EXHIBIT 4.9
GRANT PRIDECO CANADA LTD.
as Corporation
and
DEUTSCHE BANK AG, CANADA BRANCH
as Agent
--------------------------------------------------------------------------------
SECURITY AGREEMENT
DECEMBER 19, 2002
--------------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE 1
SECURITY
Section 1.1 Terms Incorporated by Reference........................................................2
Section 1.2 Grant of Security......................................................................2
Section 1.3 Obligations Secured....................................................................4
Section 1.4 Further Security.......................................................................5
Section 1.5 Attachment.............................................................................5
Section 1.6 Scope of Security Interest.............................................................5
Section 1.7 Care and Custody of Collateral.........................................................6
Section 1.8 Corporation Remains Liable.............................................................6
Section 1.9 Dealings in the Ordinary Course........................................................6
Section 1.10 Negative Pledge........................................................................7
Section 1.11 Continuing Security....................................................................7
Section 1.12 Notification of Account Debtors........................................................7
Section 1.13 No Release.............................................................................7
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1 Representations and Warranties.........................................................8
Section 2.2 Additional Covenants...................................................................9
Section 2.3 Special Covenants With Respect to Equipment and Inventory.............................11
Section 2.4 Special Covenants with respect to Receivables.........................................12
Section 2.5 Special Covenants with Respect to the Intellectual Property...........................13
ARTICLE 3
ENFORCEMENT
Section 3.1 Enforcement...........................................................................16
Section 3.2 Remedies..............................................................................16
Section 3.3 Additional Rights.....................................................................17
Section 3.4 Receiver's Powers.....................................................................18
Section 3.5 Appointment of Attorney...............................................................19
Section 3.6 Dealing with the Collateral...........................................................19
Section 3.7 Standards of Sale.....................................................................20
Section 3.8 Dealings by Third Parties.............................................................20
ARTICLE 4
GENERAL
Section 4.1 Discharge.............................................................................21
Section 4.2 Loan Agreement Governs................................................................21
Section 4.3 Amendments, etc.......................................................................21
Section 4.4 Waivers...............................................................................22
(i)
Section 4.5 No Merger.............................................................................22
Section 4.6 Further Assurances....................................................................22
Section 4.7 Supplemental Security.................................................................22
Section 4.8 Notices...............................................................................22
Section 4.9 Successors and Assigns................................................................22
Section 4.10 Gender and Number.....................................................................23
Section 4.11 Headings, etc.........................................................................23
Section 4.12 Severability..........................................................................23
Section 4.13 Governing Law.........................................................................23
(ii)
SECURITY AGREEMENT
Security Agreement (this "
SECURITY AGREEMENT") dated December 19, 2002
made by Grant Prideco Canada Ltd. (the "CORPORATION") to and in favour of
Deutsche Bank AG, Canada Branch, as Canadian agent (the "AGENT") for the
Canadian Lenders referred to below.
RECITALS:
(a) The Canadian Lenders (as that term is defined in the Loan
Agreement hereinafter defined and referred to) as may from
time to time be parties to the Loan Agreement have agreed to
make credit facilities including, without limitation, the
Canadian Term Loans (as that term is defined in the Loan
Agreement) available to the Corporation on the terms and
conditions contained in a credit agreement among Grant
Prideco, LP, XL Systems, L.P., Texas Arai, Inc., Tube-Alloy
Corporation, Star Operating Company, Xxxx-Hycalog Operating,
L.P. and the Corporation, as Borrowers (as that term is
defined in the Loan Agreement hereinafter defined and referred
to) with Grant Prideco, LP acting in its capacity as US Funds
Administrator (as that term is defined in the Loan Agreement
hereinafter defined and referred to) for the Borrowers, and
the Corporation acting in its capacity as Canadian Funds
Administrator (as that term is defined in the Loan Agreement
hereinafter defined and referred to) for the Borrowers, with
Grant Prideco, Inc., as a guarantor, each of the Lenders from
time to time party hereto (as that term is defined in the Loan
Agreement hereinafter defined and referred to), Deutsche Bank
Trust Company Americas, acting in its capacity as contractual
representative for the US Lenders (US Lenders, as that term is
defined in the Loan Agreement hereinafter defined and referred
to and Deutsche Bank Trust Company Americas, acting in its
capacity as contractual representative for the US Lenders,
referred to as the "US AGENT") and the Agent, acting in its
capacity as contractual representative of the Canadian
Lenders, Transamerica Business Capital Corporation, as
Document Agent (as that term is defined in the Loan Agreement
hereinafter defined and referred to), XX Xxxxxx Xxxxx Bank, as
Co-Syndication Agent (as that term is defined in the Loan
Agreement hereinafter defined and referred to) and Xxxxxxx
Xxxxx Capital, as Co-Syndication Agent (as that term is
defined in the Loan Agreement hereinafter defined and referred
to) (such credit agreement as it may at any time or from time
to time be amended, supplemented, restated or replaced, the
"LOAN AGREEMENT");
(b) The Agent is to hold for its own benefit and is to act as
agent to hold for itself and for the rateable benefit of the
Canadian Lenders any and
-2-
all security for the payment and performance of the
obligations of the Corporation under the Loan Agreement and
the other Credit Documents (as such term is defined in the
Loan Agreement); and
(c) The Corporation has agreed to execute and deliver this
Security Agreement to and in favour of the Agent as security
for the payment and performance of the Corporation's
obligations to the Canadian Lenders and the Agent under the
Loan Agreement and other Credit Documents in respect of the
Canadian Term Loans.
In consideration of the foregoing and other good and valuable
consideration (the receipt and adequacy of which are acknowledged), the
Corporation agrees as follows:
ARTICLE 1
SECURITY
SECTION 1.1 TERMS INCORPORATED BY REFERENCE
Terms defined in the Personal Property Security Act (
Alberta) (as
amended from time to time, the "PPSA") and used in this
Security Agreement shall
have the same meanings attributed to such terms in the PPSA. For all purposes of
this
Security Agreement, capitalized terms defined in the Loan Agreement and
used in this
Security Agreement and not otherwise defined in this
Security
Agreement shall herein have the meanings provided to those terms in the Loan
Agreement.
SECTION 1.2 GRANT OF SECURITY
As general and continuing security for the payment and performance of
the Obligations (as defined herein), the Corporation hereby grants to the Agent,
for its own benefit and as agent and for the rateable benefit of the Canadian
Lenders, a security interest in all of the present and after acquired personal
property of the Corporation and all of the present and future undertaking,
assets and property of the Corporation (collectively, the "COLLATERAL"), and as
further general and continuing security for the payment and performance of the
Obligations, the Corporation hereby assigns the Collateral to the Agent for its
own benefit and as agent and for the rateable benefit of the Canadian Lenders
and mortgages and charges the Collateral to the Agent, for its own benefit and
as agent and for the rateable benefit of the Canadian Lenders (collectively, the
"SECURITY INTEREST"). Without limiting the generality of the foregoing, the
Collateral shall include all right, title and interest that the Corporation now
has, may be possessed of, entitled to, or acquire, by way of amalgamation or
otherwise, now or hereafter or may hereafter have in all property of the
following kinds:
-3-
(1) ACCOUNTS RECEIVABLE: all present and after-acquired debts, demands,
accounts, claims and choses in action which are now, or which may
hereafter become, due, owing or accruing due to the Corporation
(collectively, the "RECEIVABLES");
(2) INVENTORY: all present and after-acquired inventory of whatever kind
and wherever situated including, without limiting the generality of the
foregoing, all goods held for sale, lease or resale, goods furnished or
to be furnished to third parties under contracts of lease, consignment
or service, goods that are work in progress or raw materials used or
consumed in the business of the Corporation (collectively, the
"INVENTORY");
(3) EQUIPMENT: all present and after-acquired equipment, machinery,
fixtures, furniture, plants, vehicles and other tangible personal
property which is not Inventory (collectively, the "EQUIPMENT");
(4) CHATTEL PAPER: all chattel paper;
(5) DOCUMENTS OF TITLE: all warehouse receipts, bills of lading and other
documents of title, whether negotiable or not;
(6) SECURITIES AND INSTRUMENTS: all shares, stock, warrants, bonds,
debentures, debenture stock and other securities and all instruments
other than those excluded by Section 7.19 of the Loan Agreement
(collectively, the "SECURITIES");
(7) INTANGIBLES: all present and after-acquired intangibles not described
in Section 1.2(1) including, without limiting the generality of the
foregoing, all other industrial property, security interests, goodwill,
choses in action and other contractual benefits and all trademarks,
trademark registrations and pending trademark applications, patents,
pending patent applications, copyrights and copyright registrations and
other intellectual property (such trademarks, trademark registrations
and pending trademark applications, patents, pending patent
applications, copyrights and copyright registrations and all other
intellectual property collectively, the "INTELLECTUAL PROPERTY");
(8) MONEY: all coins or bills or other medium of exchange adopted for use
as part of the currency of Canada or of any foreign government;
(9) BOOKS, RECORDS, ETC.: all books, papers, accounts, invoices, letters,
files, charts, plans, drawings, specifications, manuals, documents and
other records in any form recording, evidencing or relating to any of
the property described in Sections 1.2(1) to (8) inclusive, and all
contracts, securities, instruments, licences and other rights and
benefits in respect thereof;
-4-
(10) SUBSTITUTIONS. ETC.: all replacements of, substitutions for and
increases, additions and accessions to any of the property described in
Sections 1.2(1) to (9) inclusive; and
(11) PROCEEDS: all proceeds of the property described in Sections 1.2(1) to
(10) inclusive including, without limiting the generality of the
foregoing, all personal property in any form, or fixtures derived
directly or indirectly from any dealing with such property or that
indemnifies or compensates for the loss of or damage to such property,
inclusive of the proceeds of such proceeds.
SECTION 1.3 OBLIGATIONS SECURED
(a) The Security Interest granted hereby secures the payment and
performance of all debts, liabilities and obligations at any
time or from time to time due or accruing due and owing by or
otherwise payable by the Corporation to the Agent or the
Canadian Lenders under or pursuant to the Loan Agreement and
any other agreements executed by the Corporation in connection
therewith, including this
Security Agreement and the Credit
Documents to which the Corporation is a party, with respect to
the Canadian Term Loans and including all charges and fees of
the Canadian Lenders and the Agent, whether present or future,
direct or indirect, absolute or contingent, matured or
unmatured, however or wherever incurred, and in any currency,
and whether incurred by the Corporation alone or with another
or others and whether as principal or surety (collectively,
and together with the expenses, costs and charges set out in
1.3(b), herein the "OBLIGATIONS"). For greater certainty,
Obligations shall not include any debts, liabilities or
obligations payable by the Corporation with respect to the
Canadian Revolving Loans.
(b) All expenses, costs and charges incurred by or on behalf of
the Agent and the Canadian Lenders in connection with this
Security Agreement, the Security Interest or the Collateral,
including all legal fees, court costs, receiver's or agent's
remuneration and other expenses of taking possession of,
repairing, protecting, insuring, preparing for disposition,
realizing, collecting, selling, transferring, delivering or
obtaining payment of the Collateral or other lawful exercises
of the powers conferred by the Loan Agreement, and of taking,
defending or participating in any action or proceeding in
connection with any of the foregoing matters or otherwise in
connection with the Canadian Lenders' or the Agent's interest
in any Collateral shall be added to and form a part of the
Obligations.
-5-
SECTION 1.4 FURTHER SECURITY
The Corporation also grants to the Agent, for its own benefit and as
agent for the rateable benefit of the Canadian Lenders, as further security for
all of the Obligations, a security interest in all of its right, title and
interest in and to all property of the Corporation in the possession of or
deposited with or in the custody of the Agent or any Affiliate of the Agent or
any representative, agent or correspondent of the Agent. For purposes of this
Security Agreement, any property in which the Agent or any such Affiliate has
any security or title retention interest shall be deemed to be in the custody of
the Agent or of such Affiliate.
SECTION 1.5 ATTACHMENT
(a) The Corporation acknowledges that (i) value has been given,
(ii) it has rights in the Collateral (other than
after-acquired Collateral),(iii) it has not agreed to postpone
the time of attachment of the Security Interest, and (iv) it
has received a duplicate original copy of this Security
Agreement. The Security Interest is intended to, and shall,
attach to the existing Collateral when the Corporation signs
this Security Agreement, and to all Collateral subsequently
acquired by the Corporation immediately upon the Corporation
acquiring rights in such Collateral.
(b) If the Corporation acquires Collateral consisting of chattel
paper, instruments, securities or negotiable documents of
title (collectively, "NEGOTIABLE COLLATERAL"), the Corporation
will, upon the Security Interest becoming enforceable and at
the request of the Agent, deliver to the Agent the Negotiable
Collateral and the Corporation shall, at the request of the
Agent: (i) cause the transfer of the Negotiable Collateral to
the Agent to be registered wherever, in the opinion of the
Agent, such registration may be required or advisable, (ii)
duly endorse the same for transfer in blank or as the Agent
may direct, and (iii) immediately deliver to the Agent any and
all consents or other documents which may be necessary to
effect the transfer of the Negotiable Collateral to the Agent
or any third party.
(c) The Corporation will execute and deliver, at its own expense,
from time to time, amendments to this Security Agreement or
additional security agreements as may be required by the
Agent.
SECTION 1.6 SCOPE OF SECURITY INTEREST
The Security Interest shall not:
(a) extend or apply to the last day of the term of any lease,
sublease or any agreement therefore applicable to all
Collateral now held or hereafter
-6-
acquired by the Corporation, but upon enforcement of the
Security Interest, the Corporation shall thereafter stand
possessed of such last day and shall hold it in trust for the
Agent to assign the same to any person acquiring such term in
the course of the enforcement of the Security Interest; or
(b) extend to, and the Collateral shall not include any agreement,
right, franchise, licence or permit (the "CONTRACTUAL RIGHTS")
to which the Corporation is a party or of which the
Corporation has the benefit, to the extent that the creation
of the Security Interest herein would constitute a breach of
the terms of, or permit any person to terminate, the
Contractual Rights, but the Corporation shall hold its
interest therein in trust for the Agent to assign the same to
any person acquiring all or any portion of the Collateral in
the course of enforcement of the Security Interest.
SECTION 1.7 CARE AND CUSTODY OF COLLATERAL
(a) The Agent shall have no obligation to keep Collateral in its
possession identifiable.
(b) The Agent may, after the Security Interest shall have become
enforceable, (i) notify any person obligated on an account or
on chattel paper or any obligor on an instrument to make
payments to the Agent whether or not the Corporation was
previously making collections on such accounts, chattel paper
or instruments, and (ii) assume control of any proceeds
arising from the Collateral.
SECTION 1.8 CORPORATION REMAINS LIABLE
Notwithstanding the provisions of this Security Agreement: (i) the
Corporation shall remain liable to perform all of its duties and obligations in
regard to the Collateral (including, without limitation, all of its duties and
obligations arising under any leases, licenses, permits, reservations,
contracts, agreements, instruments, contractual rights and governmental orders,
authorizations, licenses and permits, if any, now or hereafter pertaining
thereto) to the same extent as if this Security Agreement had not been executed;
(ii) the exercise by or on behalf of the Agent of any of its rights and remedies
under or in regard to this Security Agreement shall not release the Corporation
from such duties and obligations; and (iii) the Agent nor the Canadian Lenders
shall have no liability for such duties and obligations by reason of the
execution and delivery of this Security Agreement.
SECTION 1.9 DEALINGS IN THE ORDINARY COURSE
Subject to Section 1.10 hereof and until the Security Interest becomes
enforceable, the Corporation may dispose of or deal with the Collateral in the
-7-
ordinary course of business and for the purpose of carrying on the same, so that
purchasers thereof or parties dealing with the Corporation take title thereto
free and clear of the Security Interest, provided that such action is not in
breach of any covenant in this Security Agreement or any covenant of the
Corporation in the Loan Agreement or any of the other Credit Documents to which
the Corporation is a party. In the event of any such disposition, and provided
that such disposition is not made in contravention of any provision in the Loan
Agreement or any of the other Credit Documents to which the Corporation is a
party, the Agent will, at the written request of the Corporation, release the
Security Interest in the Collateral which has been disposed of pursuant to such
disposition.
SECTION 1.10 NEGATIVE PLEDGE
The Corporation shall not, without the prior written consent of the
Agent, or as otherwise permitted by the Loan Agreement, create, issue, incur,
assume, have outstanding or permit to exist, any mortgage, charge, pledge, lien,
assignment by way of security, security interest or other encumbrance on any
part of the Collateral, other than Permitted Liens.
SECTION 1.11 CONTINUING SECURITY
This Security Agreement shall be a continuing obligation, shall cover
and secure any ultimate balance of the Obligations owing to the Agent or the
Canadian Lenders, and shall be operative and binding notwithstanding that at any
time or times the Obligations may be zero, or that any payments from time to
time may be made to the Agent or the Canadian Lenders, or any settlements of
account effected, or any other thing whatsoever done, suffered or permitted, or
any other action short of complete and irrevocable payment of all the
Obligations and any other amounts payable hereunder.
SECTION 1.12 NOTIFICATION OF ACCOUNT DEBTORS
Upon the occurrence and during the continuance of an Event of Default,
the Agent may give notice to any person obligated to the Corporation or other
person liable to the Corporation in respect of a Receivable or intangible to
make all further payments to the Lender, and, upon notice to the Corporation
thereof, any payment or other proceeds of Collateral received by the Corporation
from account debtors or from any other person liable to the Corporation after
any such notice is given by the Agent shall be held by the Corporation in trust
for the Agent and paid over to the Agent on request.
SECTION 1.13 NO RELEASE
The loss, injury or destruction of the Collateral shall not operate in
any manner to release or discharge the Corporation from any of its liabilities
to the Agent.
-8-
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1 REPRESENTATIONS AND WARRANTIES
The Corporation hereby represents and warrants to the Agent and the
Canadian Lenders that:
(1) the Corporation has good title to, or a valid leasehold interest in, or
a valid contractual agreement to use, all of the Collateral owned by
the Corporation free and clear of any Lien, except for a Permitted
Lien. Except as expressly permitted by the Loan Agreement and such as
may have been filed in favour of Agent or the Canadian Lenders relating
to this Security Agreement, no effective financing statement or other
instrument similar in effect under the law of any jurisdiction covering
all or any part of the Collateral is on file in any filing, registry or
recording office;
(2) all certificates or instruments (excluding cheques and drafts)
evidencing, comprising or representing the Collateral have been
delivered to the Agent duly endorsed or accompanied by duly executed
instruments of transfer or assignment in blank. Notwithstanding,
anything to the contrary in the preceding sentence, (a) the Corporation
is not obligated to deliver to the Agent negotiable instruments of
title unless an Event of Default has occurred and is continuing and the
Agent requests delivery of such items, and (b) the Corporation is not
obligated to deliver to the Agent Letters of Credit unless requested by
the Agent. If requested by the Agent, the Corporation will cause all
Letters of Credit to be delivered to the Agent. If the Corporation is
required to deliver Letters of Credit to the Agent, then the
Corporation will notify the Agent from time to time of its desire to
make a draw on a Letter of Credit and its request for return of the
Letter of Credit for such purposes. The Agent shall, promptly after
receipt of any such request, return the requested Letter of Credit to
the Corporation. The Corporation shall within five (5) business days
after receipt of such Letter of Credit either, present such Letter of
Credit to the issuing bank for draw thereon or return the Letter of
Credit to the Agent. If the Letter of Credit is partially (rather than
fully) drawn, the Corporation shall return the Letter of Credit to the
Agent within three (3) business days after submitting the Letter of
Credit for such partial draw (or if the Letter of Credit is retained by
the issuing bank, then within three (3) business days after the Letter
of Credit is returned to the Corporation by the issuing bank);
-9-
(3) with respect to the Intellectual Property:
(a) A true and complete list of all trademark registrations and
trademark applications owned by the Corporation, in whole or
in part, is set forth in Schedule 2.1(3)(a);
(b) A true and complete list of all patents owned by the
Corporation, in whole or in part, is set forth in Schedule
2.1(3)(b);
(c) A true and complete list of all copyrights and copyright
registrations and applications for copyright registrations
owned by the Corporation, in whole or in part, is set forth in
Schedule 2.1(3)(c);
(d) The Corporation is not aware of any pending or threatened
claim by any third party that any of the Intellectual Property
owned, held or used by the Corporation is invalid or
unenforceable; and
(e) No effective security interest or other Lien covering all or
any part of the Intellectual Property is on file in the
Canadian Intellectual Property Office.
(4) the Security Interest in the Collateral granted to the Agent for its
own benefit and as agent and for the rateable benefit of the Canadian
Lenders hereunder creates a valid security interest in the Collateral,
securing the payment of Obligations as provided in Section 1.3 hereof.
Upon the filing of financing statements naming the Corporation as
"debtor", naming the Agent as "secured party" and describing the
Collateral pursuant to the PPSA and the Personal Property Security Act
(Newfoundland) and the filing of a financing statement naming the
Corporation as "debtor" and the Agent as "secured party" pursuant to
the Personal Property Security Act (Nova Scotia), the Security Interest
in the Collateral granted hereunder will constitute a perfected
security interest in all Collateral now owned and hereafter acquired by
the Corporation enforceable against the Corporation prior to all other
Liens (except for Permitted Liens), and all other documents and
instruments for all filings, registrations and recordings and other
actions necessary or desirable to perfect and protect such Security
Interest will have been duly made or taken.
SECTION 2.2 ADDITIONAL COVENANTS
The Corporation covenants with the Agent that the Corporation shall:
(1) ensure that the representations and warranties set forth in Section 2.1
shall be true and correct at all times;
-10-
(2) not permit the Collateral to be affixed to real or personal property so
as to become a fixture or accession without the prior written consent
of the Agent, except where the Collateral is affixed to real or
personal property which is a Permitted Lien or which is also subject to
a security interest in favour of the Agent and which is not subject to
a security interest in favour of any other person, except for a
Permitted Lien;
(3) not change its name or, in addition to and without limiting the
provisions of the Loan Agreement, shall not amalgamate with any other
corporation, continue to, reorganize or reincorporate itself under any
other jurisdiction other than the Province of
Alberta without (i) first
giving fifteen (15) days notice to the Agent of its intention to do so
and providing such other information in connection therewith as the
Agent may request including, without limitation, the new name and the
names of all amalgamating corporations and the date when such new name
or amalgamation is to become effective; and (ii) taking all action
satisfactory to the Agent with respect to the new name or jurisdiction
to maintain the Security Interest of the Agent in the Collateral
intended to be granted and perfected hereby at all times fully
perfected and in full force and effect;
(4) pay to the Agent forthwith upon demand all reasonable costs, charges
and expenses (including, without limiting the generality of the
foregoing, all legal, receiver's and accounting fees and expenses)
incurred by or on behalf of the Agent or the Canadian Lenders in
connection with the preparation, execution and perfection of this
Security Agreement and the carrying out of any of the provisions of
this Security Agreement including, without limiting the generality of
the foregoing, protecting and preserving the Security Interest and
enforcing by legal process or otherwise the remedies provided herein;
and all such costs and expenses shall be added to and form part of the
Obligations secured hereunder;
(5) if the Agent gives value to enable the Corporation to acquire rights in
or for the use of any Collateral, use such value for such purposes; and
(6) except as expressly permitted by the Loan Agreement, pay promptly when
due all property and other taxes, assessments and governmental charges
or levies imposed upon, and all claims (including claims for labour,
services, materials and supplies) against, the Collateral, except to
the extent the validity thereof is being contested in good faith;
provided that the Corporation shall in any event pay such taxes,
assessments, charges, levies or claims not later than five (5) days
prior to the date of any proposed sale under any judgment, writ or
warrant of attachment entered or filed against the Corporation or any
of the Collateral as a result of the failure to make such payment.
-11-
(7) if the Corporation shall hereafter obtain rights to any new
Intellectual Property or become entitled to the benefit of (a) any
patent application or patent or any reissue, division, continuation,
renewal, extension or continuation-in-part of any patent or any
improvement of any patent or (b) any copyright registration,
application for copyright registration or renewals or extension of any
copyright, then in any such case, the provisions of this Security
Agreement shall automatically apply thereto. The Corporation shall
notify the Agent in writing, on the quarterly basis prescribed in
Section 7.1(b) of the Loan Agreement, of any of the foregoing rights
acquired by the Corporation after the date hereof and of (a) any
trademark registrations issued or application for a trademark
registration or application for a patent made, and (b) any copyright
registrations issued or applications for copyright registration made,
in any such case, after the date hereof. Promptly within thirty (30)
days after the filing of an application for any (i) trademark
registration; (ii) patent; and (iii) copyright registration, the
Corporation shall execute and deliver to the Agent and record in all
places where a security interest is recorded a Confirmation of Security
Interest in Intellectual Property (a "CONFIRMATION"); provided, if, in
the reasonable judgment of the Corporation, after due inquiry, filing
such Confirmation would result in the grant of a trademark registration
or copyright registration in the name of the Agent, the Corporation
shall give written notice to the Agent as soon as reasonably
practicable and the filing shall instead be undertaken as soon as
practicable but in no case later than immediately following the grant
of the applicable trademark registration or copyright registration, as
the case may be. Upon delivery to the Agent of a Confirmation,
Schedules 2.1(3)(a), 2.1(3)(b) and 2.1(3)(c) hereto shall be deemed
modified to include reference to any right, title or interest in any
existing Intellectual Property or any Intellectual Property included in
such Confirmation. The Corporation hereby authorizes the Agent to
modify this Security Agreement without the signature or consent of the
Corporation by attaching Schedules 2.1(3)(a), 2.1(3)(b) and 2.1(3)(c)
as applicable, that have been modified to include such Intellectual
Property or to delete any reference to any right, title or interest in
any Intellectual Property in which the Corporation no longer has or
claims any right, title or interest; provided, the failure of the
Corporation to execute a Confirmation with respect to any additional
Intellectual Property pledged pursuant to this Security Agreement shall
not impair the security interest of the Agent therein or otherwise
adversely affect the rights and remedies of the Agent hereunder with
respect thereto.
SECTION 2.3 SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
The Corporation shall:
-12-
(a) keep correct and accurate records of Inventory owned by the Corporation
itemizing and describing the kind, type and quality of such Inventory,
such Corporation's cost therefor and (where applicable) the current
list prices for such Inventory;
(b) if any Inventory is in possession or control of any of the
Corporation's agents or processors, upon the occurrence and
continuation of an Event of Default, instruct such agent or processor
to hold all such Inventory for the account of the Agent and subject to
the instructions of the Agent;
(c) maintain insurance with respect to the Equipment and Inventory in
accordance with the terms of the Loan Agreement; and
(d) upon (i) the occurrence and during the continuation of any Event of
Default or (ii) the actual or constructive loss of any Equipment or
Inventory, all insurance payments in respect of such Equipment or
Inventory shall be paid to and applied against the Obligations by the
Agent as specified in the Loan Agreement.
SECTION 2.4 SPECIAL COVENANTS WITH RESPECT TO RECEIVABLES
(a) The Corporation shall, for not less than three (3) years from the date
on which each Receivable of the Corporation arose, maintain (i) records
of such Receivable in such detail, form and scope as is consistent with
good business practice, and (ii) all documentation relating thereto as
is consistent with good business practice.
(b) Except as otherwise provided in this Section 2.4(b), the Corporation
shall continue to collect, at its own expense, all amounts due or to
become due to the Corporation or in any way relate to the Receivables.
In connection with such collections, the Corporation may take (and,
upon the occurrence and during the continuance of an Event of Default
at the Agent's direction, shall take) such action as the Corporation or
the Agent may deem necessary or advisable to enforce collection of
amounts due or to become due under the Receivables; provided, however,
that the Agent shall have the right at any time, upon the occurrence
and during the continuance of an Event of Default and upon written
notice to the Corporation of its intention to do so, to notify the
account debtors or obligors under any Receivables of the assignment of
such Receivables to the Agent and to direct such account debtors or
obligors to make payment of all amounts due or to become due to the
Corporation thereunder directly to the Agent, to notify each Person
maintaining a lockbox, blocked account or similar arrangement to which
account debtors or obligors under any Receivables have been
-13-
directed to make payment to remit all amounts representing collections
on cheques and other payment items from time to time sent to or
deposited in such lockbox, blocked account or other arrangement
directly to the Agent and, upon such notification and at the expense of
the Corporation, to enforce collection of any such Receivables and to
adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Corporation might have done. After
receipt by the Corporation of the notice from the Agent referred to in
the proviso to the preceding sentence and during the continuation of an
Event of Default, (i) all amounts and proceeds (including cheques and
other instruments) received by the Corporation in respect of the
Receivables shall be received in trust for the benefit of the Agent
hereunder, shall be segregated from other funds of the Corporation and
shall be forthwith paid over or delivered to the Agent in the same form
as so received (with any necessary endorsement) to be held as cash
Collateral and applied against the Obligations as provided by the Loan
Agreement, and (ii) the Corporation shall not adjust, settle or
compromise the amount or payment of any Receivable, or release wholly
or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
SECTION 2.5 SPECIAL COVENANTS WITH RESPECT TO THE INTELLECTUAL PROPERTY
(1) The Corporation shall:
(a) diligently keep reasonable records respecting the Intellectual
Property and at all times keep at least one complete set of
its records concerning such Collateral at its chief executive
office or principal place of business;
(b) take any and all reasonable steps to protect the secrecy of
all trade secrets relating to the products and services sold
or delivered under or in connection with the Intellectual
Property, including, without limitation, where appropriate
entering into confidentiality agreements with employees and
labelling and restricting access to secret information and
documents;
(c) use proper statutory notice in connection with its use of any
of the Intellectual Property;
(d) use a commercially appropriate standard of quality (which may
be consistent with the Corporation's past practices) in the
manufacture, sale and delivery of products and services sold
or delivered under or in connection with its trademarks; and
-14-
(e) furnish the Agent from time to time at the Agent's reasonable
request statements and schedules further identifying and
describing any Intellectual Property and such other reports in
connection with such Collateral, all in reasonable detail.
(2) Except as otherwise provided in this Section 2.5, the Corporation shall
continue to collect, at its own expense, all amounts due or to become
due to the Corporation in respect of the Intellectual Property or any
portion thereof. In connection with such collections, the Corporation
may take (and, after the occurrence and during the continuance of any
Event of Default at the Agent's reasonable direction, shall take) such
action as the Corporation or the Agent may deem reasonably necessary or
advisable to enforce collections of such amounts; provided, the Agent
shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default and upon written notice to the
Corporation of its security interest created hereby to direct such
obligors to make payment of all such amounts directly to the Agent,
and, upon such notification and at the expense of the Corporation, to
enforce collection of any such amounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the
same extent as the Corporation might have done. After receipt by the
Corporation of the notice from the Agent referred to in the proviso to
the preceding sentence and during the continuation of any Event of
Default, (a) all amounts and proceeds (including cheques and other
instruments) received by the Corporation in respect of amounts due to
the Corporation in respect of its Intellectual Property or any portion
thereof shall be received in trust for the benefit of the Agent
hereunder, shall be segregated from other funds of the Corporation and
shall be forthwith paid over or delivered to the Agent in the same form
as so received (with any necessary endorsement) to be held as cash
Collateral and applied against the Obligations as provided by the Loan
Agreement, and (b) the Corporation shall not adjust, settle or
compromise the amount or payment of any such amount or release wholly
or partly any obligor with respect thereto or allow any credit or
discount thereon.
(3) The Corporation shall have the duty diligently to prosecute, file
and/or make, unless and until the Corporation, in its commercially
reasonably judgment, decides otherwise, (a) any application relating to
any of the Intellectual Property owned, held or used by the Corporation
and identified on Schedules 2.1(3)(a), 2.1(3)(b) or 2.1(3)(c), as
applicable, that is pending as of the date of this Security Agreement,
(b) any copyright registration on any existing or future unregistered
but copyrightable works (except for works of nominal commercial value
or with respect to which the Corporation has determined in the exercise
of its commercially reasonable judgment that it shall not seek
registration), (c) application on any future patentable but
-15-
unpatented innovation or invention comprising Intellectual Property,
and (d) any trademark opposition and cancellation proceedings, renew
trademark registrations and copyright registrations and do any and all
acts which are necessary or desirable to preserve and maintain all
rights in its Intellectual Property. Any expenses incurred in
connection therewith shall be borne solely the Corporation. Subject to
the foregoing, the Corporation shall give the Agent prior written
notice of any abandonment of any Intellectual Property or any pending
patent application or any patent.
(4) Except as provided herein, the Corporation shall have the right to
commence and prosecute in its own name, as real party in interest, for
its own benefit and at its own expense, such suits, proceedings or
other actions for infringement, unfair competition, dilution,
misappropriation or other damage, or re-examination or reissue
proceedings as are necessary to protect the Intellectual Property. The
Agent shall provide, at the Corporation's expense, all reasonable and
necessary cooperation in connection with any such suit, proceeding or
action including, without limitation, joining as a necessary party. The
Corporation shall promptly, following its becoming aware thereof,
notify the Agent of the institution of, or of any adverse determination
in, any proceeding (whether in the Canadian Intellectual Property
Office or any federal, provincial, local or foreign court) or regarding
the Corporation's ownership, right to use, or interest in any
Intellectual Property material to the conduct of the Corporation's
business. The Corporation shall provide to the Agent any information
with respect thereto reasonably requested by the Agent.
(5) In addition to, and not by way of limitation of, the granting of a
security interest in the Collateral pursuant hereto, the Corporation,
effective upon the occurrence and during the continuation of an Event
of Default, hereby assigns, transfers and conveys to the Agent the
nonexclusive right and license to use all trademarks, tradenames,
copyrights, patents or technical processes (including, without
limitation, the Intellectual Property) owned or used by the Corporation
that relate to the Collateral and any other collateral granted by the
Corporation as security for the Obligations, together with any goodwill
associated therewith, all to the extent necessary to enable the Agent
to realize on the Collateral in accordance with this Security Agreement
and to enable any transferee or assignee of the Collateral to enjoy the
benefits of the Collateral. This right shall inure to the benefit of
all successors, assigns and transferees of the Agent or the Canadian
Lenders and their successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license shall be granted free of charge, without requirement that any
monetary payment whatsoever be made to the Corporation. In
-16-
addition, the Corporation hereby grants to the Agent and its employees,
representatives and agents the right to visit the Corporation's and any
of its Affiliate's or subcontractor's plants, facilities and other
places of business that are utilized in connection with the
manufacture, production, inspection, storage or sale of products and
services sold or delivered under any of the Intellectual Property (or
which were so utilized during the prior six month period), and to
inspect the quality control and all other records relating thereto upon
reasonable advance written notice to the Corporation and during normal
business hours at reasonable dates and times and as often as may be
reasonably requested. The Corporation may license its Intellectual
Property to any Person as it may deem necessary to the successful
conduct of its business. Nothing contained herein shall prohibit or
limit the licensing of Intellectual Property to any Person as the
Corporation may deem appropriate in the conduct of its business. If and
to the extent that the Corporation licenses the Intellectual Property,
the Agent shall promptly enter into a non-disturbance agreement or
other similar arrangement, at the Corporation's request and expense,
with the Corporation and any licensee of any Intellectual Property
permitted hereunder in form and substance reasonably satisfactory to
the Agent pursuant to which (a) the Agent shall agree not to disturb or
interfere with such licensee's rights under its license agreement with
the Corporation so long as such licensee is not in default thereunder,
and (b) such licensee shall acknowledge and agree that the Intellectual
Property licensed to it is subject to the Security Interest created in
favour of the Agent and the other terms of this Security Agreement
subject to clause (a).
(6) Notwithstanding anything in the foregoing, the Corporation will not be
subject to Subsections 2.5(1)(a) through 2.5(1)(d), 2.5(2) and 2.5(3)
with respect to Intellectual Property that is obsolete.
ARTICLE 3
ENFORCEMENT
SECTION 3.1 ENFORCEMENT
The Security Interest shall be and become enforceable against the
Corporation upon the occurrence and during the continuance of an Event of
Default.
SECTION 3.2 REMEDIES
(a) Whenever the Security Interest has become enforceable, the
Agent may realize upon the Collateral and enforce its rights
by:
(i) entry onto any premises where Collateral consisting
of tangible personal property may be located;
-17-
(ii) entry into possession of the Collateral by any method
permitted by law;
(iii) sale or lease of all or any part of the Collateral;
(iv) collection of any proceeds arising in respect of the
Collateral;
(v) collection, realization or sale of, or other dealing
with, the Receivables;
(vi) appointment by instrument in writing of a receiver or
agent of all or any part of the Collateral and
removal or replacement from time to time of any
receiver or agent;
(vii) institution of proceedings in any court of competent
jurisdiction for the appointment of a receiver of all
or any part of the Collateral;
(viii) institution of proceedings in any court of competent
jurisdiction for sale or foreclosure of all or any
part of the Collateral;
(ix) filing of proofs of claim and other documents to
establish claims to the Collateral in any proceeding
relating to the Corporation; and
(x) any other remedy or proceeding authorized or
permitted under the PPSA or otherwise by law or
equity.
(b) Such remedies may be exercised from time to time separately or
in combination and are in addition to, and not in substitution
for, any other rights of the Agent and the Canadian Lenders
however created. The Agent or the Canadian Lenders shall not
be bound to exercise any right or remedy, and the exercise of
any rights and remedies shall be without prejudice to the
rights of the Agent and the Canadian Lenders in respect of the
Obligations including the right to claim for any deficiency.
SECTION 3.3 ADDITIONAL RIGHTS
In addition to the remedies set forth in Section 3.2, the Agent may,
whenever the Security Interest has become enforceable:
(a) require the Corporation, by notice in writing, at the
Corporation's expense, to assemble the Collateral at a place
or places designated by notice in writing and the Corporation
agrees to so assemble the Collateral;
-18-
(b) require the Corporation, by notice in writing, to disclose to
the Agent the location or locations of the Collateral and the
Corporation agrees to make such disclosure when so required;
(c) repair, process, modify, complete or otherwise deal with the
Collateral and prepare for the disposition of the Collateral,
whether on the premises of the Corporation or otherwise;
(d) enter upon, occupy and use all or any of the premises,
buildings, and other property of or used by the Corporation
for such time as the Agent sees fit, free of charge, to
exercise any of the Agent's rights or remedies under or in
relation to this Security Agreement, and the Agent and the
Canadian Lenders shall not be liable to the Corporation for
any act, omission or negligence in so doing or for any rent,
charges, depreciation or damages incurred in connection with
or resulting from such action;
(e) borrow for the purpose of the maintenance, preservation or
protection of the Collateral and grant a security interest in
the Collateral, whether or not in priority to the Security
Interest, to secure repayment; and
(f) commence, continue or defend any judicial or administrative
proceedings for the purpose of protecting, seizing,
collecting, realizing or obtaining possession or payment of
the Collateral, and give good and valid receipts and
discharges in respect of the Collateral and compromise or give
time for the payment or performance of all or any part of the
accounts or any other obligation of any third party to the
Corporation.
SECTION 3.4 RECEIVER'S POWERS.
(a) Any receiver appointed by the Agent shall be vested with the
rights and remedies which could have been exercised by the
Agent in respect of the Corporation or the Collateral. The
identity of the receiver, its replacement and its remuneration
shall be within the sole and unfettered discretion of the
Agent. Any receiver appointed by a court shall have all powers
and discretions as are granted in the instrument of
appointment and any supplemental instruments.
(b) Any receiver appointed by the Agent shall act as agent for the
Agent for the purposes of taking possession of the Collateral,
but otherwise and for all other purposes (except as provided
below), as agent for the Corporation. The receiver may sell,
lease, or otherwise dispose of Collateral as agent for the
Corporation or as agent for the Agent as the Agent may
determine in its discretion. The Corporation agrees to
-19-
ratify and confirm all actions of the receiver acting as agent
for the Corporation, and to release and indemnify the receiver
in respect of all such actions.
(c) The Agent, in appointing or refraining from appointing any
receiver, shall not incur liability to the receiver, the
Corporation or otherwise and shall not be responsible for any
misconduct or negligence of the receiver.
SECTION 3.5 APPOINTMENT OF ATTORNEY
The Corporation irrevocably appoints the Agent (and any of its
officers) as attorney of the Corporation (with full power of substitution) to
(a) sign the Corporation's name on any documents, instruments and other items
described in the Loan Agreement; (b) request at any time from parties indebted
to the Corporation verification of information concerning such indebtedness
including the amount owing thereon (provided that any verification prior to an
the occurrence of an Event of Default shall not contain the Agent's name); and
(c) upon the occurrence and during the continuance of an Event of Default: (i)
convey any item of the Collateral to any purchaser thereof; and (ii) make any
payment or take any act necessary or desirable to protect or preserve any
Collateral. The Agent's authority hereunder shall include, without limitation,
the authority to execute and give receipt for any certificate of ownership or
any document, to transfer title to any item of the Collateral and to take any
other actions arising from or incident to the powers granted to the Agent under
this Security Agreement. This power of attorney is coupled with an interest and
is irrevocable.
SECTION 3.6 DEALING WITH THE COLLATERAL
(a) The Agent and the Canadian Lenders shall not be obliged to
exhaust their recourse against the Corporation or any other
person or against any other security it may hold in respect of
the Obligations before realizing upon or otherwise dealing
with the Collateral in such manner as the Agent may consider
desirable.
(b) The Agent and the Canadian Lenders may grant extensions or
other indulgences, take and give up securities, accept
compositions, grant releases and discharges and otherwise deal
with the Corporation, the Collateral and with other persons,
sureties or securities as it may see fit without prejudice to
the Obligations, the liability of the Corporation or the
rights of the Agent in respect of the Collateral.
(c) Except as otherwise provided by law or this Security
Agreement, the Agent and the Canadian Lenders shall not be:
(i) liable or accountable for any failure to collect, realize
or obtain payment in respect of the
-20-
Collateral; (ii) bound to institute proceedings for the
purpose of collecting, enforcing, realizing or obtaining
payment of the Collateral or for the purpose of preserving any
rights of any persons in respect of the Collateral; (iii)
responsible for any loss occasioned by any sale or other
dealing with the Collateral or by the retention of or failure
to sell or otherwise deal with the Collateral; or (iv) bound
to protect the Collateral from depreciating in value or
becoming worthless.
SECTION 3.7 STANDARDS OF SALE
The Corporation acknowledges that, upon the Security Interest becoming
enforceable and without prejudice to the ability of the Agent to dispose of the
Collateral in any manner which is commercially reasonable:
(a) the Collateral may be disposed of in whole or in part;
(b) the Collateral may be disposed of by public auction, public
tender and/or private contract, with or without advertising
and without any other formality;
(c) any assignee of the Collateral or any part thereof may be a
customer of the Agent or a Canadian Lender;
(d) a disposition of the Collateral or any part thereof may be on
such terms and conditions as to credit or otherwise as the
Agent, in its sole discretion, may deem advantageous; and
(e) the Agent may establish an upset or reserve bid or price in
respect of the Collateral or any part thereof.
SECTION 3.8 DEALINGS BY THIRD PARTIES
(a) No person dealing with the Agent, any of the Canadian Lenders
or an agent or receiver shall be required to determine (i)
whether the Security Interest has become enforceable, (ii)
whether the powers which such person is purporting to exercise
have become exercisable, whether any money remains due to the
Agent or the Canadian Lenders by the Corporation, (iii) the
necessity or expediency of the stipulations and conditions
subject to which any sale or lease is made, (iv) the propriety
or regularity of any sale or other dealing by the Agent or any
Canadian Lender with the Collateral, or (v) how any money paid
to the Agent or the Canadian Lenders has been applied.
(b) At any time on or after such time as the Security Interest
becomes enforceable, any purchaser of all or any part of the
Collateral from the Agent or a receiver or agent shall hold
the Collateral absolutely, free
-21-
from any claim or right of whatever kind, including any equity
of redemption, of the Corporation, which it specifically
waives (to the fullest extent permitted by law) as against any
such purchaser together with all rights of redemption, stay or
appraisal which the Corporation has or may have under any rule
of law or statute now existing or hereafter adopted.
ARTICLE 4
GENERAL
SECTION 4.1 DISCHARGE
The Security Interest shall be discharged upon, but only upon, (a) full
payment and performance of the Obligations, and (b) the Agent and the Canadian
Lenders having no obligations under the Loan Documents or otherwise. Upon
discharge of the Security Interest and at the request and expense of the
Corporation, the Agent shall execute and deliver to the Corporation such
releases and discharges as the Corporation may reasonably require.
SECTION 4.2 LOAN AGREEMENT GOVERNS
Notwithstanding anything to the contrary contained herein, this
Security Agreement is issued subject always to the covenants, conditions,
limitations and other provisions contained in the Loan Agreement. In the event
of any conflict, discrepancy or ambiguity in or between any of the provisions of
this Security Agreement and any of the provisions of the Loan Agreement,
including, without limitation, in the amount payable thereunder, the principal
amount for which this Security Agreement is expressed to be security, the
interest payable on such principal amount, the time at which demand may be made,
the covenants therein and the remedies available to the Agent or the Canadian
Lenders, the provisions of the Loan Agreement shall prevail and the provisions
of this Security Agreement shall be deemed to be rendered inoperative by the
Loan Agreement, to the extent necessary to eliminate such conflict, discrepancy,
difference or ambiguity.
SECTION 4.3 AMENDMENTS, ETC.
No amendment or waiver of any provision of this Security Agreement, nor
consent to any departure by the Corporation from such provisions, is effective
unless in writing and, in the case of an amendment, signed by the Corporation
and the Agent or, in the case of a waiver or consent, approved by the Agent. Any
amendment, waiver or consent is effective only in the specific instance and for
the specific purpose for which it was given.
-22-
SECTION 4.4 WAIVERS
No failure on the part of the Agent or any of the Canadian Lenders to
exercise, and no delay in exercising, any right under this Security Agreement
shall operate as a waiver of such right; nor shall any single or partial
exercise of any right under this Security Agreement preclude any other or
further exercise of such right or the exercise of any other right.
SECTION 4.5 NO MERGER
This Security Agreement shall not operate by way of merger of any of
the Obligations and no judgment recovered by the Agent or any of the Canadian
Lenders shall operate by way of merger of, or in any way affect, the Security
Interest, which is in addition to, and not in substitution for, any other
security now or hereafter held by the Agent for itself and the rateable benefit
of the Canadian Lenders in respect of the Obligations.
SECTION 4.6 FURTHER ASSURANCES
The Corporation shall from time to time, whether before or after the
Security Interest shall have become enforceable, do all acts and things and
execute and deliver all transfers, assignments and instruments as the Agent may
reasonably require for (i) protecting the Collateral, (ii) perfecting the
Security Interest, and (iii) exercising all powers, authorities and discretions
conferred upon the Agent, provided that notwithstanding the foregoing, the
Corporation is not required to assist the Agent in exercising any rights
available to the Agent which are dependent upon the occurrence of an Event of
Default until the Security Interest has become enforceable. The Corporation
shall, from time to time after the Security Interest has become enforceable, do
all acts and things and execute and deliver all transfers, assignments and
instruments as the Agent may require for facilitating the sale or other
disposition of the Collateral in connection with its realization.
SECTION 4.7 SUPPLEMENTAL SECURITY
This Security Agreement is in addition and without prejudice to and
supplemental all other security now held or which may hereafter be held by the
Agent or the Canadian Lenders as security for the Obligations.
SECTION 4.8 NOTICES
Any notices, directions or other communications provided for in this
Security Agreement shall be in writing and given in accordance with the
provisions of the Loan Agreement.
SECTION 4.9 SUCCESSORS AND ASSIGNS
This Security Agreement shall be binding upon the Corporation, its
successors and assigns, and shall enure to the benefit of the Agent and its
successors
-23-
and permitted assigns. The rights of the Agent hereunder shall be assignable in
accordance with the provisions of the Loan Agreement.
SECTION 4.10 GENDER AND NUMBER
Any reference in this Security Agreement to gender shall include all
genders and words importing the singular number only shall include the plural
and vice versa.
SECTION 4.11 HEADINGS, ETC.
The division of this Security Agreement into Articles and Sections and
the insertion of headings are for convenient reference only and are not to
affect its interpretation.
SECTION 4.12 SEVERABILITY
If any provision of this Security Agreement shall be deemed by any
court of competent jurisdiction to be invalid or void, the remaining provisions
shall remain in full force and effect.
SECTION 4.13 GOVERNING LAW
This Security Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of
Alberta and the laws of
Canada applicable therein.
-24-
IN WITNESS WHEREOF the Corporation has executed this Security
Agreement.
GRANT PRIDECO CANADA LTD.
By:
-------------------------------------
Authorized Signing Officer
By:
-------------------------------------
Authorized Signing Officer
