SECURITY AGREEMENT
SECURITY
AGREEMENT dated as of May 5, 2008 (this “Agreement”),
made
by
the
Borrower and each of the Guarantors referred to below (each a “Grantor”
and,
collectively, the “Grantors”),
in
favor
of ACF CTC, L.L.C., a Delaware limited liability company, in its capacity as
agent (in such capacity, together with any successor in such capacity,
the “Agent”)
on
behalf of itself and the Lenders referred to below.
WITNESSETH:
WHEREAS,
Composite Technology Corporation, a Nevada corporation, (the “Borrower”),
each
subsidiary of the Borrower listed as a “Guarantor”
on
the
signature pages thereto (together with each other Person that executes a joinder
agreement and becomes a “Guarantor”
thereunder or otherwise guaranties all or any part of the Obligations, each
a
“Guarantor”
and
collectively, the “Guarantors”),
the
financial institutions from time to time party thereto (each a “Lender”
and,
collectively, the “Lenders”),
and
the Agent are parties to the Financing Agreement, dated as of the date hereof
(such agreement, as amended, restated, supplemented or otherwise modified from
time to time, being hereinafter referred to as the “Financing
Agreement”),
pursuant to which the Lenders have agreed to make certain loans (collectively,
the “Loans”)
to the
Borrower;
WHEREAS,
it is a condition precedent to the making of any Loan to the Borrower pursuant
to the Financing Agreement that each Grantor shall have executed and delivered
to the Agent a security agreement providing for the grant to the Agent for
the
benefit of the Agent and the Lenders of a security interest in all personal
property of such Grantor;
WHEREAS,
the Grantors are mutually dependent on each other in the conduct of their
respective businesses as an integrated operation, with the credit needed from
time to time by each Grantor often being provided through financing obtained
by
the other Grantors and the ability to obtain such financing being dependent
on
the successful operations of all of the Grantors as a whole; and
WHEREAS,
each Grantor has determined that the execution, delivery and performance of
this
Agreement directly benefit, and are in the best interest of, such
Grantor.
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Lenders to make and maintain the Loans pursuant to the
Financing Agreement, each Grantor hereby jointly and severally agrees with
the
Agent, for the benefit of the Agent and the Lenders, as follows:
SECTION
1. Definitions.
(a) Reference
is hereby made to the Financing Agreement for a statement of the terms thereof.
All terms used in this Agreement and the recitals hereto which are defined
in
the Financing Agreement or in Article 9 of the Uniform Commercial Code as in
effect from time to time in the State of New York (the “Code”)
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth therein; provided
that
terms used herein which are defined in the Code as in effect
in
the State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the
Agent
may otherwise determine.
(b) The
following terms shall have the respective meanings provided for in the Code:
“Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort Claim”,
“Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”,
“Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”,
“Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Noncash
Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Record”,
“Security Account”, “Software”, and “Supporting Obligations”.
(c) As
used
in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular
and
plural forms of such terms:
“Copyright
Licenses”
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensee or licensor and providing for the grant of any right to
use
or sell any works covered by any copyright (including, without limitation,
all
Copyright Licenses set forth in Schedule II hereto).
“Copyrights”
means
all domestic and foreign copyrights, whether registered or unregistered,
including, without limitation, all copyright rights throughout the universe
(whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or
any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
“Intellectual
Property”
means
the Copyrights, Trademarks and Patents.
“Licenses”
means
the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.
“Patent
Licenses”
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any Patent (including, without
limitation, all Patent Licenses set forth in Schedule II hereto).
“Patents”
means
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how, formulae,
rights of publicity and other general intangibles of like nature, now existing
or hereafter acquired (including, without limitation, all domestic and foreign
letters patent, design patents, utility patents, industrial designs, inventions,
trade secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how and formulae described in Schedule II hereto),
all applications, 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 or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
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“Trademark
Licenses”
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and
symbolized by any such trademark licenses, contracts or agreements and the
right
to prepare for sale or lease and sell or lease any and all Inventory now or
hereafter owned by any Grantor and now or hereafter covered by such licenses
(including, without limitation, all Trademark Licenses described in Schedule
II
hereto).
“Trademarks”
means
all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a’s, Internet domain
names, trade styles, designs, logos and other source or business identifiers
and
all general intangibles of like nature, now or hereafter owned, adopted,
acquired or used by any Grantor (including, without limitation, all domestic
and
foreign trademarks, service marks, collective marks, certification marks,
trademark registrations, trade names, business names, d/b/a’s, Internet domain
names, trade styles, designs, logos and other source or business identifiers
described in Schedule II hereto), all applications, 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, any state thereof or any other country
or
any political subdivision thereof), and all reissues, extensions or renewals
thereof, together with all goodwill of the business symbolized by such marks
and
all customer lists, formulae and other Records of any Grantor relating to the
distribution of products and services in connection with which any of such
marks
are used.
SECTION
2. Grant
of Security Interest.
As
collateral security for all of the Obligations (as defined in Section 3 hereof),
each Grantor hereby pledges and assigns to the Agent, and grants to the Agent
for the benefit of the Agent and the Lenders a continuing security interest
in,
all personal property of such Grantor, wherever located and whether now or
hereafter existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible (the “Collateral”),
including, without limitation, the following:
(a) all
Accounts;
(b) all
Chattel Paper (whether tangible or electronic);
(c) the
Commercial Tort Claims specified on Schedule VI hereto;
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(d) all
Deposit Accounts, all cash, and all other property from time to time deposited
therein and the monies and property in the possession or under the control
of
the Agent or any Lender or any affiliate, representative, agent or correspondent
of the Agent or any Lender;
(e) all
Documents;
(f) all
Equipment;
(g) all
Fixtures;
(h) all
General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all
Goods;
(j) all
Instruments (including, without limitation, Promissory Notes);
(k) all
Inventory;
(l) all
Investment Property;
(m) all
Copyrights, Patents and Trademarks, and all Licenses;
(n) all
Letter-of-Credit Rights;
(o) all
Supporting Obligations;
(p) all
other
tangible and intangible personal property of such Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts
and all cash and all investments therein, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements
of
and to any of the property of such Grantor described in the preceding clauses
of
this Section 2 (including, without limitation, any proceeds of insurance thereon
and all causes of action, claims and warranties now or hereafter held by such
Grantor in respect of any of the items listed above), and all books,
correspondence, files and other Records, including, without limitation, all
tapes, disks, cards, Software, data and computer programs in the possession
or
under the control of such Grantor or any other Person from time to time acting
for such Grantor that at any time evidence or contain information relating
to
any of the property described in the preceding clauses of this Section 2 or
are
otherwise necessary or helpful in the collection or realization
thereof;
and
(q) all
Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of
any
and all of the foregoing Collateral; in
each
case howsoever such Grantor’s interest therein may arise or appear (whether by
ownership, security interest, claim or otherwise).
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SECTION
3. Security
for Obligations.
The
security interest created hereby in the Collateral constitutes continuing
collateral security for all of the following obligations, whether now existing
or hereafter incurred (the “Obligations”):
(a) the
prompt payment by each Grantor, as and when due and payable (by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by it in respect of the Financing Agreement
and
the other Loan Documents, including, without limitation, (i) the Obligations
(as
defined in the Financing Agreement), (ii) principal of and interest on the
Loans
(including, without limitation, all interest that accrues after the commencement
of any Insolvency Proceeding of any Grantor, whether or not the payment of
such
interest is unenforceable or is not allowable due to the existence of such
Insolvency Proceeding), (iii) in the case of a Guarantor, all amounts from
time
to time owing by such Grantor in respect of its guaranty made pursuant to
Article XI of the Financing Agreement or under any other Guaranty to which
it is
a party, including all obligations guaranteed by such Grantor and (iv) all
fees,
commissions, charges, expense reimbursements, indemnifications and all other
amounts due or to become due under any Loan Document; and
(b) the
due
performance and observance by each Grantor of all of its other obligations
from
time to time existing in respect of the Loan Documents.
SECTION
4. Representations
and Warranties.
Each
Grantor jointly and severally represents and warrants as follows:
(a) Schedule
I hereto sets forth (i) the exact legal name of each Grantor and (ii) the
organizational identification number of each Grantor or states that no such
organizational identification number exists.
(b) Each
Grantor (i) is a corporation, limited liability company or limited partnership
duly organized, validly existing and in good standing under the laws of the
state or jurisdiction of its organization as set forth on Schedule I hereto,
(ii) has all requisite power and authority to execute, deliver and perform
this Agreement and each other Loan Document to be executed and delivered by
it
pursuant hereto and to consummate the transactions contemplated hereby and
thereby, and (iii) is duly qualified to do business and is in good standing
in each jurisdiction in which the character of the properties owned or leased
by
it or in which the transaction of its business makes such qualification
necessary,
except
where the failure to be so qualified could not be expected to have a Material
Adverse Effect.
(c) The
execution, delivery and performance by each Grantor of this Agreement and each
other Loan Document to which such Grantor is a party or will be a party
(i) have been duly authorized by all necessary action, (ii) do not and will
not contravene its charter or by-laws, its limited liability company or
operating agreement or its certificate of partnership or partnership agreement,
as applicable, or any applicable law or any contractual restriction binding
on
or otherwise affecting such Grantor or its properties, (iii) do not and will
not
result in or require the creation of any Lien upon or with respect to any of
its
properties other than pursuant to any Loan Document and (iv) do not and
will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to it or its operations or any of its
properties.
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(d) This
Agreement is, and each other Loan Document to which any Grantor is or will
be a
party, when executed and delivered pursuant hereto, will be, a legal, valid
and
binding obligation of such Grantor, enforceable against such Grantor in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and by general equitable
principles.
(e) Except
as
set forth on Schedule 6.01(f) of the Financing Agreement, there is no pending
or, to the best knowledge of any Grantor, threatened action, suit, proceeding
or
claim affecting any Grantor or to which any of the properties of any Grantor
is
subject, before any Governmental Authority or any arbitrator, or any order,
judgment or award by any Governmental Authority or arbitrator, that may
adversely affect the grant by any Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral, or the exercise
by
the Agent of any of its rights or remedies hereunder.
(f) All
taxes, assessments and other governmental charges imposed upon any Grantor
or
any property of such Grantor (including, without limitation, all federal income
and social security taxes on employees’ wages) and which have become due and
payable on or prior to the date hereof have been paid, except to the extent
contested in good faith by proper proceedings which stay the imposition of
any
penalty, fine or Lien resulting from the non-payment thereof and with respect
to
which adequate reserves have been set aside for the payment thereof on the
Financial Statements in accordance with GAAP.
(g) All
Equipment, Fixtures, Goods and Inventory now existing are, and all Equipment,
Fixtures, Goods and Inventory hereafter existing will be, located at the
addresses specified therefor in Schedule III hereto. Each Grantor’s chief place
of business and chief executive office, the place where such Grantor keeps
its
Records concerning Accounts and all originals of all Chattel Paper are located
at the addresses specified therefor in Schedule III hereto. None of the Accounts
is evidenced by Promissory Notes or other Instruments. Set forth in Schedule
IV
hereto is a complete and accurate list, as of the date of this Agreement, of
each Deposit Account, Securities Account and Commodities Account of each
Grantor, together with the name and address of each institution at which each
such Account is maintained, the account number for each such Account and a
description of the purpose of each such Account. Set forth in Schedule II hereto
is a complete and correct list of each trade name used by each Grantor and
the
name of, and each trade name used by, each person from which such Grantor has
acquired any substantial part of the Collateral.
(h) Each
Grantor has delivered to the Agent complete and correct copies of each License
described in Schedule II hereto, including all schedules and exhibits thereto,
which represents all of the Licenses existing on the date of this Agreement.
Each such License sets forth the entire agreement and understanding of the
parties thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby or the rights of any Grantor or any of its Affiliates
in
respect thereof. Each License now existing is, and each other License will
be,
the legal, valid and binding obligation of the parties thereto, enforceable
against such parties in accordance with its terms. No default thereunder by
any
such party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.
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(i) The
Grantors own and control, or otherwise possess adequate rights to use, all
Trademarks, Patents and Copyrights, which are the only trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, and rights of publicity necessary to conduct their business
in substantially the same manner as conducted as of the date hereof. Schedule
II
hereto sets forth a true and complete list of all Intellectual Property and
Licenses owned or used by each Grantor as of the date hereof. All such
Intellectual Property is subsisting and in full force and effect, has not been
adjudged invalid or unenforceable, is valid and enforceable and has not been
abandoned in whole or in part. Except as set forth in Schedule II, no such
Intellectual Property is the subject of any licensing or franchising agreement.
No Grantor has any knowledge of any conflict with the rights of others to any
Intellectual Property and, to the best knowledge of each Grantor, no Grantor
is
now infringing or in conflict with any such rights of others in any material
respect, and to the best knowledge of each Grantor, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by any Grantor. No Grantor has received any
notice that it is violating or has violated the trademarks, patents, copyrights,
inventions, trade secrets, proprietary information and technology, know-how,
formulae, rights of publicity or other intellectual property rights of any
third
party.
(j) The
Grantors are and will be at all times the sole and exclusive owners of, or
otherwise have and will have adequate rights in, the Collateral free and clear
of any Lien except for (i) the Lien created by this Agreement and
(ii) the Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is
on
file in any recording or filing office except (A) such as may have been
filed in favor of the Agent relating to this Agreement and (B) such as may
have been filed to perfect or protect any security interests or Liens permitted
by the Financing Agreement.
(k) The
exercise by the Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or otherwise
affecting any Grantor or any of its properties and will not result in or require
the creation of any Lien, upon or with respect to any of its
properties.
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(l) No
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority or other regulatory body, or any other Person, is
required for (i) the grant by any Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral or
(ii) the exercise by the Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in
the applicable jurisdiction of the financing statements described in Schedule
V
hereto, all of which financing statements have been duly filed and are in full
force and effect, (B) with respect to the perfection of the security
interest created hereby in the United States Intellectual Property, for the
recording of the appropriate Assignment for Security, substantially in the
form
of Exhibit A hereto in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, (C) with respect to the
perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to the Intellectual Property and Licenses, (D) with respect to the
perfection of the security interest created hereby in motor vehicles for which
the title to such motor vehicles is governed by a certificate of title or
ownership (collectively, the “Motor
Vehicles”),
for
the submission of an appropriate application requesting that the Lien of the
Agent be noted on the certificate of title or ownership, completed and
authenticated by the applicable Grantor, together with the certificate of title,
with respect to each Motor Vehicle, to the appropriate state agency,
(E) with respect to any action that may be necessary to obtain control in
Collateral described in Sections 5(i) and 5(k) hereof, the taking of such action
and (F) the taking of possession of all Documents, Chattel Paper,
Instruments and cash constituting Collateral.
(m) This
Agreement creates in favor of the Agent a legal, valid and enforceable security
interest in the Collateral, as security for the Obligations. The Agent’s having
possession of all Instruments, Documents, Chattel Paper and cash constituting
Collateral and obtaining control of all Collateral described in Sections 5(i)
and 5(k) hereof from time to time, the recording of the appropriate Assignment
for Security executed pursuant hereto in the United States Patent and Trademark
Office and the United States Copyright Office, as applicable, the submission
of
an appropriate application requesting that the Lien of the Agent be noted on
the
certificate of title or ownership, completed and authenticated by the applicable
Grantor, together with the certificate of title or ownership, with respect
to
such Motor Vehicles, to the applicable state agency, and the filing of the
financing statements described in Schedule V hereto and, with respect to the
Intellectual Property hereafter existing and not covered by an appropriate
Assignment for Security, the recording in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, of appropriate
instruments of assignment, result in the perfection of such security interests.
Such security interests are, or in the case of Collateral in which any Grantor
obtains rights after the date hereof, will be, perfected, first priority
security interests, subject only to the Permitted Liens and the recording of
such instruments of assignment. Such recordings and filings and all other action
necessary or desirable to perfect and protect such security interest have been
duly taken, except for (i) the Agent’s having possession of Instruments,
Documents, Chattel Paper and cash constituting Collateral after the date hereof,
(ii) the Agent obtaining control of any Collateral described in Sections
5(i) and 5(k) hereof and (iii) the other filings and recordations described
in Section 4(l) hereof.
(n) No
Grantor holds any Commercial Tort Claims or is aware of any such pending claims,
except for such claims described in Schedule VI.
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SECTION
5. Covenants
as to the Collateral.
So long
as any of the Obligations shall remain outstanding and all Commitments shall
not
have expired or terminated, unless the Agent shall otherwise consent in
writing:
(a) Further
Assurances.
Each
Grantor will at its expense, at any time and from time to time, promptly execute
and deliver all further instruments and documents and take all further action
that may be necessary or desirable or that the Agent may reasonably request
in
order to (i) perfect and protect the security interest purported to be
created hereby; (ii) enable the Agent to exercise and enforce its rights
and remedies hereunder in respect of the Collateral; or (iii) otherwise
effect the purposes of this Agreement, including, without limitation:
(A) marking conspicuously all Chattel Paper and each License and, at the
request of the Agent, each of its Records pertaining to the Collateral with
a
legend, in form and substance satisfactory to the Agent, indicating that such
Chattel Paper, License or Collateral is subject to the security interest created
hereby, (B) if any Account shall be evidenced by Promissory Notes or other
Instruments or Chattel Paper, delivering and pledging to the Agent hereunder
such Promissory Notes, Instruments or Chattel Paper, duly endorsed and
accompanied by executed instruments of transfer or assignment, all in form
and
substance reasonably satisfactory to the Agent, (C) executing and filing
(to the extent, if any, that such Grantor’s signature is required thereon) or
authenticating the filing of, such financing or continuation statements, or
amendments thereto, as may be necessary or desirable or that the Agent may
reasonably request in order to perfect and preserve the security interest
purported to be created hereby, (D) furnishing to the Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail, (E) if any Collateral shall
be in the possession of a third party, notifying such Person of the Agent’s
security interest created hereby and obtaining a written acknowledgment from
such Person that such Person holds possession of the Collateral for
the
benefit of the Agent, which such written acknowledgement shall be in form and
substance reasonably satisfactory to the Agent, (F) if at any time after
the date hereof, any Grantor acquires or holds any Commercial Tort Claim,
promptly notifying the Agent in a writing signed by such Grantor setting forth
a
brief description of such Commercial Tort Claim and granting to the Agent a
security interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and substance reasonably
satisfactory to the Agent, (G) if requested by Agent after the occurrence
or during the continuance of an Event of Default, causing the Agent to be listed
as the lienholder, for the benefit of the Agent and the Lenders, on each
certificate of title or ownership with respect to each Motor Vehicle or other
item of Equipment subject to a certificate of title or ownership (other than
a
Motor Vehicle or item of Equipment that is subject to a purchase money security
interest permitted by Section 7.02(a) of the Financing Agreement) and within
30
days of such request deliver evidence of the same to the Agent and
(H) taking all actions required by any earlier versions of the Uniform
Commercial Code or by other law, as applicable, in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.
(b) Location
of Equipment and Inventory.
Each
Grantor will keep the Equipment and Inventory (other than used Equipment and
Inventory sold in the ordinary course of business in accordance with Section
5(g) hereof) at the locations specified therefor in Section 4(g) hereof or,
upon not less than 30 days’ prior written notice to the Agent accompanied by a
new Schedule III hereto indicating each new location of the Equipment and
Inventory, at such other locations in the continental United States as the
Grantors may elect, provided that (i) all action has been taken to grant to
the
Agent a perfected, first priority security interest in such Equipment and
Inventory (subject only to Permitted Liens), and (ii) the Agent’s rights in such
Equipment and Inventory, including, without limitation, the existence,
perfection and priority of the security interest created hereby in such
Equipment and Inventory, are not adversely affected thereby.
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(c) Condition
of Equipment.
Each
Grantor will maintain the Equipment or cause the Equipment to be maintained
and
preserved in good condition, repair and working order as when acquired and
in
accordance with any manufacturer’s manual, ordinary wear and tear excepted, and
will forthwith, or in the case of any loss or damage to any Equipment as quickly
as practicable after the occurrence thereof, make or cause to be made all
repairs, replacements and other improvements in connection therewith which
are
necessary or desirable, consistent with past practice, or which the Agent may
request to such end. Each Grantor will promptly furnish to the Agent a statement
describing in reasonable detail any loss or damage in excess of $250,000 to
any
Equipment.
(d) Taxes,
Etc.
Each
Grantor jointly and severally agrees to pay promptly when due all property
and
other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Equipment and Inventory, except to the
extent the validity thereof is being contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves in
accordance with GAAP have been set aside for the payment thereof.
(e) Insurance.
(i) Each
Grantor will, at its own expense, maintain (i) products liability insurance
in
an amount not less than $12,000,000, reasonably satisfactory to the Agent,
and
(ii) insurance (including, without limitation, comprehensive general liability
and property insurance) with respect to the Equipment and Inventory in such
amounts, against such risks, in such form and with responsible and reputable
insurance companies or associations as is required by any Governmental Authority
having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated and in any event, in amount, adequacy and scope reasonably
satisfactory to the Agent. Each policy for liability insurance shall provide
for
all losses to be paid on behalf of the Agent and the Grantors as their
respective interests may appear, and each policy for property damage insurance
shall provide for all losses (except for losses of less than $50,000 per
occurrence) to be adjusted with, and paid directly to, the Agent. Each such
policy shall in addition (A) name each Grantor and the Agent as insured parties
thereunder (without any representation or warranty by or obligation upon the
Agent) as their interests may appear, (B) contain an agreement by the insurer
that any loss thereunder shall be payable to the Agent on its own account
notwithstanding any action, inaction or breach of representation or warranty
by
any Grantor, (C) provide that there shall be no recourse against the Agent
for
payment of premiums or other amounts with respect thereto and (D) provide that
at least 30 days’ prior written notice of cancellation, lapse, expiration or
other adverse change shall be given to the Agent by the insurer. Each Grantor
will, if so requested by the Agent, deliver to the Agent original or duplicate
policies of such insurance and, as often as the Agent may reasonably request,
a
report of a reputable insurance broker with respect to such insurance. Each
Grantor will also, at the request of the Agent, execute and deliver instruments
of assignment of such insurance policies and cause the respective insurers
to
acknowledge notice of such assignment.
-10-
(ii) Reimbursement
under any liability insurance maintained by any Grantor pursuant to this Section
5(e) may be paid directly to the Person who shall have incurred liability
covered by such insurance. In the case of any loss involving damage to Equipment
or Inventory, any proceeds of insurance maintained by a Grantor pursuant to
this
Section 5(e) shall be paid to the Agent (except as to which paragraph (iii)
of
this Section 5(e) is not applicable), such Grantor will make or cause to be
made
the necessary repairs to or replacements of such Equipment or Inventory, and
any
proceeds of insurance maintained by such Grantor pursuant to this Section 5(e)
shall be paid by the Agent to such Grantor as reimbursement for the costs of
such repairs or replacements.
(iii) Upon
the
occurrence and during the continuance of a Default or Event of Default or upon
any insurance payment (in excess of $50,000 per occurrence) in respect of any
Equipment or Inventory, all insurance payments in respect of such Equipment
or
Inventory shall be paid to the Agent and applied as specified in Section 7(b)
hereof.
(f) Provisions
Concerning the Accounts and the Licenses.
(i) No
Grantor shall, without the prior written consent of the Agent, change
(A) its name, identity or organizational structure, or (B) its
jurisdiction of incorporation as set forth in Section 4(b) hereto. Each Grantor
shall (x) immediately notify the Agent upon obtaining an organizational
identification number, if on the date hereof such Grantor did not have such
identification number, and (y) keep adequate records concerning the
Accounts and Chattel Paper and permit representatives of the Agent pursuant
to
the terms of the Financing Agreement to inspect and make abstracts from such
Records and Chattel Paper.
(ii) Each
Grantor will, except as otherwise provided in this subsection (f), continue
to collect, at its own expense, all amounts due or to become due under the
Accounts. In connection with such collections, each Grantor may (and, at the
Agent’s direction, will) take such action as such Grantor or the Agent may deem
necessary or advisable to enforce collection or performance of the Accounts;
provided,
however,
that
the Agent shall have the right at any time, upon the occurrence and during
the
continuance of an Event of Default, to notify the Account Debtors or obligors
under any Accounts of the assignment of such Accounts to the Agent and to direct
such Account Debtors or obligors to make payment of all amounts due or to become
due to such Grantor thereunder directly to the Agent or its designated agent
and, upon such notification and at the expense of such Grantor and to the extent
permitted by law, to enforce collection of any such Accounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and
to
the same extent as such Grantor might have done. After receipt by any Grantor
of
a notice from the Agent that the Agent has notified, intends to notify, or
has
enforced or intends to enforce a Grantor’s rights against the Account Debtors or
obligors under any Accounts as referred to in the proviso to the immediately
preceding sentence, (A) all amounts and proceeds (including Instruments)
received by such Grantor in respect of the Accounts shall be received in trust
for the benefit of the Agent hereunder, shall be segregated from other funds
of
such Grantor and shall be forthwith paid over to the Agent in the same form
as
so received (with any necessary endorsement) to be held as cash collateral
and
either (i) credited to the Loan Account so long as no Event of Default
shall have occurred and be continuing or (ii) if an Event of Default shall
have
occurred and be continuing, applied as specified in Section 7(b) hereof, and
(B)
such Grantor will not adjust, settle or compromise the amount or payment of
any
Account or release wholly or partly any Account Debtor or obligor thereof or
allow any credit or discount thereon. In addition, upon the occurrence and
during the continuance of an Event of Default, the Agent may (in its sole and
absolute discretion) direct any or all of the banks and financial institutions
with which any Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Accounts to send immediately to the Agent by wire
transfer (to such account as the Agent shall specify, or in such other manner
as
the Agent shall direct) all or a portion of such securities, cash, investments
and other items held by such institution. Any such securities, cash, investments
and other items so received by the Agent shall (in the sole and absolute
discretion of the Agent) be held as additional Collateral for the Obligations
or
distributed in accordance with Section 7 hereof.
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(iii) Upon
the
occurrence and during the continuance of any breach or default under any License
referred to in Schedule II hereto by any party thereto other than a Grantor,
(A) the relevant Grantor will, promptly after obtaining knowledge thereof,
give the Agent written notice of the nature and duration thereof, specifying
what action, if any, it has taken and proposes to take with respect thereto,
(B)
no Grantor will, without the prior written consent of the Agent, declare or
waive any such breach or default or affirmatively consent to the cure thereof
or
exercise any of its remedies in respect thereof, and (C) each Grantor will,
upon
written instructions from the Agent and at such Grantor’s expense, take such
action as the Agent may deem necessary or advisable in respect
thereof.
(iv) Each
Grantor will, at its expense, promptly deliver to the Agent a copy of each
notice or other communication received by it by which any other party to any
License referred to in Schedule II hereto purports to exercise any of its rights
or affect any of its obligations thereunder, together with a copy of any reply
by such Grantor thereto.
(v) Each
Grantor will exercise promptly and diligently each and every material right
which it may have under each License (other than any right of termination)
and
will duly perform and observe in all material respects all of its obligations
under each License and will take all action necessary to maintain the Licenses
in full force and effect. No Grantor will, without the prior written consent
of
the Agent, cancel, terminate, amend or otherwise modify in any material respect,
or waive any material provision of, any License referred to in Schedule II
hereto.
(g) Transfers
and Other Liens.
(i) Except
to
the extent expressly permitted by the Financing Agreement, no Grantor will
sell,
assign (by operation of law or otherwise), lease, license, exchange or otherwise
transfer or dispose of any of the Collateral.
(ii) Except
to
the extent expressly permitted by Section 7.02(a) of the Financing Agreement,
no
Grantor will create, suffer to exist or grant any Lien upon or with respect
to
any Collateral.
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(h) Intellectual
Property.
(i) In
the
event that any Grantor shall (A) obtain rights to any new Trademarks
necessary for the operation of its business, or any reissue, renewal or
extension of any existing Trademark necessary for the operation of its business,
(B) obtain rights to or develop any new patentable inventions, or become
entitled to the benefit of any Patent, or any reissue, division, continuation,
renewal, extension or continuation-in-part of any existing Patent or any
improvement thereof (whether pursuant to any license or otherwise) or (C) obtain
rights to or develop any new works protectable by Copyright, or become entitled
to the benefit of any rights with respect to any Copyright or any registration
or application therefor, or any renewal or extension of any existing Copyright
or any registration or application therefor, the provisions of Section 2
shall automatically apply thereto and such Grantor shall give to the Agent
prompt notice thereof in accordance with the terms of this Agreement and the
Financing Agreement. Except as otherwise provided herein or in the Financing
Agreement, in
no
event shall any Grantor, either itself or through any agent, employee, licensee
or designee, file an application for the registration of any Trademark or
Copyright or the issuance of any Patent with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, or in
any
similar office or agency of the United States or any country or any political
subdivision thereof unless it gives the Agent prior written notice
thereof.
(ii) Each
Grantor shall execute, authenticate and deliver any and all assignments,
agreements, instruments, documents and papers as required by this Agreement
or
the Financing Agreement, or as the Agent may otherwise reasonably request,
to
evidence the Agent’s security interest hereunder in such future acquired
Intellectual Property and the General Intangibles of such Grantor relating
thereto or represented thereby, and each Grantor hereby appoints the Agent
its
attorney-in-fact to execute and/or authenticate and file all such writings
for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the termination of all Commitments, the repayment of all of the
Obligations in full and the termination of each of the Loan
Documents.
-13-
(iii) If
applicable, each Grantor has duly executed and delivered the applicable
Assignment for Security in the form attached hereto as Exhibit A.
Each
Grantor (either itself or through licensees) will, and will cause each licensee
thereof to, take all commercially reasonable action necessary to maintain all
of
the Intellectual Property in full force and effect, including, without
limitation, using the proper statutory notices and markings and using the
Trademarks on each applicable trademark class of goods in order to so maintain
the Trademarks in full force free, from any claim of abandonment for non-use,
and no Grantor will (nor permit any licensee thereof to) do any act or knowingly
omit to do any act whereby any Intellectual Property may become invalidated;
provided,
however,
that so
long as no Event of Default has occurred and is continuing, no Grantor shall
have an obligation to use or to maintain any Intellectual Property (A) that
relates solely to any product or work, that has been, or is in the process
of
being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use
or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as any other Intellectual
Property that is in full force, so long the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of
such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this Agreement.
Each Grantor will cause to be taken all necessary steps in any proceeding before
the United States Patent and Trademark Office and the United States Copyright
Office or any similar office or agency in any other country or political
subdivision thereof to maintain each registration of the Intellectual Property
(other than the Intellectual Property described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property
is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, the Grantors shall (x) upon learning of such
infringement, misappropriation, dilution or other violation, promptly notify
the
Agent and (y) to the extent the Grantors shall deem appropriate under the
circumstances, promptly xxx for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as the Grantors shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Agent from time to time (but, unless an Event of Default
has occurred and is continuing, no more frequently than quarterly) statements
and schedules further identifying and describing the Intellectual Property
and
Licenses and such other reports in connection with the Intellectual Property
and
Licenses as the Agent may reasonably request, all in reasonable detail and
promptly upon request of the Agent, following receipt by the Agent of any such
statements, schedules or reports, the Grantors shall modify this Agreement
by
amending Schedule II hereto to include any Intellectual Property or License,
as
the case may be, which becomes part of the Collateral under this Agreement
and
shall execute and authenticate such documents and do such acts as shall be
necessary or, in the judgment of the Agent, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created
by
this Agreement. Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, no Grantor may
abandon or otherwise permit any Intellectual Property to become invalid without
the prior written consent of the Agent, and if any Intellectual Property is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, the Grantors will take such action as the Agent shall
deem appropriate under the circumstances to protect such Intellectual
Property.
(i) Deposit,
Commodities and Securities Accounts.
Prior
to the date hereof, each Grantor shall, in accordance with the terms of the
Financing Agreement, cause each bank and other financial institution referred
to
in Schedule IV hereto to execute and deliver to the Agent a control agreement,
in form and substance reasonably satisfactory to the Agent, duly executed by
such Grantor and such bank or financial institution, or enter into other
arrangements in form and substance reasonably satisfactory to the Agent,
pursuant to which such institution shall irrevocably agree, inter alia,
that
(i) it will comply at any time with the instructions originated by the
Agent to such bank or financial institution directing the disposition of cash,
Commodity Contracts, securities, Investment Property and other items from time
to time credited to such account, without further consent of such Grantor,
which
instructions the Agent will not give to such bank or other financial institution
in the absence of a continuing Event of Default, (ii) except as otherwise
set forth in the Financing Agreement, all cash, Commodity Contracts, securities,
Investment Property and other items of such Grantor deposited with such
institution shall be subject to a perfected, first priority security interest
in
favor of the Agent, (iii) any right of set off, banker’s Lien or other
similar Lien, security interest or encumbrance shall be fully waived as against
the Agent, and (iv) upon receipt of written notice from the Agent during
the continuance of an Event of Default, such bank or financial institution
shall
promptly send to the Agent by wire transfer (to such account as the Agent shall
specify, or in such other manner as the Agent shall direct) all such cash,
the
value of any Commodity Contracts, securities, Investment Property and other
items held by it. Without the prior written consent of the Agent, no Grantor
shall make or maintain any Deposit Account, Commodity Account or Securities
Account except for the accounts set forth in Schedule VI hereto. The provisions
of this paragraph 5(i) shall not apply to (i) Deposit Accounts for which the
Agent is the depositary and (ii) Deposit Accounts specially and exclusively
used
for payroll, payroll taxes and other employee wage and benefit payments to
or
for the benefit of a Grantor’s salaried employees.
-14-
(j) Motor
Vehicles.
(i) If
requested by the Agent after the occurrence and during the continuance of a
Default or Event of Default, each Grantor shall deliver to the Agent originals
of the certificates of title or ownership for all Motor Vehicles owned by it
with the Agent listed as lienholder, for the benefit of the Agent and the
Lenders; provided
that the
Agent shall not be required to be listed as the lienholder if a Motor Vehicle
is
subject to a purchase money security interest permitted by Section 7.02(a)
of
the Financing Agreement.
(ii) Each
Grantor hereby appoints the Agent as its attorney-in-fact, effective the date
hereof and terminating upon the termination of this Agreement, for the purpose
of (A) executing on behalf of such Grantor title or ownership applications
for
filing with appropriate state agencies to enable Motor Vehicles now owned or
hereafter acquired by such Grantor to be retitled and the Agent listed as
lienholder thereof, (B) filing such applications with such state agencies,
and
(C) executing such other documents and instruments on behalf of, and taking
such
other action in the name of, such Grantor as the Agent may deem necessary or
advisable to accomplish the purposes hereof (including, without limitation,
for
the purpose of creating in favor of the Agent a perfected Lien on the Motor
Vehicles and exercising the rights and remedies of the Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until all of the Obligations are paid in full after all Commitments have been
terminated.
(iii) Any
certificates of title or ownership delivered pursuant to the terms hereof shall
be accompanied by odometer statements for each Motor Vehicle covered
thereby.
(iv) So
long
as no Event of Default shall have occurred and be continuing, upon the request
of any Grantor, the Agent shall execute and deliver to such Grantor such
instruments as such Grantor shall reasonably request to remove the notation
of
the Agent as lienholder on any certificate of title for any Motor Vehicle;
provided
that any
such instruments shall be delivered, and the release effective, only upon
receipt by the Agent of a certificate from such Grantor, stating that the Motor
Vehicle, the Lien on which is to be released, is to be sold or has suffered
a
casualty loss (with title thereto passing to the casualty insurance company
therefor in settlement of the claim for such loss), the amount that such Grantor
will receive as sale proceeds or insurance proceeds and whether or not such
sale
proceeds or insurance proceeds are required by Section 2.05 of the Financing
Agreement to be paid to the Agent to be applied to the Obligations and, to
the
extent required by Section 2.05 of the Financing Agreement, any proceeds of
such
sale or casualty loss shall be paid to the Agent hereunder to be applied to
the
Obligations then outstanding.
-15-
(k) Control.
Each
Grantor hereby agrees to take any or all action that may be necessary or
desirable or that the Agent may reasonably request in order for the Agent to
obtain control in accordance with Sections 9-104 through 9-107 of the Code
with
respect to the following Collateral: (i) Deposit Accounts, (ii) Electronic
Chattel Paper, (iii) Investment Property and (iv) Letter-of-Credit
Rights.
(l) Inspection
and Reporting.
Each
Grantor shall permit the Agent, or any agents or representatives thereof or
such
professionals or other Persons as the Agent may designate (i) to examine
and make copies of and abstracts from such Grantor’s records and books of
account, (ii) to visit and inspect its properties, (iii) to verify
materials, leases, notes, Accounts, Inventory and other assets of such Grantor
from time to time, (iii) to conduct audits, physical counts, appraisals
and/or valuations, Phase I and Phase II Environmental Site Assessments or
examinations at the locations of such Grantor and (iv) to discuss such Grantor’s
affairs, finances and accounts with any of its directors, officers, managerial
employees, independent accountants or any of its other representatives, in
each
case, as provided in and subject to Section 4.01 and Section 7.01(f) the
Financing Agreement.
(m) The
partnership interests or membership interests of each Grantor in each of its
Subsidiaries that is a partnership or a limited liability company are not (i)
dealt in or traded on securities exchanges or in securities markets, (ii)
securities for purposes of Article 8 of any relevant Uniform Commercial Code,
(iii) investment company securities within the meaning of Section 8-103 of
any
relevant Uniform Commercial Code and (iv) evidenced by a certificate. Such
partnership interests or membership interests constitute General
Intangibles.
SECTION
6. Additional
Provisions Concerning the Collateral.
(a) Each
Grantor hereby (i) authorizes the Agent to file, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral
and
(ii) ratifies such authorization to the extent that the Agent has filed any
such financing or continuation statements, or amendments thereto, prior to
the
date hereof. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
-16-
(b) Each
Grantor hereby irrevocably appoints the Agent as its attorney-in-fact and proxy,
with full authority in the place and stead of such Grantor and in the name
of
such Grantor or otherwise, from time to time in the Agent’s discretion, to take
any action and to execute any instrument which the Agent may deem necessary
or
advisable to accomplish the purposes of this Agreement (subject to the rights
of
a Grantor under Section 5 hereof), including, without limitation, (i) to obtain
and adjust insurance required to be paid to the Agent pursuant to Section 5(e)
hereof, (ii) to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, endorse, and collect any drafts
or
other instruments, documents and chattel paper in connection with clause (i)
or
(ii) above, (iv) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the collection
of any Collateral or otherwise to enforce the rights of the Agent and the
Lenders with respect to any Collateral, and (v) to execute assignments, licenses
and other documents to enforce the rights of the Agent and the Lenders with
respect to any Collateral. This power is coupled with an interest and is
irrevocable until all of the Obligations are paid in full after all Commitments
have been terminated.
(c) For
the
purpose of enabling the Agent to exercise rights and remedies hereunder, at
such
time as the Agent shall be lawfully entitled to exercise such rights and
remedies, and for no other purpose, each Grantor hereby grants to the Agent,
to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to any Grantor) to use, assign,
license or sublicense any Intellectual Property now owned or hereafter acquired
by any Grantor, wherever the same may be located, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof. Notwithstanding anything contained herein to the contrary,
but
subject to the provisions of the Financing Agreement that limit the right of
a
Grantor to dispose of its property and Section 5(h) hereof, so long as no Event
of Default shall have occurred and be continuing, each Grantor may exploit,
use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of
its
business. In furtherance of the foregoing, unless an Event of Default shall
have
occurred and be continuing, the Agent shall from time to time, upon the request
of a Grantor, execute and deliver any instruments, certificates or other
documents, in the form so requested, which such Grantor shall have certified
are
appropriate (in such Grantor’s judgment) to allow it to take any action
permitted above (including relinquishment of the license provided pursuant
to
this clause (c) as to any Intellectual Property). Further, upon the payment
in
full of all of the Obligations after the cancellation or termination of the
Commitments, the Agent (subject to Section 11(e) hereof) shall release and
reassign to the Grantors all of the Agent’s right, title and interest in and to
the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever and at such Grantor’s sole expense. The
exercise of rights and remedies hereunder by the Agent shall not terminate
the
rights of the holders of any licenses or sublicenses theretofore granted by
any
Grantor in accordance with the second sentence of this clause (c). Each Grantor
hereby releases the Agent 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 Agent’s gross negligence or willful
misconduct, as determined by a final determination of a court of competent
jurisdiction.
-17-
(d) If
any
Grantor fails to perform any agreement contained herein, the Agent may itself
perform, or cause performance of, such agreement or obligation, in the name
of
such Grantor or the Agent, and the expenses of the Agent incurred in connection
therewith shall be jointly and severally payable by the Grantors pursuant to
Section 8 hereof and shall be secured by the Collateral.
(e) The
powers conferred on the Agent hereunder are solely to protect its interest
in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
the
accounting for moneys actually received by it hereunder, the Agent shall have
no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral.
(f) Anything
herein to the contrary notwithstanding (i) each Grantor shall remain liable
under the Licenses and otherwise with respect to any of the Collateral to the
extent set forth therein to perform all of its obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise
by the Agent of any of its rights hereunder shall not release any Grantor from
any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Agent shall not have any obligation or liability
by reason of this Agreement under the Licenses or with respect to any of the
other Collateral, nor shall the Agent be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
(g) Notwithstanding
any provision to the contrary in any of the Loan Documents, the Agent, by
acceptance of this Agreement, hereby acknowledges that the Lien on the Loan
Parties’ Inventory benefiting Enerserve Limited as identified on Schedule
7.02(a) to the Financing Agreement shall be prior to the Lien in such Inventory
benefiting the Agent and the Lenders created pursuant to this Agreement;
provided,
however,
that
such priority shall apply only to (i) such specified items of Inventory
identified on Schedule 7.02(a) and (ii) such other items of Inventory purchased
by the Loan Parties subsequent to the Effective Date as to which Enerserve
Limited shall have taken appropriate action under Section 9-324 of the Uniform
Commercial Code. The Agent will, at the Loan Parties’ expense, execute and
deliver such further instruments and documents and take such further action
as
the Loan Parties’ may reasonably request in order to effect the purposes of the
foregoing sentence.
-18-
SECTION
7. Remedies
Upon Default.
If any
Event of Default shall have occurred and be continuing:
(a) The
Agent
may exercise in respect of the Collateral, in addition to any other rights
and
remedies provided for herein or otherwise available to it, all of the rights
and
remedies of a secured party upon default under the Code (whether or not the
Code
applies to the affected Collateral), and also may (i) take absolute control
of the Collateral, including, without limitation, transfer into the Agent’s name
or into the name of its nominee or nominees (to the extent the Agent has not
theretofore done so) and thereafter receive, for the benefit of the Agent,
all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees
that it will at its expense and upon request of the Agent forthwith, assemble
all or part of the Collateral as directed by the Agent and make it available
to
the Agent at a place or places to be designated by the Agent that is reasonably
convenient to both parties, and the Agent may enter into and occupy any premises
owned or leased by any Grantor where the Collateral or any part thereof is
located or assembled for a reasonable period in order to effectuate the Agent’s
rights and remedies hereunder or under law, without obligation to any Grantor
in
respect of such occupation, and (iii) without notice except as specified
below and without any obligation to prepare or process the Collateral for sale,
(A) sell the Collateral or
any
part thereof in one or more parcels at public or private sale, at any of the
Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as the Agent may deem
commercially reasonable and/or (B) lease, license or dispose of the
Collateral or any part thereof upon such terms as the Agent may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of
sale
or any other disposition of the Collateral shall be required by law, at least
10
days’ notice to a Grantor of the time and place of any public sale or the time
after which any private sale or other disposition of the Collateral is to be
made shall constitute reasonable notification. The Agent shall not be obligated
to make any sale or other disposition of Collateral regardless of notice of
sale
having been given. The Agent may adjourn any public or private sale from time
to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against the Agent and the
Lenders arising by reason of the fact that the price at which the Collateral
may
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree, and waives all rights that such
Grantor may have to require that all or any part of the Collateral be marshalled
upon any sale (public or private) thereof. Each Grantor hereby acknowledges
that
(i) any such sale of the Collateral by the Agent shall be made without
warranty, (ii) the Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely effect the commercial
reasonableness of any such sale of the Collateral. In addition to the foregoing,
(i) upon written notice to any Grantor from the Agent, each Grantor shall
cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (ii) the Agent may,
at
any time and from time to time, upon 10 days’ prior notice to any Grantor,
license, whether general, special or otherwise, and whether on an exclusive
or
non-exclusive basis, any of the Intellectual Property, throughout the universe
for such term or terms, on such conditions, and in such manner, as the Agent
shall in its sole discretion determine; and (iii) the Agent may, at any time,
pursuant to the authority granted in Section 6 hereof (such authority being
effective upon the occurrence and during the continuance of an Event of
Default), execute and deliver on behalf of a Grantor, one or more instruments
of
assignment of the Intellectual Property (or any application or registration
thereof), in form suitable for filing, recording or registration in any
country.
(b) Any
cash
held by the Agent as Collateral and all Cash Proceeds received by the Agent
in
respect of any sale of or collection from, or other realization upon, all or
any
part of the Collateral may, in the discretion of the Agent, be held by the
Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Agent pursuant to Section 8 hereof) in whole
or in
part by the Agent against, all or any part of the Obligations in such order
as
the Agent shall elect, consistent with the provisions of the Financing
Agreement. Any surplus of such cash or Cash Proceeds held by the Agent and
remaining after payment in full of all of the Obligations after all Commitments
have been terminated shall be paid over to whomsoever shall be lawfully entitled
to receive the same or as a court of competent jurisdiction shall
direct.
-19-
(c) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Agent and the Lenders are legally
entitled, the Grantors shall be jointly and severally liable for the deficiency,
together with interest thereon at the highest rate specified in any applicable
Loan Document for interest on overdue principal thereof or such other rate
as
shall be fixed by applicable law, together with the costs of collection and
the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by the Agent to collect such deficiency.
(d) Each
Grantor hereby acknowledges that if the Agent complies with any applicable
state
or federal law requirements in connection with a disposition of the Collateral,
such compliance will not adversely effect the commercial reasonableness of
any
sale or other disposition of the Collateral.
(e) The
Agent
shall not be required to marshal any present or future collateral security
(including, but not limited to, this Agreement and the Collateral) for, or
other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order,
and
all of the Agent’s rights hereunder and in respect of such collateral security
and other assurances of payment shall be cumulative and in addition to all
other
rights, however existing or arising. To the extent that any Grantor lawfully
may, such Grantor hereby agrees that it will not invoke any law relating to
the
marshalling of collateral which might cause delay in or impede the enforcement
of the Agent’s rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
each Grantor hereby irrevocably waives the benefits of all such
laws.
SECTION
8. Indemnity
and Expenses.
(a) Each
Grantor jointly and severally agrees to defend, protect, indemnify and hold
the
Agent and each Lender (and all their respective officers, directors, employees,
attorneys, consultants, and agents) harmless from and against any and all
claims, damages, losses, liabilities, obligations, penalties, fees, reasonable
costs and expenses (including, without limitation, reasonable legal fees, costs,
expenses, and disbursements of Agent’s counsel) to the extent that they arise
out of or otherwise result from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities to the
extent resulting from the Agent’s gross negligence or willful misconduct, as
determined by a final judgment of a court of competent
jurisdiction.
-20-
(b) Each
Grantor will upon demand jointly and severally agree to pay to the Agent the
amount of any and all reasonable costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Agent and of any
experts and agents (including, without limitation, any collateral trustee which
may act as agent of the Agent), which the Agent may incur in connection with
(i) the preparation, negotiation, execution, delivery, recordation,
administration, amendment, waiver or other modification or termination of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any Collateral, (iii) the
exercise or enforcement of any of the rights of the Agent hereunder, or
(iv) the failure by any Grantor to perform or observe any of the provisions
hereof.
SECTION
9. Notices,
Etc.
All
notices and other communications provided for hereunder shall be in writing
and
shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied or delivered by hand, Federal Express or other reputable
overnight courier, if to a Grantor, to it in care of the Borrower at its address
specified in the Financing Agreement and if to the Agent, to it at its address
specified in the Financing Agreement; or as to any such Person, at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 9. All such
notices and other communications shall be effective, (a) if mailed (certified
mail, postage prepaid and return receipt requested), when received or 3 days
after deposited in the mails, whichever occurs first, (b) if telecopied, when
transmitted and confirmation received, or (c) if delivered by hand, Federal
Express or other reputable overnight courier, upon delivery.
SECTION
10. Security
Interest Absolute.
All
rights of the Agent and the Lenders, all Liens and all obligations of each
of
the Grantors hereunder shall be absolute and unconditional irrespective of
(a)
any lack of validity or enforceability of the Financing Agreement, any other
Loan Document or any other agreement or instrument relating thereto,
(b) any change in the time, manner or place of payment of, or in any other
term in respect of, all or any of the Obligations, or any other amendment or
waiver of or consent to any departure from the Financing Agreement or any other
Loan Document, (c) any exchange or release of, or non-perfection of any Lien
on
any Collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations, or (d) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any of the Grantors in respect of the Obligations. All
authorizations and agencies contained herein with respect to any of the
Collateral are irrevocable and powers coupled with an interest.
SECTION
11. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by each Grantor and the Agent, and no waiver of any provision
of this Agreement, and no consent to any departure by any Person therefrom,
shall be effective unless it is in writing and signed by the waiving and
consenting Person, and then such waiver or consent shall be effective only
in
the specific instance and for the specific purpose for which given.
-21-
(b) No
failure on the part of the Agent to exercise, and no delay in exercising, any
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Agent or any Lender provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agent or any Lender under
any Loan Document against any party thereto are not conditional or contingent
on
any attempt by such Person to exercise any of its rights under any other Loan
Document against such party or against any other Person, including but not
limited to, any Grantor.
(c) Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the later of (A) the payment
in
full of the Obligations and (B) the termination of all of the Commitments,
and
(ii) be binding on each Grantor, all other Persons who become bound as debtor
to
this Agreement in accordance with Section 9-203(d) of the Code and, by its
acceptance hereof, the Agent and its respective successors and assigns, and
shall inure, together with all rights and remedies of the Agent and the Lenders
hereunder, to the benefit of the Agent and the Lenders and their respective
permitted successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, without notice to the
Grantors, the Agent and the Lenders may assign or otherwise transfer their
rights and obligations under this Agreement and any other Loan Document, to
any
other Person and such other Person shall thereupon become vested with all of
the
benefits in respect thereof granted to the Agent and the Lenders herein or
otherwise. Upon any such assignment or transfer, all references in this
Agreement to the Agent or any such Lender shall mean the assignee of the Agent
or such Lender. None of the rights or obligations of any Grantor hereunder
may
be assigned or otherwise transferred without the prior written consent of the
Agent, and any such assignment or transfer shall be null and void.
(e) Upon
the
satisfaction in full of the Obligations and the termination of all of the
Commitments, (i) this Agreement and the security interests created hereby shall
terminate and all rights to the Collateral shall revert to the Grantors and
(ii)
the Agent will, upon the Grantors’ request and at the Grantors’ expense without
any representation, warranty or recourse whatsoever, (A) return to the Grantors
such of the Collateral as shall not have been sold or otherwise disposed of
or
applied pursuant to the terms hereof and (B) execute and deliver to the Grantors
such documents as the Grantors shall reasonably request to evidence such
termination.
a) THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION
OR
THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY
INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF
NEW
YORK.
-22-
b) ANY
LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX IN THE
COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF
NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT
OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF
SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
c) EACH
OF THE GRANTORS AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE
AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR
WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
(i) Each
Grantor irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to such Grantor at its address provided herein, such service
to
become effective 10 days after such mailing.
(j) Nothing
contained herein shall affect the right of the Agent to serve process in any
other manner permitted by law or commence legal proceedings or otherwise proceed
against any Grantor or any property of any Grantor in any other
jurisdiction.
(k) Each
Grantor irrevocably and unconditionally waives any right it may have to claim
or
recover in any legal action, suit or proceeding referred to in this Section
any
special, exemplary, punitive or consequential damages.
(l) Section
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
-23-
(m) This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together constitute one in the same
Agreement.
(n) All
of
the obligations of the Grantors hereunder are joint and several. The Agent
may,
in its sole and absolute discretion, enforce the provisions hereof against
any
of the Grantors and shall not be required to proceed against all Grantors
jointly or seek payment from the Grantors ratably. In addition, the Agent may,
in its sole and absolute discretion, select the Collateral of any one or more
of
the Grantors for sale or application to the Obligations, without regard to
the
ownership of such Collateral, and shall not be required to make such selection
ratably from the Collateral owned by all of the Grantors. The release or
discharge of any Grantor by the Agent shall not release or discharge any other
Grantor from the obligations of such Person hereunder.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
-24-
IN
WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.
|
GRANTORS:
|
||||
|
COMPOSITE
TECHNOLOGY CORPORATION
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
CTC
CABLE CORPORATION
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
TRANSMISSION
TECHNOLOGY CORPORATION
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
CTC
TOWERS & POLES CORPORATION
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
XXXXXX,
INC.
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
EU
ENERGY INC.
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
EU
ENERGY NORTH AMERICA, INC
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
SCHEDULE
I
LEGAL
NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR JURISDICTION OF
ORGANIZATION
Sched.
I-1
SCHEDULE
II
INTELLECTUAL
PROPERTY AND LICENSES; TRADENAMES
Sched.
II-1
SCHEDULE
III
LOCATIONS
OF GRANTORS
| LOCATION |
Description
of Location (State if Location
(i) contains
Equipment, Fixtures,
Goods
or Inventory,
(ii)
is chief place of business and
chief
executive office, or
(iii)
contains Records concerning Accounts
and
originals
of
Chattel Paper)
|
Sched.
III-1
SCHEDULE
IV
DEPOSIT
ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
|
Name
and Address
of
Institution
Maintaining
Account
|
Account
Number
|
Type
of Account
|
Sched.
IV-1
SCHEDULE
V
UCC-1
FINANCING STATEMENTS
Sched.
V-1
SCHEDULE
VI
COMMERCIAL
TORT CLAIMS
Sched.
VI-1
EXHIBIT
A
ASSIGNMENT
FOR SECURITY
[TRADEMARKS]
[PATENTS] [COPYRIGHTS]
WHEREAS,
____________________ (the “Assignor”)
[has
adopted, used and is using, and holds all right, title and interest in and
to,
the trademarks and service marks listed on the annexed Schedule 1A, which
trademarks and service marks are registered or applied for in the United States
Patent and Trademark Office (the “Trademarks”)]
[holds all right, title and interest in the letter patents, design patents
and
utility patents listed on the annexed Schedule 1A, which patents are issued
or applied for in the United States Patent and Trademark Office (the
“Patents”)]
[holds all right, title and interest in the copyrights listed on the annexed
Schedule 1A, which copyrights are registered in the United States Copyright
Office (the “Copyrights”)];
WHEREAS,
the Assignor, has entered into a Security Agreement, dated as of May __, 2008
(the “Security
Agreement”),
in
favor of ACF CTC, L.L.C., as agent for itself and certain lenders (the
“Assignee”);
WHEREAS,
pursuant to the Security Agreement, the Assignor has assigned to the Assignee
and granted to the Assignee for the benefit of itself and the lenders a
continuing security interest in all right, title and interest of the Assignor
in, to and under the [Trademarks, together with, among other things, the
good-will of the business symbolized by the Trademarks] [Patents] [Copyrights]
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 and any and all damages arising from past,
present and future violations thereof (the “Collateral”),
to
secure the payment, performance and observance of the Obligations (as defined
in
the Security Agreement);
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee
for
the benefit of itself and the lenders a continuing security interest in the
Collateral to secure the prompt payment, performance and for the benefit of
itself and the lenders observance of the Obligations.
The
Assignor does hereby further acknowledge and affirm that the rights and remedies
of the Assignee with respect to the Collateral are more fully set forth in
the
Security Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
IN
WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by
its officer thereunto duly authorized as of _____________ __, 20__.
|
[GRANTOR]
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
Exh.
A-1
|
STATE
OF ____________
|
|
|
|
ss.:
|
|
COUNTY
OF __________
|
On
this
____ day of _______________, 20__, before me personally came ________________,
to me known to be the person who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say that s/he is the ________________
of
_______________________________________, a ____________________, and that s/he
executed the foregoing instrument in the firm name of
_______________________________________, and that s/he had authority to sign
the
same, and s/he acknowledged to me that he executed the same as the act and
deed
of said firm for the uses and purposes therein mentioned.
Exh.
A-2
SCHEDULE
1A TO ASSIGNMENT FOR SECURITY
[Trademarks
and Trademark Applications]
[Patent
and Patent Applications]
[Copyright
and Copyright Applications]
Owned
by
______________________________
