Benefit of Secured Parties. All Liens granted or
contemplated hereby shall be for the benefit of the Secured Parties, and all
proceeds or payments realized from Collateral in accordance herewith shall be
applied to the Obligations in accordance with the terms of the Credit Agreement.
26
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTORS:
GENTEK INC.
GENTEK HOLDING CORPORATION
(formerly known as General
Chemical Corporation)
GENERAL CHEMICAL PERFORMANCE
PRODUCTS LLC
NOMA HOLDING INC.
GENTEK TECHNOLOGIES MARKETING
INC.
VIGILANT NETWORKS LLC
BIG T-2 COMPANY LLC
KRONE DIGITAL COMMUNICATIONS INC.
PRINTING DEVELOPMENTS, INC.
KRONE INTERNATIONAL HOLDING INC.
GENERAL CHEMICAL WEST LLC
GENERAL CHEMICAL LLC
FINI ENTERPRISES, INC.
XXXXXX, INC.
NOMA CORPORATION
NOMA DELAWARE INC.
BALCRANK PRODUCTS INC.
TOLEDO TECHNOLOGIES INC.
DEFIANCE, INC.
XXXXXX HOLDINGS INC.
NOMA O.P., INC.
NOMA TECHNOLOGIES LIMITED
PARTNERSHIP
TOLEDO TECHNOLOGIES MANAGEMENT
LLC
DEFIANCE PRECISION PRODUCTS, INC.
HY-FORM PRODUCTS, INC.
DEFIANCE TESTING AND ENGINEERING
SERVICES, INC.
DEFIANCE PRECISION PRODUCTS
MANAGEMENT LLC
DEFIANCE PRECISION PRODUCTS
MANUFACTURING LLC
DEFIANCE KINEMATICS INC.
BINDERLINE DRAFTLINE, INC.
KRONE HOLDING INC.
KRONE USA INCORPORATED
27
KRONE INCORPORATED
By:
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
CON-X CORPORATION
KRONE OPTICAL SYSTEMS INC.
By:
--------------------------------
Name: Xxxxx X'Xxxxxx
Title: Vice President
TOLEDO TECHNOLOGIES MANUFACTURING
LLC
By:
--------------------------------
Name:
Title:
KRONE HOLDING LLC, By its
Sole Member and Manager
Krone Holding Inc.
By:
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
AGENT:
BANK OF AMERICA, N.A., as the Agent
By:
--------------------------------
Name:
Title:
28
SCHEDULE I
----------
to
SECURITY AGREEMENT
LOCATION OF COLLATERAL
----------------------
A. Location of Chief Executive Office
B. Location of Books and Records
C. Location of Collateral
D. Location of all other places of business
E. Location of leased facilities and name of lessor/sublessor
[to be completed by Grantors]
SCHEDULE II
-----------
to
SECURITY AGREEMENT
JURISDICTION OF ORGANIZATION
----------------------------
[to be completed by Grantors]
SCHEDULE III
------------
to
SECURITY AGREEMENT
PATENTS, TRADEMARKS AND COPYRIGHTS
----------------------------------
[to be completed by Grantors]
SCHEDULE IV
-----------
to
SECURITY AGREEMENT
COLLECTION ACCOUNTS
-------------------
[to be completed by Grantors]
SCHEDULE V
----------
to
SECURITY AGREEMENT
SPECIFIED FOREIGN SUBSIDIARIES
------------------------------
[to be completed by Grantors]
SCHEDULE VI
-----------
to
SECURITY AGREEMENT
SPECIFIED DOMESTIC HOLDING COMPANIES
------------------------------------
[to be completed by Grantors]
Exhibit A to
Security Agreement
SPECIAL POWER OF ATTORNEY
-------------------------
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT [NAME OF GRANTOR], a
______________ corporation, with its principal office at __________________,
(hereinafter called the "Assignor"), hereby appoints and constitutes Bank of
America N.A., a national banking association, as agent (in its capacity as
agent, together with any successor in such capacity, referred to herein as the
"Assignee") for the financial institutions (the "Lenders") now or hereafter
being parties to the Credit Agreement, dated as of the date hereof (as amended,
modified or supplemented from time to time in accordance with its terms, the
"Credit Agreement"), among the Assignor, certain affiliates of the Assignor,
Assignee, Bank of America, N.A., as syndication agent, Fleet Capital
Corporation, as documentation agent, and Banc of America Securities LLC, as sole
book runner and lead arranger, its true and lawful attorney, with full power of
substitution, and with full power and authority to perform the following acts on
behalf of the Assignor upon and during the continuance of an Event of Default:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of the Assignor in and to any letters
patent of the United States or any other country or political subdivision
thereof, and all registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending applications
therefor, and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of the Assignor in and to any
trademarks, trade names, trade styles and service marks, and all registrations,
recordings, reissues, extensions and renewals thereof, and all pending
applications therefor, and for the purpose of the recording, registering and
filing of, or accomplishing any other formality with respect to, the foregoing,
to execute and deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes described
above as the Assignee may in its sole discretion determine.
This power of attorney is made pursuant to a Security Agreement,
dated the date hereof, among the Assignor the Assignee and certain other
Grantors and takes effect solely for
the purposes of Section 23 thereof and is subject to the conditions thereof and
may not be revoked until the indefeasible payment and performance in full in
cash of all "Obligations" as defined in such Security Agreement and the
expiration or termination of all of the Commitments (as defined in the Credit
Agreement) of the Lenders under the Credit Agreement and the cancellation and of
all Letters of Credit (as defined in the Credit Agreement) issued pursuant to
the Credit Agreement (or to the extent not so cancelled and returned, the
deposit with the Assignee of Supporting Letters of Credit (as defined in the
Credit Agreement) for such outstanding Letters of Credit (or related Credit
Support, as defined in the Credit Agreement) in accordance with and as required
by the Credit Agreement).
Dated: ________ __, 2003
[NAME OF GRANTOR]
By:
--------------------------------
Name:
Title:
2
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
On this ___ day of ________, 2003, before me personally appeared
__________________, proved to me on the basis of satisfactory evidence to be the
person who executed the foregoing instrument on behalf of _____________________,
who being by me duly sworn did depose and say that he or she is an authorized
officer of said entity, that said instrument was signed on behalf of said entity
as authorized by the Board of Directors and that he or she acknowledged said
instrument to be the free act and deed of said entity.
---------------------------
Notary Public
Exhibit B to
Security Agreement
GRANT OF SECURITY
-----------------
(COPYRIGHTS)
------------
WHEREAS, [NAME OF GRANTOR] (herein referred to as "Assignor"),
owns the copyrights listed on the annexed Schedule A, which copyrights are
registered in the United States Copyright Office (the "Copyrights");
WHEREAS, Assignor, certain affiliates thereof, certain financial
institutions named therein (the "Lenders"), Bank of America, N.A., as agent for
the Lenders (in such capacity, together with any successor agent, "Assignee"),
Bank of America, N.A., as syndication agent, Fleet Capital Corporation, as
documentation agent, and Banc of America Securities LLC, as sole book runner and
lead arranger, are parties to the Credit Agreement dated as of November 10,
2003, and Assignee, and the Lenders are desirous of having a security interest
and liens in favor of Assignee on the above-identified property as security for
all Obligations (as defined in the Agreement);
WHEREAS, Assignor has entered into a Security Agreement, dated
as of November 10, 2003 (as it may hereafter be amended, supplemented or
otherwise modified from time to time, the "Agreement") with Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has granted to
Assignee a security interest in and lien on, all right, title and interest of
Assignor in and to the Copyrights, and the registrations and recordings thereof
in the United States, any State thereof or any other country or any political
subdivision thereof, all whether now or hereafter owned or licensable by
Assignor and all extensions or renewals thereof and all licenses thereof and all
proceeds thereof, including, without limitation, any claims by Assignor against
third parties for infringement thereof (the "Collateral"), as security for all
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby grant to Assignee a
continuing security interest in, and lien on, the Collateral as security for all
Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the security interest in and
lien on the Collateral granted hereby are more fully set forth in the Agreement,
the terms and provisions of which are hereby incorporated herein by reference as
if fully set forth herein.
Assignee's address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
IN WITNESS WHEREOF, Assignor has caused this Grant to be duly
executed by its officer thereunto duly authorized as of the _____ day of ____,
200_.
[NAME OF GRANTOR]
By:
--------------------------------
Name:
Title:
2
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
On this ___ day of ________, 2003, before me personally appeared
__________________, proved to me on the basis of satisfactory evidence to be the
person who executed the foregoing instrument on behalf of _____________________,
who being by me duly sworn did depose and say that he or she is an authorized
officer of said entity, that said instrument was signed on behalf of said entity
as authorized by the Board of Directors and that he or she acknowledged said
instrument to be the free act and deed of said entity.
---------------------------
Notary Public
3
SCHEDULE A TO GRANT OF SECURITY (COPYRIGHTS)
--------------------------------------------
COPYRIGHTS
----------
Titles Issue or Filing Date Copyright No.
------ -------------------- -------------
Exhibit C to
Security Agreement
GRANT OF SECURITY
-----------------
(PATENTS)
---------
WHEREAS, [NAME OF GRANTOR] (herein referred to as "Assignor"),
owns the letters patent, and/or applications for letters patent, of the United
States, more particularly described on Schedule A annexed hereto as part hereof
(the "Patents");
WHEREAS, Assignor, certain affiliates thereof, certain financial
institutions named therein (the "Lenders"), Bank of America, N.A., as agent for
the Lenders (in such capacity, together with any successor agent, "Assignee"),
Bank of America, N.A., as syndication agent, Fleet Capital Corporation, as
documentation agent, and Banc of America Securities LLC, as sole book runner and
lead arranger, are parties to the Credit Agreement dated as of November 10,
2003, and Assignee and the Lenders are desirous of having a security interest
and lien on the above-identified property as security for all Obligations, as
defined in the Agreement;
WHEREAS, Assignor has entered into a Security Agreement, dated
as of November 10, 2003 (as it may hereafter be amended, supplemented or
otherwise modified from time to time, the "Agreement") with Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has granted to
Assignee a security interest in, and lien on, all right, title and interest of
Assignor in and to the Patents, together with any reissue, continuation,
continuation-in-part or extension thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof for the full term of the Patents (the "Collateral"), as
security for all Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby grant to Assignee a
continuing security interest in, and lien on, the Collateral as security for all
Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the security interest in and
lien on the Collateral granted hereby are more fully set forth in the Agreement,
the terms and provisions of which are hereby incorporated herein by reference as
if fully set forth herein.
Assignee's address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
IN WITNESS WHEREOF, Assignor has caused this Grant to be duly
executed by its officer thereunto duly authorized as of the _____ day of ____,
200_.
[NAME OF GRANTOR]
By:
--------------------------------
Name:
Title:
2
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
On this ___ day of ________, 2003, before me personally appeared
__________________, proved to me on the basis of satisfactory evidence to be the
person who executed the foregoing instrument on behalf of
______________________, who being by me duly sworn did depose and say that he or
she is an authorized officer of said entity, that said instrument was signed on
behalf of said entity as authorized by the Board of Directors and that he or she
acknowledged said instrument to be the free act and deed of said entity.
---------------------------
Notary Public
SCHEDULE A TO GRANT OF SECURITY
-------------------------------
PATENTS
-------
File Number Serial/Patent No. Status Title
----------- ----------------- ------ -----
Exhibit D to
Security Agreement
GRANT OF SECURITY
-----------------
(TRADEMARKS)
------------
WHEREAS, [NAME OF GRANTOR] (herein referred to as "Assignor"),
owns the trademarks listed on the annexed Schedule A, which trademarks are
registered in the United States Patent and Trademark Office (the "Trademarks");
WHEREAS, Assignor, certain affiliates thereof, certain financial
institutions named therein (the "Lenders"), Bank of America, N.A., as agent for
the Lenders (in such capacity, together with any successor agent, "Assignee"),
Bank of America, N.A., as syndication agent, Fleet Capital Corporation, as
documentation agent, and Banc of America Securities LLC, as sole book runner and
lead arranger, are parties to the Credit Agreement dated as of November 10, 2003
and Assignee and the Lenders are desirous of having a security interest and lien
on the above-identified property as security for all Obligations as defined in
the Agreement;
WHEREAS, Assignor has entered into a Security Agreement, dated
as of November 10, 2003 (as it may be amended, supplemented, or otherwise
modified from time to time, the "Agreement") with Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has granted to
Assignee a security interest in, and lien on, all right, title and interest of
Assignor in and to the Trademarks, together with the goodwill of the business
symbolized by the Trademarks and the applications and registrations thereof, and
all proceeds thereof, including, without limitation, any and all causes of
action which may exist by reason of infringement thereof (the "Collateral"), as
security for all Obligations, as defined in the Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby grant to Assignee a
continuing security interest in, and lien on, the Collateral as security for all
Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the security interest in and
lien on the Collateral granted hereby are more fully set forth in the Agreement,
the terms and provisions of which are hereby incorporated herein by reference as
if fully set forth herein.
Assignee's address is 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
IN WITNESS WHEREOF, Assignor has caused this Grant to be duly
executed by its officer thereunto duly authorized as of the _____ day of _____,
200_.
[NAME OF GRANTOR]
By:
--------------------------------
Name:
Title:
2
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
On this ___ day of ________, 2003, before me personally appeared
__________________, proved to me on the basis of satisfactory evidence to be the
person who executed the foregoing instrument on behalf of
______________________, who being by me duly sworn did depose and say that he or
she is an authorized officer of said entity, that said instrument was signed on
behalf of said entity as authorized by the Board of Directors and that he or she
acknowledged said instrument to be the free act and deed of said entity.
---------------------------
Notary Public
3
SCHEDULE A TO GRANT OF SECURITY
-------------------------------
TRADEMARKS
----------
Trademark Reg. Date Reg. No.
--------- --------- --------
