Exhibit 10.47
SUBORDINATED SECURITY AGREEMENT
This SUBORDINATED SECURITY AGREEMENT, dated as of December 18, 2000,
(the "Security Agreement") is entered into between HTI CLASS B, LLC, a
Delaware limited liability company (the "Grantor"), HEARTLAND TECHNOLOGY,
INC., a Delaware corporation (the "Borrower"), and PG OLDCO, INC., a Michigan
corporation (the "Secured Party"). When referred to jointly, the signatories
to this Security Agreement will hereafter be referred to as the "Parties".
WITNESSETH:
WHEREAS, the Borrower is the sole member of the Grantor; and
WHEREAS, the Borrower, PG Design, Inc. and the Secured Party are
parties to that certain Confidential Settlement Agreement and Release dated
as of December 18, 2000 (the "Settlement Agreement"), pursuant to which the
Secured Party has agreed to extend certain financial accommodations to the
Borrower and the Grantor is required to execute and deliver this Security
Agreement in favor of the Secured Party encumbering certain "Collateral"
(hereinafter defined) owned by the Grantor as of the date of the Settlement
Agreement; and
WHEREAS, the extension and/or continued extension of credit, as
aforesaid, by the Secured Party is necessary and desirable to the conduct and
operation of the business of the Borrower and will inure to the personal and
financial benefit of the Grantor; and
WHEREAS, the Grantor presently owns all of the "Collateral" (as defined
herein); and
WHEREAS, the Parties have determined that it is in their best interest
to execute this Security Agreement;
NOW, THEREFORE for good and valuable consideration, the receipt of
which is hereby acknowledged by the Grantor, the Borrower and the Secured
Party hereby agree as follows:
1. Definitions. The terms defined in this Section shall have the
following defined meanings for all purposes of this Agreement:
1.1. "Amended Notes" shall mean the notes due December 29, 2000,
December 31, 2001, December 31, 2002, December 31, 2003, and
December 31, 2004 issued by the Borrower to the Secured Party
pursuant to the Settlement Agreement.
1.2. "Borrower" shall mean Heartland Technology, Inc., a Delaware
corporation.
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1.3. "Class B Limited Partner" shall mean Grantor's status, rights,
and privileges as a Class B limited partner of the Partnership,
as reflected on the books and records of the Partnership on the
date of this Security Agreement.
1.4. "Class B Limited Partnership Interest" shall mean the interest of
the Class B Limited Partner in the Partnership.
1.5. "Collateral" shall mean the following, whether now existing or
hereafter acquired: (i) the Class B Limited Partnership Interest,
and any substitutions, replacements or additions thereto, (ii)
all of the Grantor's right, title and interest as a Class B
Limited Partner in the Partnership, including without limitation,
all of the Grantor's (a) rights as a Class B Limited Partner to
receive deposits, proceeds, profits, distributions, special
distributions, dividends, interest, return of capital, and any
other amounts, at any time or from time to time (including
without limitation upon the complete or partial liquidation of
the Partnership or otherwise), of cash or other property, real,
personal or mixed, (b) rights in any capital account, and (c) all
other rights, powers, privileges and benefits relating to or
arising from the Grantor's status as a Class B Limited Partner in
the Partnership, and (iii) to the extent not otherwise included
in subsections (i) and (ii) all distributions, interest,
dividends, increases, substitutions or additions to any of the
foregoing items and all Proceeds of any of the foregoing.
1.6. "Collateral Release Event" shall mean ninety (90) days after the
satisfaction and payment of all Obligations.
1.7. "Control Agreement" shall mean a control agreement executed by
the Partnership, the Grantor and the Secured Party substantially
in the form of Exhibit A attached hereto.
1.8. "Event of Default" shall mean (i) a failure of the Borrower to
make any payment of the Obligations to Secured Party when such
payment becomes due, (ii) a failure to comply with the Collateral
Value Ratio (as defined in Section 3 below), (iii) a breach of
the representations and warranties set forth in Sections 6.2,
6.5, 6.6 or 6.11 below, (iv) the termination of the Control
Agreement by the Partnership in violation of Section 10 of the
Control Agreement, or (v) a default of any Senior Debt and
Enforcement (as defined in the Inter-Creditor Agreement) thereof.
1.9. "Grantor" shall mean HTI Class B, LLC, a Delaware limited
liability company.
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1.10. "Inter-Creditor Agreement" shall mean that certain Lien
Subordination and Inter- Creditor Agreement dated of even date
herewith between the Senior Debt Holder and the Secured Party.
1.11. "Obligations" shall mean the indebtedness evidenced by the
Amended Notes, and any extensions, renewals or refinancing
thereof and any substitutions therefor.
1.12. "Pari Passu Debt" shall mean all obligations, liabilities and
indebtedness of the Borrower to any other holders of subordinated
security interests in the Collateral, whether now existing or
hereafter arising.
1.13. "Pari Passu Debt Holders" shall mean all holders of any
subordinated security interests in the Collateral, whether now
existing or hereafter arising.
1.14. "Partnership" shall mean Heartland Partners, L.P., a Delaware
limited partnership organized under the Partnership Agreement.
1.15. "Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of Heartland Partners, L.P.,
dated as of June 27, 1990, as amended by the Amendment to the
Amended and Restated Agreement of Limited Partnership of
Heartland Partners, L.P., dated December 4, 1997, as it may be
further amended, supplemented or restated from time to time.
1.16. "Secured Party" shall mean PG Oldco, Inc., a Michigan Corporation.
1.17. "Security Interest" shall mean the security interest granted by
the Grantor to the Secured Party in the Collateral pursuant to
Section 2 of this Security Agreement.
1.18. "Senior Debt" shall mean all obligations, liabilities, and
indebtedness of the Borrower to the Senior Debt Holder, whether
now existing or hereafter arising, directly between Borrower and
the Senior Debt Holder, or acquired outright, conditionally or as
collateral security from another, subject to the terms of the
Inter-Creditor Agreement.
1.19. "Senior Debt Holder" shall mean Heartland Partners, L.P. and CMC
Heartland Partners, individually or jointly.
1.20. "Settlement Agreement" shall mean that certain Confidential
Settlement Agreement and Release dated December 18, 2000 by and
among, inter alia, the Borrower, PG Design, Inc. and the Secured
Party.
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1.21. "UCC" shall mean the Uniform Commercial Code as the same may from
time to time be in effect in the State of Delaware and any
successor statute thereto.
1.22. Terms otherwise not specifically defined herein shall have the
meaning ascribed to them in the UCC.
2. Pledge and Grant of Junior Security Interest. To secure the prompt
payment, performance, satisfaction and discharge of the Obligations
(together with all reasonable costs and expenses of the Secured Party
incurred in connection with the enforcement of this Security Agreement
and the Amended Notes), the Grantor hereby pledges and grants to
Secured Party a lien on, and a security interest in, the Collateral.
3. Value of Collateral.
3.1. For so long as any of the Amended Notes are outstanding, the
"Total Indebtedness" (as defined below) shall not exceed 90% of
the Collateral Value (as defined below) (the "Collateral Value
Ratio"). As used herein, "Total Indebtedness" shall mean,
collectively, the sum of (i) the principal amount of the Amended
Notes then outstanding plus all accrued and unpaid interest
thereon, and (ii) the principal amount of all loans or advances
then outstanding under the Loan Agreements (as defined in the
Inter-Creditor Agreement) plus all accrued and unpaid interest
thereon, and (iii) any other loans, advances, extensions of
credit, or indebtedness (including all principal and all accrued
and unpaid interest thereon) then outstanding that may hereafter
be secured by the Collateral. Neither the Borrower nor the
Grantor shall incur any indebtedness secured by any interest in
the Collateral that would cause the Collateral Value Ratio to be
exceeded.
The value of the Collateral for purposes of this Security
Agreement (the "Collateral Value") shall be determined as of the
end of each fiscal quarter of the Borrower and the Grantor (the
"Valuation Date") as follows: Until any Additional Collateral or
Substitute Collateral has been pledged to the Secured Party in
accordance with the terms of this Security Agreement, the
Collateral Value shall be equal to the average of the value
attributed to the Collateral for the most recent fiscal quarter
of the Borrower and the Grantor (the "Most Recent Quarter") and
for each of the two fiscal quarters of the Borrower and the
Grantor immediately preceding the Most Recent Quarter, each such
value as set forth in the Borrower's applicable Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or, in the case of the
fourth quarter, the Borrower's Annual Report Pursuant to Section
13 or 15(d) of the Exchange Act, filed with the United States
Securities and Exchange Commission (the "SEC Reports").
Notwithstanding anything to the contrary herein, from the date of
this Security Agreement to, but excluding, the date on which the
applicable SEC Report for the fourth quarter of fiscal year 2000
is filed with the United States Securities and Exchange
Commission, the Collateral Value shall be equal to the average of
the value attributed to the Collateral for the Most Recent
Quarter and for the fiscal quarter of the Borrower and the
Grantor immediately preceding the Most Recent Quarter.
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Except as provided in the last sentence of the preceding
paragraph and for illustrative purposes only, if (a) the value
attributed to the Collateral for the Most Recent Quarter of the
Borrower and the Grantor in the applicable SEC Report is equal to
$9.5 million, and (b) the value attributed to Collateral for the
two fiscal quarters of the Borrower and the Grantor immediately
preceding the Most Recent Quarter in the applicable SEC Report is
equal to $8.0 million and $6.5 million, respectively, then the
Collateral Value would be equal to $8 million and, in accordance
with the Collateral Value Ratio, the Total Indebtedness could not
exceed $7.2 million.
The Collateral Value of any Substitute Collateral shall be as
agreed between the Borrower and the Secured Party or as
determined by the Arbitrator (as defined below) pursuant to
Section 4 of this Security Agreement and shall refer to the
readily saleable value of any Substitute Collateral.
3.2. If at any time it is determined that the Collateral Value has
declined with the result that the then current Total Indebtedness
exceeds 90% of the Collateral Value, the Borrower shall, at its
option, take any one or more (alone or in combination) of the
following actions: (a) cause the principal amount of the loans or
advances then outstanding under the Loan Agreements to be repaid
by an amount sufficient to comply with the Collateral Value
Ratio, or (b) cause the Borrower to prepay the then outstanding
Amended Note(s) by an amount sufficient to comply with the
Collateral Value Ratio, or (c) pledge additional collateral (the
"Additional Collateral") having readily saleable value sufficient
to comply with the Collateral Value Ratio.
In the event the Borrower elects to pledge Additional Collateral,
the type and liquidity of the Additional Collateral shall be
materially comparable to the Collateral, and shall be subject to
the approval of the Secured Party, which approval shall not be
unreasonably withheld or delayed. The Borrower shall deliver
written notice to the Secured Party (the "Additional Collateral
Notice") which shall (i) identify the proposed Additional
Collateral, (ii) set forth its readily saleable value and include
information that supports the value thereof, (iii) provide
information concerning the liquidity of the Additional
Collateral, (iv) identify ownership of the Additional Collateral,
and (v) include such other information as the Borrower deems
necessary or desirable or as is reasonably requested by the
Secured Party. In the event of a dispute concerning whether the
Secured Party has unreasonably withheld or delayed its approval
of any proposed Additional Collateral, the matter shall be
determined by the Arbitrator pursuant to Section 4 of this
Agreement.
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3.3. The parties hereby acknowledge that, as of the date hereof, the
equity of PG Design Electronics, Inc., Zecal Corp., and Solder
Station-One, Inc. (collectively, the "Other Subsidiaries") does
not have materially comparable liquidity to that of the
Collateral and does not therefore, as of the date hereof, qualify
as either Additional Collateral or Substitute Collateral (as
defined in Section 4 below). Notwithstanding the foregoing
acknowledgment, nothing shall preclude the Borrower in the future
from using the equity of one or more of the other Subsidiaries as
Additional Collateral or Substitute Collateral, as the case may
be, provided that as at such future time it is materially
comparable to the Collateral and the Secured Party consents to
such use at the Secured Party's sole discretion.
4. Substitution of Collateral; Determination of Collateral Value. Subject
to the terms of this Section 4 and provided that no Event of Default
has occurred and is continuing, the Borrower may, from time to time,
upon written notice to the Secured Party (the "Collateral Notice"),
replace the Collateral with substitute collateral (the "Substitute
Collateral"). The Collateral Notice shall (i) identify the Substitute
Collateral, (ii) set forth its readily saleable value and include
information that supports such value (which value shall not be less
than that of the Collateral), (iii) provide information concerning the
liquidity of the Substitute Collateral (which liquidity shall be
materially comparable to that of the Collateral), (iv) identify
ownership of the Substitute Collateral, and (v) include such other
information as the Borrower deems necessary or desirable or as is
reasonably requested by the Secured Party. Within l0 business days of
receipt of the Collateral Notice, the Secured Party shall provide to
the Borrower, in writing, any objection(s) (the "Notice of Objection")
the Secured Party may have with respect to the Substitute Collateral,
including the factual basis for the Secured Party's objection. The
failure to timely provide the Notice of Objection shall automatically
constitute acceptance by the Secured Party of the Substitute
Collateral. In the event that the Secured Party timely furnishes its
Notice of Objection, a senior executive of the Secured Party and the
Borrower shall promptly (but in no event later than the 5th business
day) thereafter meet to attempt to resolve the objection (the
"Objection") that is the subject of the Notice of Objection. In the
event the Objection cannot be resolved within 5 business days of
receipt by the Borrower of the Notice of Objection or in the event the
Borrower and the Secured Party cannot agree on the Collateral Value of
any Collateral within 5 business days of the Valuation Date or in the
event of a dispute concerning whether the Secured Party has
unreasonably withheld or delayed its approval of the proposed
Additional Collateral that is not resolved within 5 business days of
receipt of the Additional Collateral Notice by the Secured Party, the
matter shall be submitted to final and binding resolution (the
"Arbitration") by Xxxxxxxx Xxxxx & Company, Inc. (the "Arbitrator").
The Borrower and the Secured Party each agree that any Arbitration
shall be commenced and completed within 35 days of the date on which
the Notice of Objection was received by the Borrower, the Valuation
Date or the date on which the Additional Collateral Notice was received
by the Secured Party, as applicable. In connection with any
Arbitration, the Borrower and Secured Party shall disclose to each
other all facts and opinions upon which they intend to rely in support
of their respective positions. Such disclosure shall occur within a
sufficient time before any fact finding proceeding by the Arbitrator so
as to provide the other party with fair notice of, and a reasonable
opportunity to respond to, all such facts and opinions, subject to the
time limitations set forth above. The parties shall be entitled to
legal representation in the Arbitration if they so choose. The
Arbitrator's decision shall be in writing, shall state the basis of his
decision and shall be based upon the facts and opinions presented by
the parties. The Arbitrator shall have the authority to set specific
schedules and procedures for the Arbitration consistent with the
provisions of this Agreement.
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Each party shall bear all costs and expenses, including lawyers' and
accountants' fees, incurred by it in connection with the Arbitration.
The fees and expenses of the Arbitrator shall be shared equally by the
Borrower and the Secured Party.
Upon delivery of the Substitute Collateral without objection or upon
settlement of all objections in accordance with the terms hereof and,
in either case, upon the attachment and perfection of the Secured
Party's security interest in such Substitute Collateral with the same
priority as the Secured Party had in the Collateral, the Secured Party
agrees to take all action necessary to release (and document the
release of) its security interest in and to the Collateral.
Thereafter, the Substitute Collateral shall be deemed to be
"Collateral" for purposes of this Security Agreement, except as
specifically provided herein.
5. Subordination. Notwithstanding any security agreement(s) or other
agreements heretofore or hereafter entered into between the Secured
Party and the Grantor or any financing statement(s) heretofore or
hereafter filed against the Collateral, and notwithstanding the time or
order of filing, attachment or perfection, the Secured Party hereby
agrees that any security interest, lien, claim or right now or
hereafter asserted by the Secured Party with respect to any of the
Collateral shall be subject to the terms of the Inter-Creditor
Agreement and shall be junior and subordinated to the security interest
of the Senior Debt Holder now or hereafter acquired with respect to the
Collateral to the extent provided in the Inter-Creditor Agreement.
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6. Representations, Warranties and Covenants. The Grantor represents,
warrants and covenants that as of the date of execution of this
Agreement, and continuing until the occurrence of the Collateral
Release Event:
6.1. The Grantor is duly organized under the law of the State of
Delaware, and shall not change the state of its organization
without the prior consent of the Secured Party.
6.2. The Grantor is the sole owner of 100% of the Class B Limited
Partnership Interest, subject to a prior superior security
interest now existing or hereafter granted to the Senior Debt
Holder and a pari passu security interest now existing or
hereafter granted to the Pari Passu Debt Holders.
6.3. No certificate has been issued to represent the Class B Limited
Partnership Interest, and the Class B Limited Partnership
Interest is an uncertificated security within the meaning of
8-102(a)(18) of the UCC.
6.4. The Grantor has full power, authority and legal right to execute
this Security Agreement and to grant the Security Interest in the
Collateral to the Secured Party.
6.5. This Security Agreement has been duly executed and delivered by
the each of the Grantor and the Borrower and constitutes a legal,
valid and binding obligation of each of the Grantor and the
Borrower in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting
the rights and remedies of creditors generally.
6.6. The Grantor will not suffer or permit any security interests,
mortgages, pledges, liens, encumbrances or restrictions to attach
to the Collateral or transfer (including by operation of law) or
attempt to transfer any interest in the Collateral except as
permitted by this Security Agreement and the Inter-Creditor
Agreement.
6.7. The Partnership is the issuer of the Class B Limited Partnership
Interest.
6.8. The Class B Limited Partnership Interest is a security within the
meaning of 8- 102(a)(15) of the UCC.
6.9. Each of the Partnership and the Grantor has full power, authority
and legal right to execute the Control Agreement.
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6.10. The Control Agreement has been duly executed and delivered by
each of the Partnership and the Grantor and constitutes a legal,
valid and binding obligation of each of the Partnership and the
Grantor in accordance with its terms.
6.11. Upon execution and delivery of the Security Agreement and the
Control Agreement, the Secured Party will have a perfected
security interest in the Collateral.
7. Grantors' Powers; Redemption and Liquidation.
7.1. So long as an Event of Default shall not then exist, Grantor
shall be the only party entitled (a) to exercise for any purpose
any and all (i) voting rights and (ii) powers, and (b) to receive
any and all distributions, in each case arising from or relating
to the Collateral; provided, however, that the Grantor shall not
exercise such rights or powers in a manner that would, or consent
to any action of the Partnership that would be in contravention
of the provisions of, or constitute an Event of Default under,
this Security Agreement or the Amended Notes.
7.2. Notwithstanding anything herein to the contrary:
(A) Upon the redemption of the Class B Limited Partnership
Interest or the dissolution or liquidation (in whole or in part)
of the Partnership, if any sum is to be paid in redemption of the
Class B Limited Partnership Interest or as a liquidating
distribution or dividend or otherwise, or
(B) If any distribution of capital shall be made on the Class B
Limited Partnership Interest, or any shares, interests, warrants,
rights, obligations or other property shall be distributed upon
or with respect to the Collateral pursuant to a recapitalization
or reclassification of the capital of the Partnership, or
pursuant to the dissolution, liquidation (in whole or in part),
bankruptcy or reorganization of the Partnership, or pursuant to
the merger or consolidation of the Partnership with or into
another entity,
then any sum or any shares, interests, warrants, obligations,
rights or other property so paid or distributed shall be held by
the Secured Party or made subject to a control agreement or
otherwise as the parties agree to perfect the Secured Party's
security interest therein, shall otherwise be deemed to be
Collateral hereunder and shall be subject to the Inter-Creditor
Agreement.
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8. Cure Period and Remedies upon Event of Default. Notwithstanding the
occurrence of an Event of Default, Grantor shall have 60 days from the
date of the Event of Default to fully cure and remedy such Event of
Default (the "Cure Period"). If an Event of Default is not cured
within the Cure Period, and the Collateral Release Event shall not have
occurred, Secured Party shall have all of its rights and remedies under
the Amended Notes and applicable law, and in addition thereto, but
subject at all times to any prior superior rights of the Senior Debt
Holder or any rights of the Pari Passu Debt Holders as provided in
InterCreditor Agreement:
8.1. The Secured Party, without obligation to resort to other
security, shall have the right at any time and from time to time
to sell, resell, assign and deliver, in its discretion, all or
any of the Collateral, and all right, title and interest, claim
and demand therein and right of redemption thereof, on any
securities exchange on which the Class B Limited Partnership
Interest may be listed, or at public or private sale, at Secured
Party's premises or elsewhere, for cash, upon credit or for
future delivery, and in connection therewith Secured Party may
grant options, Grantor hereby waiving and releasing any and all
equity or right of redemption. If any of the Collateral is sold
by Secured Party upon credit or for future delivery, Secured
Party shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such
failure, Secured Party may resell such Collateral. In no event
shall Grantor or Borrower be credited with any part of the
proceeds of sale of any Collateral until cash payment thereof has
actually been received by Secured Party. All proceeds of all
sales or other dispositions of any of the Collateral by the
Secured Party pursuant to this Section 8.01 shall be subject to
the priorities set forth in the Inter-Creditor Agreement.
8.2. Secured Party shall be entitled to exercise all rights and to
enjoy all benefits of the Grantor under the Collateral,
including, without limitation, the right to enforce any rights of
Grantor with respect to the Collateral, and to receive, retain
and apply to the payment of the Obligations any and all monies
paid upon or for the account of the Grantor with respect to the
Collateral.
8.3. Secured Party shall be entitled to exercise all voting power with
respect to the Collateral and to receive and retain, as
additional Collateral hereunder, any and all interest payments,
distributions or dividends at any time declared or paid upon any
of the Collateral.
8.4. The Secured Party may exercise any and all of the rights and
remedies of a secured party under the UCC.
8.5. The Secured Party shall be entitled to reimbursement for all of
the Secured Party's expenses and costs, including without
limitation reasonable fees and expenses of counsel, in connection
with the enforcement of this Security Agreement and the Amended
Notes.
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9. Power of Attorney. The Grantor hereby appoints the Secured Party as
its lawful attorney-in-fact to take, at the Secured Party's option and
at the Grantor's expense and liability, all actions which the Secured
Party may deem necessary or desirable to effectuate the Secured Party's
rights under this Security Agreement, including without limitation the
execution of any instrument which the Secured Party may deem necessary
or desirable in connection with the protection or enforcement of the
Secured Party's rights, interests and powers hereunder.
10. Protection of Security Interest.
10.1. The Grantor shall take any action necessary to preserve
redemption, conversion, warrant, preemptive or other rights (and
be aware of the dates limiting the exercise of such rights)
concerning the Collateral. The Secured Party may, but need not,
take any action to preserve such rights. No failure to act by the
Secured Party shall relieve the Grantor of its duties under this
section or in any way impair or discharge the Obligations or any
of them, and no failure to act by the Secured Party shall result
in any liability to the Grantor or the Borrower on the part of
the Secured Party. No omission by the Secured Party with respect
to any such matters shall in any way impair or discharge the
Obligations or any of them. Notwithstanding anything in this
Security Agreement to the contrary, the Secured Party shall have
no obligation to exercise any rights or privileges, and no
failure by the Secured Party to exercise any rights or privileges
shall constitute a default under this Security Agreement or
result in any liability to the Grantor on the part of the Secured
Party.
10.2. If the validity or priority of this Security Agreement or of any
rights, titles, security interests or other interests created or
evidenced hereby or thereby shall be attacked, endangered or
questioned, or if any legal proceedings are instituted with
respect thereto, the Grantor will give prompt written notice
thereof to the Secured Party and the Grantor at its own cost and
expense will diligently endeavor to cure any defect that may be
developed or claimed, and will take all necessary and appropriate
steps for the defense of such legal proceedings. The Secured
Party (whether or not named as a party to legal proceedings with
respect thereto) is hereby authorized and empowered to take such
additional steps as in its sole judgment and discretion may be
necessary or proper for the defense of any such legal proceedings
or the protection of the validity or priority of this Security
Agreement and the rights, titles, security interests and other
interests created or evidenced hereby or thereby, and all
expenses so incurred of every kind and character shall be a
demand obligation owing by the Grantor to the Secured Party and
shall bear interest from the date of expenditure until paid at
the rate of 10% per annum or, if lower, the highest rate of
interest permitted by law.
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11. Application of Securities Laws. The Grantor and the Borrower recognize
that the Secured Party's ability to effect a public sale of all or a
part of the Collateral may be limited by reason of certain prohibitions
contained in (a) the Securities Act of 1933, as amended, as now or
hereafter in effect, (b) the Exchange Act, or (c) applicable Blue Sky
or other state securities laws, as now or hereafter in effect, and the
Secured Party may be compelled to resort to one or more private sales
of the Collateral to a restricted group of purchasers who may be
obliged to agree, among other things, to acquire such Collateral for
their own account, for investment and not with a view to the
distribution or resale thereof. The Grantor and the Borrower agree
that private sales so made may be at prices and other terms less
favorable than if such Collateral were sold at public sales, and that
the Secured Party has no obligation to delay sale of any such
Collateral for the period of time necessary to permit the Partnership,
as issuer of such Collateral, even if the Partnership would agree, to
register such Collateral for public sale under such applicable
securities laws. The Grantor and the Borrower agree that private sales
made under the foregoing circumstances shall be deemed to have been
made in a commercially reasonable manner.
12. Remedies Cumulative. The remedies provided herein in favor of the
Secured Party shall not be deemed exclusive, but shall be cumulative,
and shall be in addition to all other remedies in favor of the Secured
Party existing at law or in equity, including without limitation, those
remedies specified in the Amended Notes.
13. No Waiver. No delay on the part of Secured Party or of any holder of
the obligations in exercising any of its options, powers or rights, or
partial or single exercise thereof, shall constitute a waiver thereof.
No waiver or amendment of any provision of this Agreement shall be
enforceable unless in writing and signed by Secured Party and unless it
expressly refers to the provision affected.
14. Termination of the Security Interest. Upon the occurrence of a
Collateral Release Event,
14.1. Secured Party shall terminate and release its Security Interest.
14.2. Grantor shall be entitled to the return of all of the Collateral
and the release by Secured Party of its security interest therein.
15. Conflict between Security Agreements. This Security Agreement and any
security agreement entered into between the Grantor or the Borrower and
a Senior Debt Holder (each a "Senior Debt Holder Security Agreement"),
whether prior to, as of or after the date of this Security Agreement,
shall be subject to the provisions of the Inter-Creditor Agreement and
to the extent any rights of the Secured Party under this Security
Agreement conflict or are inconsistent with any rights of a Senior Debt
Holder under a Senior Debt Holder Security Agreement, such conflict or
inconsistency shall be resolved in accordance with the provisions of
the Inter-Creditor Agreement.
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16. Acknowledgment Regarding Pari Passu Debt. Notwithstanding anything
herein to the contrary, the parties hereby acknowledge and agree that
the Secured Party's security interest in the Collateral hereunder shall
be senior to any Pari Passu Debt that is not incurred in compliance
with the Collateral Value Ratio.
17. Notice of Additional Indebtedness. The Borrower shall provide the
Secured Party with written notice of the amount, date, other material
terms and lender of any other loans, advances, extensions of credit or
indebtedness that may hereafter be secured by the Collateral within 5
business days of the date on which such loan, advance, extension of
credit or indebtedness was made or incurred.
18. Notices. All notices given pursuant to any provision of this Security
Agreement shall be in writing and hand delivered, with a receipt being
obtained therefor, or sent by United States registered or certified
mail, return receipt requested, postage prepaid, or by Federal Express
or other overnight courier service, or via telecopier, at the following
addresses or such other addresses as to which the parties hereto may be
notified in writing from time to time:
Grantor:
HTI Class B, LLC
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
With copy to:
Jenner & Block
Xxx XXX Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Borrower:
Heartland Technology, Inc.
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
With copy to:
Jenner & Block
Xxx XXX Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Secured Party:
PG Oldco, Inc.
c/o Columbo & Columbo
00000 Xxxxxxxx Xxxxxx, Xxxxx 00
X.X. Xxx 0000
Xxxxxxxxxx Xxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Xxxxx XxxXxxxxxx
Fax: (000) 000-0000
With copy to:
Colombo & Columbo
00000 Xxxxxxxx Xxxxxx, Xxxxx 00
X.X. Xxx 0000
Xxxxxxxxxx Xxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
13
Each party may designate by notice in writing a new or additional
address to which any notice, request, demand or communication may
thereafter be so given, served or sent. All notices shall be deemed to
have been given when personally received (if hand delivered) or when
received and confirmed (if telecopied) or five (5) days after deposit
in the mails (if mailed) or the next business day (if sent by Federal
Express or other overnight courier service); provided, that any notice
to Secured Party shall be effective only upon receipt.
19. Governing Law. This Security Agreement and the rights and obligations
of the Secured Party and Grantor hereunder shall be construed in
accordance with and governed by the internal laws of the State of
Delaware, cannot be changed orally, and shall bind and inure to the
benefit of Grantor and the Secured Party and their respective
successors and assigns.
20. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of
which taken together shall constitute but one and the same instrument.
21. Secured Party's Signature Not Necessary. The Grantor acknowledges that
this Security Agreement is and shall be effective upon execution by the
Grantor and delivery to and acceptance hereof by the Secured Party, and
it shall not be necessary for the Secured Party to execute any
acceptance hereof or otherwise to signify or express its acceptance
hereof to Grantor. This Security Agreement may be executed by facsimile
signature, and if this Security Agreement is executed by facsimile
signature, the Grantor agrees to furnish an original signature to the
Secured Party within ten business days after the Grantor's execution of
the Security Agreement by facsimile signature.
22. Headings. The article headings of this Security Agreement are for
convenience of reference only, and will not affect the meaning of any
of its provisions.
23. Guaranty. The Borrower hereby guarantees the performance by the
Grantor of all obligations of the Grantor under this Security Agreement.
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IN WITNESS WHEREOF, the Grantor, the Borrower and the Secured Party
have caused this Security Agreement to be duly executed as of the day and
year first above written.
PG OLDCO, INC.
By s/Xxxxx X. XxxXxxxxxx
Its President
HTI CLASS B, LLC
By s/Xxxxx Xxxxxxxx
Its__________________________________
HEARTLAND TECHNOLOGY, INC.
By s/Xxxxx Xxxxxxxx
Its__________________________________
15
EXHIBIT A
16
CONTROL AGREEMENT
This CONTROL AGREEMENT, dated as of December 18, 2000, (the "Control
Agreement") is entered into between Heartland Partners, L.P., a Delaware
limited liability partnership (the "Partnership"), HTI Class B, LLC, a
Delaware limited liability company (the "Grantor"), and PG Oldco, Inc., a
Michigan corporation (the "Secured Party").
1. The Grantor and the Secured Party have entered into a certain
Subordinated Security Agreement dated as of the date hereof (the
"Security Agreement") and the Secured Party, the Grantor, the
Partnership and CMC Heartland Partners have entered into that certain
Lien Subordination and Inter-Creditor Agreement dated as of the date
hereof (the "Inter-Creditor Agreement"). Unless otherwise defined
herein, all capitalized terms used in this Control Agreement shall have
the meaning ascribed to them in the Security Agreement. Pursuant to the
Security Agreement, the Grantor has granted the Secured Party a junior
security interest in the Collateral, including the Class B Limited
Partnership Interest in the Partnership (the "Pledged Collateral"). The
parties are entering into this Control Agreement to perfect the Secured
Party's security interest in the Pledged Collateral.
2. The Partnership represents and warrants to the Secured Party that:
2.1. The Partnership is the issuer of the Pledged Collateral.
2.2. The Pledged Collateral is a security within the meaning of
8-102(a)(15) of the UCC.
2.3. No certificate has been issued to represent the Pledged
Collateral, and the Pledged Collateral is an uncertificated
security within the meaning of 8-102(a)(18) of the UCC.
2.4. The Partnership does not know of any claim to or interest in the
Pledged Collateral, except for claims and interests of the Senior
Debt Holder and the Secured Party.
3. The Partnership shall comply with all notifications it receives
directing it to transfer or redeem the Pledged Collateral (each an
entitlement order) originated by the Secured Party without further
consent by the Grantor, subject to the terms and provisions of the
Inter-Creditor Agreement.
4. Except as otherwise provided in this section, the Partnership shall
comply with entitlement orders originated by the Grantor without
further consent by the Secured Party. If the Secured Party notifies
the Partnership that the Secured Party will exercise exclusive control
over the Pledged Collateral (a "notice of exclusive control"), the
Partnership shall cease complying with entitlement orders or other
directions concerning the Pledged Collateral originated by the Grantor
and distributing to the Grantor interest and dividends on property in
the Pledged Collateral. Until the Partnership receives a notice of
exclusive control, the Partnership may distribute to the Grantor all
interest and regular cash dividends on property in the Pledged
Collateral. Except as specifically provided in the immediately
preceding sentence, the Partnership shall not comply with any
entitlement order originated by the Grantor that would require the
Partnership to make a delivery to the Grantor or any other person of
all or any part of the Collateral.
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5. The Partnership shall not agree with any third party, other than the
Senior Debt Holder and, subject to Section 12 hereof, the Pari Passu
Debt Holders, that the Partnership will comply with entitlement orders
originated by the third party.
6. The Partnership shall send copies of all statements and confirmations
for the Pledged Collateral simultaneously to the Grantor and the
Secured Party. The Partnership shall use reasonable efforts promptly to
notify the Secured Party and the Grantor if any other person, other
than the Senior Debt Holder and the Pari Passu Debt Holders, claims
that it has a property interest in property in the Pledged Collateral
and that it is a violation of that person's rights for anyone else to
hold, transfer, or deal with the property.
7. Except for permitting a withdrawal, delivery, or payment in violation
of section 4, the Partnership will not be liable to the Secured Party
for complying with entitlement orders from the Grantor that are
received by the Partnership before the Partnership receives and has a
reasonable opportunity to act on a notice of exclusive control. The
Partnership shall not be liable to the Grantor for complying with a
notice of exclusive control or with entitlement orders originated by
the Secured Party, even if the Grantor notifies the Partnership that
the Secured Party is not legally entitled to issue the entitlement
order or notice of exclusive control, unless the Partnership takes the
action after it is served with an injunction, restraining order, or
other legal process enjoining it from doing so, issued by a court of
competent jurisdiction, and had a reasonable opportunity to act on the
injunction, restraining order or other legal process, or the
Partnership acts in collusion with the Secured Party in violating the
Grantor's rights.
8. This Control Agreement does not create any obligation of the
Partnership except for those expressly set forth in this Control
Agreement. In particular, the Partnership shall not be obligated to
investigate whether the Secured Party is entitled under the Secured
Party's agreements with the Grantor to give an entitlement order or a
notice of exclusive control. The Partnership may rely on notices and
communications it believes given by the appropriate party.
9. The Grantor shall indemnify the Partnership, its officers, directors,
employees, and agents against claims, liabilities, and expenses arising
out of this Control Agreement (including reasonable attorneys' fees and
disbursements), except to the extent the claims, liabilities, or
expenses are caused by the Partnership's gross negligence or willful
misconduct.
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10. The Secured Party may terminate this Control Agreement by notice to the
Partnership and the Grantor. The Partnership shall not terminate this
Control Agreement at any time prior to the full satisfaction of all
obligations to the Secured Party under the PG Loan Agreements (as that
term is defined in the Inter-Creditor Agreement).
11. If the Secured Party notifies the Partnership that the Secured Party's
security interest in the Pledged Collateral has terminated, this
Security Agreement will immediately terminate. Sections 8 and 9 will
survive termination of this Control Agreement.
12. The Grantor and the Partnership shall not enter into any control
agreement with any Pari Passu Debt Holder without the prior written
consent of the Secured Party which consent will be given so long as the
related Pari Passu Debt (and any future advance in respect thereof, is
incurred in compliance with the Collateral Value Ratio.
13. This Control Agreement shall be governed by the laws of the State of
Delaware. The Partnership and the Grantor may not change the law
governing the Pledged Collateral without the Secured Party's express
written agreement.
14. This agreement is the entire agreement, and supersedes any prior
agreements and contemporaneous oral agreements, of the parties
concerning its subject manner
15. No amendment of, or waiver of a right under, this Control Agreement
will be binding unless it is in writing and signed by the party to be
charged.
16. To the extent a provision of this Control Agreement is unenforceable,
this Control Agreement will be construed as if the unenforceable
provision were omitted.
17. All property credited to the Pledged Collateral will be treated as
financial assets under Article 8 of the Delaware Uniform Commercial
Code.
18. This Control Agreement and any control agreement entered into between
the Grantor, the Partnership and a Senior Debt Holder (each a "Senior
Debt Holder Control Agreement"), whether prior to, as of or after the
date of this Control Agreement, shall be subject to the provisions of
the Inter-Creditor Agreement and to the extent that any rights of the
Secured Party under this Control Agreement conflict or are inconsistent
with the rights of a Senior Debt Holder under a Senior Debt Holder
Control Agreement, such conflict or inconsistency shall be resolved in
accordance with the provisions of the Inter-Creditor Agreement.
19
19. A successor to or assignee of the Secured Party's rights and
obligations under the Security Agreement will succeed to the Secured
Party's rights arid obligations under this Control Agreement.
20. A notice or other communication to a party under this Control Agreement
will be in writing, will be sent to the party's address set forth below
or to such other address as the party may notify the other parties and
will be effective on receipt.
IN WITNESS WHEREOF, the Partnership, Grantor and Secured Party have
caused this Control Agreement to be duly executed as of the day and year
first above written.
HEARTLAND PARTNERS, L.P.
By: HTI Interests, LLC
Its General Partner
By___________________________________
Its___________________________________
PG OLDCO, INC.
By:___________________________________
Its___________________________________
HTI CLASS B, LLC
By:___________________________________
Its___________________________________
20
