Exhibit 6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of December 19, 1997 among Xxxxx & Lord Industries, Inc., a Delaware corporation
(the "Borrower"), Xxxxx & Lord, Inc., a Delaware corporation (the "Company"),
the subsidiaries of the Borrower and of the Company listed on the signature
pages attached hereto (the "Subsidiary Guarantors" and together with the
Company, the "Guarantors") and such other subsidiaries of the Borrower and of
the Company as may from time to time become party hereto (hereinafter, the
Borrower and the Guarantors are collectively referred to as the "Obligors" and,
individually, as an "Obligor") and FIRST UNION NATIONAL BANK, in its capacity as
agent (in such capacity, the "Agent") for the financial institutions from time
to time party to the Credit Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Company, the Subsidiary
Guarantors, the Lenders and the Agent, the Lenders have agreed to make Loans and
issue Letters of Credit upon the terms and subject to the conditions set forth
therein;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligors shall
have executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of North Carolina on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Deposit
Accounts, Documents, Equipment, Farm Products, Fixtures, General
Intangibles, Instruments, Inventory, Investment Property and Proceeds.
For purposes of this Security Agreement, the term "Lender" shall
include any affiliate of any Lender which has entered into any Hedging
Agreement permitted to be entered into pursuant to Section 6.1 of the
Credit Agreement.
(b) In addition, the following terms shall have the following
meanings:
"Copyright Licenses": any written agreement, naming any
Obligor as licensor, granting any right under any Copyright including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Copyrights": (a) all registered United States copyrights in
all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule 1(b)
hereto, and (b) all renewals thereof including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Material Copyright Licenses": all Copyright Licenses
constituting Material Intellectual Property.
"Material Copyrights": all Copyrights constituting Material
Intellectual Property.
"Material Intellectual Property": all Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses
in which the failure by an Obligor to own or have the legal right to
use such Copyright, Copyright License, Patent, Patent License,
Trademark or Trademark License could have a Material Adverse Effect.
"Material Patent Licenses": all Patent Licenses constituting
Material Intellectual Property.
"Material Patents": all Patents constituting Material
Intellectual Property.
"Material Trademark Licenses": all Trademark Licenses
constituting Material Intellectual Property.
"Material Trademarks": all Trademarks constituting Material
Intellectual Property.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 1(b) hereto,
and (b) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Secured Obligations": (a) all Credit Party Obligations and
(b) all expenses and charges, legal and otherwise, reasonably incurred
by the Agent and/or the Lenders in collecting or enforcing any Credit
Party Obligations or in realizing on or protecting any security
therefor, including without limitation the security afforded hereunder.
"Trademark License": means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
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"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
"Work": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles;
(j) all Instruments;
(k) all Inventory;
(l) all Investment Property;
(m) all Patents;
(n) all Patent Licenses;
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(o) all Trademarks;
(p) all Trademark Licenses;
(q) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and
related data processing software (owned by such
Obligor or in which it has an interest) that at any
time evidence or contain information relating to any
Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon; and
(r) to the extent not otherwise included,
all Proceeds and products of any and all of the
foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks or Trademark Licenses.
3. Representations and Warranties. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is (and, except for
any Obligor acquired pursuant to the G&L Acquisition, for the prior
four months have been) located at the locations set forth on Schedule
3(a) hereto, and each Obligor keeps its books and records at such
locations.
(b) Location of Collateral. The location of all Collateral
owned by each Obligor is as shown on Schedule 3(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner
of its Collateral and has the right to pledge, sell, assign or transfer
the same. Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename except as set forth in Schedule 3(c) attached
hereto. Schedule 3(c) may be updated by the Company and the Borrower to
reflect changes resulting from the G&L Acquisition.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of such Obligor and, when
properly perfected by filing, shall constitute a valid perfected
security interest in such Collateral, to the extent such security can
be perfected by filing under the UCC, free and clear of all Liens
except for Permitted Liens.
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(e) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(f) Accounts. (i) Each Account of the Obligors and the papers
and documents relating thereto are genuine and in all material respects
what they purport to be, (ii) each Account arises out of (A) a bona
fide sale of goods sold and delivered by such Obligor (or is in the
process of being delivered) or (B) services theretofore actually
rendered by such Obligor to, the account debtor named therein, (iii) no
Account of an Obligor is evidenced by any Instrument or Chattel Paper
unless such Instrument or Chattel Paper has been theretofore endorsed
over and delivered to the Agent and (iv) no surety bond was required or
given in connection with any Account of an Obligor or the contracts or
purchase orders out of which they arose.
(g) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(h) Copyrights, Patents and Trademarks.
(i) Schedule 1(b) hereto includes all
Material Copyrights, Material Copyright Licenses, Material
Patents, Material Patent Licenses, Material Trademarks and
Material Trademark Licenses owned by the Obligors in their own
names as of the date hereof.
(ii) To the best of each Obligor's
knowledge, each Material Copyright, Material Patent and
Material Trademark of such Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b)
hereto, none of such Material Copyrights, Material Patents and
Material Trademarks is the subject of any licensing or
franchise agreement.
(iv) No holding, decision or judgment has
been rendered which would limit, cancel or question the
validity of any Material Copyright, Material Patent or
Material Trademark.
(v) No action or proceeding is pending
seeking to limit, cancel or question the validity of any
Material Copyright, Material Patent or Material Trademark, or
which, if adversely determined, would have a material adverse
effect on the value of any Material Copyright, Material Patent
or Material Trademark.
(vi) All applications pertaining to the
Material Copyrights, Material Patents and Material Trademarks
of each Obligor have been duly and properly filed, and all
registrations or letters pertaining to such Material
Copyrights, Material Patents and Material Trademarks have been
duly and properly filed and issued, and all of such Material
Copyrights, Material Patents and Material Trademarks are valid
and enforceable.
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(vii) No Obligor has made any assignment or
agreement in conflict with the security interest in the
Copyrights, Patents or Trademarks of each Obligor hereunder
except for any such assignment or agreement that would not
have a Material Adverse Effect.
4. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect or
any Letter of Credit shall remain outstanding, and until all of the Commitments
shall have been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the
Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or any
applicable statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Chattel Paper. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, immediately deliver such Instrument
or Chattel Paper to the Agent, duly indorsed in a manner satisfactory
to the Agent, to be held as Collateral pursuant to this Security
Agreement.
(d) Change in Location. Not, without providing 30 days prior
written notice to the Agent and without filing such amendments to any
previously filed financing statements as the Agent may require, (a)
change the location of its chief executive office and chief place of
business (as well as its books and records) from the locations set
forth on Schedule 3(a) hereto, (b) change the location of its
Collateral from the locations set forth for such Obligor on Schedule
3(b) hereto, or (c) change its name, be party to a merger,
consolidation or other change in structure or use any tradename other
than as set forth on Schedule 3(c) attached hereto.
(e) Inspection. Upon reasonable notice, at such reasonable
times during normal business hours and as often as may be reasonably
desired, allow the Agent, any Lender or their respective
representatives free access to and right of inspection of the tangible
Collateral.
(f) Perfection of Security Interest. Execute and deliver to
the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and
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maintain the security interests granted hereunder in accordance with
the UCC, (B) with regard to Material Copyrights, a Notice of Grant of
Security Interest in Copyrights in the form of Schedule 4(f)(i), (C)
with regard to Material Patents, a Notice of Grant of Security Interest
in Patents for filing with the United States Patent and Trademark
Office in the form of Schedule 4(f)(ii) attached hereto and (D) with
regard to Material Trademarks, a Notice of Grant of Security Interest
in Trademarks for filing with the United States Patent and Trademark
Office in the form of Schedule 4(f)(iii) attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise
protect and assure the Agent of its rights and interests hereunder. To
that end, each Obligor agrees that the Agent may file one or more
financing statements disclosing the Agent's security interest in any or
all of the Collateral of such Obligor without, to the extent permitted
by law, such Obligor's signature thereon, and further each Obligor also
hereby irrevocably makes, constitutes and appoints the Agent, its
nominee or any other person whom the Agent may designate, as such
Obligor's attorney in fact with full power and for the limited purpose
to sign in the name of such Obligor any such financing statements, or
amendments and supplements to financing statements, renewal financing
statements, notices or any similar documents which in the Agent's
reasonable discretion would be necessary, appropriate or convenient in
order to perfect and maintain perfection of the security interests
granted hereunder, such power, being coupled with an interest, being
and remaining irrevocable so long as the Credit Agreement is in effect
or any amounts payable thereunder or under any other Credit Document or
any Letter of Credit shall remain outstanding, and until all of the
Commitments thereunder shall have terminated. Each Obligor hereby
agrees that a carbon, photographic or other reproduction of this
Security Agreement or any such financing statement is sufficient for
filing as a financing statement by the Agent without notice thereof to
such Obligor wherever the Agent may in its sole discretion desire to
file the same. In the event for any reason the law of any jurisdiction
other than North Carolina becomes or is applicable to the Collateral of
any Obligor or any part thereof, or to any of the Secured Obligations,
such Obligor agrees to execute and deliver all such instruments and to
do all such other things as the Agent in its sole discretion reasonably
deems necessary or appropriate to preserve, protect and enforce the
security interests of the Agent under the law of such other
jurisdiction (and, if an Obligor shall fail to do so promptly upon the
request of the Agent, then the Agent may execute any and all such
requested documents on behalf of such Obligor pursuant to the power of
attorney granted hereinabove). If any Collateral is in the possession
or control of an Obligor's agents and the Agent so requests, such
Obligor agrees to notify such agents in writing of the Agent's security
interest therein and, upon the Agent's request, instruct them to hold
all such Collateral for the Lenders' account and subject to the Agent's
instructions. Each Obligor agrees to xxxx its books and records to
reflect the security interest of the Agent in the Collateral.
(g) Covenants Relating to Accounts.
(i) Comply with all reporting requirements set forth
in the Credit Agreement with respect to Accounts.
(ii) Upon the occurrence of any Event of Default and
during the continuation thereof, set aside and hold as trustee
for the Agent any merchandise which is returned by a customer
or account debtor or otherwise recovered. Unless
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and until an Event of Default occurs and is continuing, each
Obligor may settle and adjust disputes and claims with its
customers and account debtors, handle returns and recoveries
and grant discounts, credits and allowances in the ordinary
course of its business as presently conducted and otherwise
for amounts and on terms which such Obligor in good faith
considers advisable. However, upon the occurrence of any Event
of Default and during the continuation thereof, if so
instructed by the Agent, such Obligor shall settle and adjust
disputes and claims at no expense to the Agent, but no
discount, credit or allowance other than on normal trade terms
in the ordinary course of business shall be granted to any
customer or account debtor and no returns of merchandise shall
be accepted by such Obligor without the Agent's consent. The
Agent may (but shall not be required to), at all times upon
the occurrence of any Event of Default and during the
continuance thereof, settle or adjust disputes and claims
directly with customers or account debtors for amounts and
upon terms which the Agent considers advisable.
(h) Covenants Relating to Inventory.
(i) Maintain, keep and preserve the Inventory in good
salable condition at its own cost and expense.
(ii) Comply with all reporting requirements set forth
in the Credit Agreement with respect to Inventory.
(iii) If any of the Inventory is at any time
evidenced by a document of title, immediately upon request by
the Agent, deliver such document of title to the Agent.
(i) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with
such notice of copyright as may be required by law to secure
copyright protection except to the extent the failure to so
employ the Copyright would not have a Material Adverse Effect.
(ii) Not do any act or knowingly omit to do
any act whereby any Material Copyright may become invalidated
and (A) not do any act, or knowingly omit to do any act,
whereby any Material Copyright may become injected into the
public domain; (B) notify the Agent immediately if it knows,
or has reason to know, that any Material Copyright may become
injected into the public domain or of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any court or tribunal in the United States or any other
country) regarding an Obligor's ownership of any such Material
Copyright or its validity; (C) take all necessary steps as it
shall deem appropriate under the circumstances, to maintain
and pursue each application (and to obtain the relevant
registration) and to maintain each registration of each
Material Copyright owned by an Obligor including, without
limitation, filing of applications for renewal where
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necessary; and (D) promptly notify the Agent of any material
infringement of any Material Copyright of an Obligor of which
it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such
Material Copyright, including, where appropriate, the bringing
of suit for infringement, seeking injunctive relief and
seeking to recover any and all damages for such infringement.
(iii) Not make any assignment or agreement
in conflict with the security interest in the Copyrights of
each Obligor hereunder except for any such assignment or
agreement that would not have a Material Adverse Effect.
(j) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Material
Trademark on each and every trademark class of goods
applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such
Material Trademark in full force free from any claim of
abandonment for non-use, (B) maintain as in the past the
quality of products and services offered under such Material
Trademark, (C) employ such Material Trademark with the
appropriate notice of registration, (D) not adopt or use any
xxxx which is confusingly similar or a colorable imitation of
such Material Trademark unless the Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security
interest in such xxxx pursuant to this Security Agreement, and
(E) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any
such Material Trademark may become invalidated.
(ii) Not do any act, or omit to do any act,
whereby any Material Patent may become abandoned or dedicated.
(iii) Notify the Agent and the Lenders
immediately if it knows, or has reason to know, that any
application or registration relating to any Material Patent or
Material Trademark may become abandoned or dedicated, or of
any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country)
regarding an Obligor's ownership of any Material Patent or
Material Trademark or its right to register the same or to
keep and maintain the same.
(iv) Whenever an Obligor, either by itself
or through an agent, employee, licensee or designee, shall
file an application for the registration of any Material
Patent or Material Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other
country or any political subdivision thereof, an Obligor shall
report such filing to the Agent and the Lenders within five
Business Days after the last day of the fiscal quarter in
which such filing occurs. Upon request of the Agent, an
Obligor shall execute and deliver any and all agreements,
instruments, documents and papers as the Agent may reasonably
request to evidence the Agent's and the Lenders' security
interest in any Material Patent or Material Trademark and the
goodwill and general intangibles of an Obligor relating
thereto or represented thereby.
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(v) Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar
office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of the Material Patents and Material Trademarks,
including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.
(vi) Promptly notify the Agent and the
Lenders after it learns that any Material Patent or Material
Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly xxx
for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution,
or take such other actions as it shall reasonably deem
appropriate under the circumstances to protect such Material
Patent or Material Trademark.
(vii) Not make any assignment or agreement
in conflict with the security interest in the Patents or
Trademarks of each Obligor hereunder except for any such
assignment or agreement that would not have a Material Adverse
Effect.
(k) New Material Patents, Material Copyrights and Material
Trademarks. Promptly provide the Agent with (i) a listing of all
applications, if any, for new Material Copyrights, Material Patents or
Material Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new
applications and issued registrations or letters shall be subject to
the terms and conditions hereunder, and (ii) (A) with respect to
Material Copyrights, a duly executed Notice of Security Interest in
Copyrights, (B) with respect to Material Patents, a duly executed
Notice of Security Interest in Patents, (C) with respect to Material
Trademarks, a duly executed Notice of Security Interest in Trademarks
or (D) such other duly executed documents as the Agent may reasonably
request in a form acceptable to counsel for the Agent and suitable for
recording to evidence the security interest in the Material Copyright,
Material Patent or Material Trademark which is the subject of such new
application.
(l) Insurance. Have and maintain at all times with respect to
the Collateral the same types and amounts of insurance as the Obligors
are required to maintain pursuant to the Credit Agreement. All
insurance proceeds shall be subject to the Lien of the Agent hereunder;
provided that any such insurance proceeds may be retained by the
Obligors to the extent permitted under the Credit Agreement.
(m) [Intentionally Omitted]
5. Special Provisions Relating to Accounts. Anything herein to the
contrary notwithstanding, each of the Obligors shall remain liable under each of
the Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Agent nor
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any Lender shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Agent or any Lender of any payment relating to
such Account pursuant hereto, nor shall the Agent or any Lender be obligated in
any manner to perform any of the obligations of an Obligor under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
6. Special Provisions Regarding Inventory.
(a) Notwithstanding anything to the contrary contained in this
Security Agreement, each Obligor may, unless and until an Event of
Default occurs and is continuing and the Agent instructs such Obligor
otherwise, without further consent or approval of the Agent, use,
consume, sell, lease and exchange the Inventory in the ordinary course
of its business as presently conducted (and as will be conducted after
giving effect to the G&L Acquisition), whereupon, in the case of such a
sale or exchange, the security interest created hereby in the Inventory
so sold or exchanged (but not in any proceeds arising from such sale or
exchange) shall cease immediately without any further action on the
part of the Agent.
(b) Upon the Lenders' making any Loan pursuant to the Credit
Agreement or the Issuing Bank issuing any Letter of Credit pursuant to
the Credit Agreement, each Obligor shall be deemed to have warranted
that all warranties of such Obligor set forth in this Security
Agreement with respect to its Inventory are true and correct in all
material respects with respect to such Inventory, including without
limitation that such Inventory is located at a location permitted by
Section 3(b) or 4(d) hereof.
7. Advances by Lenders. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien (other than a
Permitted Lien), expenditures made in defending against any adverse claim (other
than a Permitted Lien) and all other expenditures which the Agent or the Lenders
may make for the protection of the security hereof or which may be compelled to
make by operation of law. All such sums and amounts so expended shall be
repayable by the Obligors on a joint and several basis promptly upon timely
notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 2.9 of the Credit Agreement for Loans that
are not LIBOR Rate Loans. No such performance of any covenant or agreement by
the Agent or the Lenders on behalf of any Obligor, and no such advance or
expenditure therefor, shall relieve the Obligors of any default under the terms
of this Security Agreement or the other Credit Documents. The Lenders may make
any payment hereby authorized in accordance with any xxxx, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such xxxx, statement or estimate
or into the validity of
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any tax assessment, sale, forfeiture, tax lien, title or claim except to the
extent such payment is being contested in good faith by an Obligor in
appropriate proceedings and against which adequate reserves are being maintained
in accordance with GAAP.
8. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during continuation thereof (unless and until such Event of
Default has been waived or cured in accordance with the terms of the
Credit Agreement), the Lenders shall have, in addition to the rights
and remedies provided herein, in the Credit Documents or by law
(including, but not limited to, the rights and remedies set forth in
the Uniform Commercial Code of the jurisdiction applicable to the
affected Collateral), the rights and remedies of a secured party under
the UCC (regardless of whether the UCC is the law of the jurisdiction
where the rights and remedies are asserted and regardless of whether
the UCC applies to the affected Collateral), and further, the Agent
may, with or without judicial process or the aid and assistance of
others, (i) enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any
such premises, (iii) require the Obligors to assemble and make
available to the Agent at the expense of the Obligors any Collateral at
any place and time designated by the Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such
premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice,
hearing or process of law, all of which each of the Obligors hereby
waives to the fullest extent permitted by law, at any place and time or
times, sell and deliver any or all Collateral held by or for it at
public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In addition to
all other sums due the Agent and the Lenders with respect to the
Secured Obligations, the Obligors shall pay the Agent and each of the
Lenders all reasonable documented costs and expenses incurred by the
Agent or any such Lender, including, but not limited to, reasonable
attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against the
Agent or the Lenders or the Obligors concerning any matter arising out
of or connected with this Security Agreement, any Collateral or the
Secured Obligations, including, without limitation, any of the
foregoing arising in, arising under or related to a case under any
bankruptcy, insolvency or similar law. To the extent the rights of
notice cannot be legally waived hereunder, each Obligor agrees that any
requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Obligors in
accordance with the notice provisions of Section 9.2 of the Credit
Agreement at least 10 days before the time of sale or other event
giving rise to the requirement of such notice. The Agent and the
Lenders shall not be obligated to make any sale or other disposition of
the Collateral regardless of notice having been given. To the extent
permitted by
12
law, any Lender may be a purchaser at any such sale. To the extent
permitted by applicable law, each of the Obligors hereby waives all of
its rights of redemption with respect to any such sale. Subject to the
provisions of applicable law, the Agent and the Lenders may postpone or
cause the postponement of the sale of all or any portion of the
Collateral by announcement at the time and place of such sale, and such
sale may, without further notice, to the extent permitted by law, be
made at the time and place to which the sale was postponed, or the
Agent and the Lenders may further postpone such sale by announcement
made at such time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
Event of Default and during the continuation thereof (unless and until
such Event of Default has been waived or cured in accordance with the
terms of the Credit Agreement), whether or not the Agent has exercised
any or all of its rights and remedies hereunder, the Agent or its
designee may notify any Obligor's customers and account debtors that
the Accounts of such Obligor have been assigned to the Agent or of the
Agent's security interest therein, and may (either in its own name or
in the name of an Obligor or both) demand, collect, receive, take
receipt for, sell, xxx for, compound, settle, compromise and give
acquittance for any and all amounts due or to become due on any
Account, and, in the Agent's discretion, file any claim or take any
other action or proceeding to protect and realize upon the security
interest of the Lenders in the Accounts. Each Obligor acknowledges and
agrees that the Proceeds of its Accounts remitted to or on behalf of
the Agent in accordance with the provisions hereof shall be solely for
the Agent's own convenience and that such Obligor shall not have any
right, title or interest in such Accounts or in any such other amounts
except as expressly provided herein. The Agent may apply all or any
part of any Proceeds of Accounts or other Collateral received by it
from any source to the payment of the Secured Obligations (whether or
not then due and payable). The Agent shall have no obligation to apply
or give credit for any item included in proceeds of Accounts or other
Collateral until it has received final payment therefor at its offices
in cash. However, if the Agent does permit credit to be given for any
item prior to receiving final payment therefor and the Agent fails to
receive such final payment or an item is charged back to the Agent for
any reason, the Agent may at its election in either instance charge the
amount of such item back against the Obligors, together with interest
thereon at a rate per annum equal to the Alternate Base Rate, plus two
percent (2.0%). Each Obligor hereby indemnifies the Agent from and
against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys' fees (except such as
result from the Agent's gross negligence or willful misconduct)
suffered or incurred by the Agent because of the maintenance of the
foregoing arrangements. The Agent shall have no liability or
responsibility to any Obligor for accepting any check, draft or other
order for payment of money bearing the legend "payment in full" or
words of similar import or any other restrictive legend or endorsement
whatsoever or be responsible for determining the correctness of any
remittance.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuance
thereof (unless and until such Event of Default has been waived or
cured in accordance with the terms of the Credit Agreement), the Agent
shall have the right to take physical possession of any and all of the
Collateral and anything found therein, the right for that purpose to
enter without legal process and without breach of the peace any
premises where the Collateral may be found (provided
13
such entry be done lawfully), and the right to maintain such possession
on any Obligor's premises (each Obligor hereby agreeing to lease
warehouses and storage facilities to the Agent or its designee if the
Agent so requests) or to remove the Collateral or any part thereof to
such other places as the Agent may desire. Upon the occurrence of any
Event of Default and at any time thereafter, unless and until such
Event of Default has been waived by the Lenders or cured to the
satisfaction of the Lenders, each Obligor shall, upon the Agent's
demand, assemble the Collateral and make it available to the Agent at a
place reasonably designated by the Agent. If the Agent exercises its
right to take possession of the Collateral, each Obligor shall also at
its expense perform any and all other steps reasonably requested by the
Agent to preserve and protect the security interest hereby granted in
the Collateral, such as placing and maintaining signs indicating the
security interest of the Agent, appointing overseers for the Collateral
and maintaining inventory records.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or
the Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document or as provided by law, or any
delay by the Agent or the Lenders in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only
to the extent specifically stated, which in the case of the Agent or
the Lenders shall only be granted as provided herein. To the extent
permitted by law, neither the Agent, the Lenders, nor any party acting
as attorney for the Agent or the Lenders, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct
hereunder. The rights and remedies of the Agents and the Lenders under
this Security Agreement shall be cumulative and not exclusive of any
other right or remedy which the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC or otherwise
complying with the requirements of applicable law of the relevant
jurisdiction, to the extent the Agent is in possession of any of the
Collateral, retain the Collateral in satisfaction of the Secured
Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Obligors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 2.9 of the Credit
Agreement for Revolving Loans that are Base Rate Loans, together with
the costs of collection and the reasonable fees of any attorneys
employed by the Agent to collect such deficiency. Any surplus remaining
after the full payment and satisfaction of the Secured Obligations
shall be returned to the Obligors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
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10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents,
as attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default (unless and until such Event of Default has been waived or
cured in accordance with the terms of the Credit Agreement):
(i) to demand, collect or settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to
an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the
Agent were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance
policy relating thereto;
(vii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may reasonably determine to be necessary in order to perfect
and maintain the security interests and liens granted in this
Security Agreement and in order to fully consummate all of the
transactions contemplated therein;
(viii) institute any foreclosure proceedings that the
Agent may deem appropriate; and
15
(ix) do and perform all such other acts and things as
the Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding or any Credit Document is in effect or any Letter of Credit
shall remain outstanding and (ii) until all of the Commitments shall
have been terminated. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Security
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several basis
pursuant to Section 25 hereof.
(c) Assignment by the Agent. Subject to Section 9.6 of the
Credit Agreement, the Agent may from time to time assign the Secured
Obligations and any portion thereof and/or the Collateral and any
portion thereof, and the assignee shall be entitled to all of the
rights and remedies of the Agent under this Security Agreement in
relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for taking any necessary steps to preserve
rights against any parties with respect to any of the Collateral.
11. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, the Proceeds and avails of the Collateral
at any time received by the Agent shall, when received by the Agent in cash or
its equivalent, be applied as follows: first, to all reasonable costs and
expenses of the Agent (including without limitation reasonable attorneys' fees
and expenses) incurred in connection with the implementation and/or enforcement
of this Security Agreement and/or any of the other Credit Documents; second, to
all costs and expenses of the Lenders (including without limitation reasonable
attorneys' fees and expenses) incurred in
16
connection with the implementation and/or enforcement of this Security Agreement
and/or any of the other Credit Documents; third, to the principal amount of the
Secured Obligations; fourth, to such of the Secured Obligations consisting of
accrued but unpaid interest and fees; fifth, to all other amounts payable with
respect to the Secured Obligations; and sixth, to the payment of the surplus, if
any, to whoever may be lawfully entitled to receive such surplus. The Obligors
shall remain liable to the Agent and the Lenders for any deficiency.
12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Lenders, all of which costs
and expenses shall constitute Secured Obligations hereunder.
13. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as the
Credit Agreement is in effect or any amounts payable thereunder or
under any other Credit Document or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated (other than any obligations with respect to the indemnities
and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement
shall be automatically terminated and the Lenders shall, upon the
request and at the expense of the Obligors, forthwith release all of
its liens and security interests hereunder and shall execute and
deliver all UCC termination statements and/or other documents
reasonably requested by the Obligors evidencing such termination.
Notwithstanding the foregoing all releases and indemnities provided
hereunder shall survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
14. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 9.1 of the Credit Agreement.
15. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall
17
inure, together with the rights and remedies of the Agent and the Lenders
hereunder, to the benefit of the Agent and the Lenders and their successors and
permitted assigns; provided, however, that none of the Obligors may assign its
rights or delegate its duties hereunder without the prior written consent of the
Agent. To the fullest extent permitted by law, each Obligor hereby releases the
Agent and each Lender, and its successors and permitted assigns, from any
liability for any act or omission relating to this Security Agreement or the
Collateral, except for any liability arising from the gross negligence or
willful misconduct of the Agent, or such Lender, or its officers, employees or
agents.
16. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 9.2 of the Credit
Agreement.
17. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
19. Governing Law; Submission to Jurisdiction; Venue. THIS SECURITY
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NORTH CAROLINA. THE PROVISIONS OF THE CREDIT AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY
REFERENCE HEREIN, MUTATIS MUTANDIS.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OBLIGOR AND THE AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS SECURITY AGREEMENT, THE CREDIT
DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
21. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Security Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the
18
Notes and the making of the Loans and the issuance of the Letters of Credit
under the Credit Agreement.
24. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence and during the continuance of any Event of
Default (unless waived or cured in accordance with the Credit Agreement), and
the Agent and the Lenders have the right, in their sole discretion, to determine
which rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Secured Obligations under this
Security Agreement, under any other of the Credit Documents.
25. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement or the other
Credit Documents, it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each of
the Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state or federal law relating to fraudulent conveyances
or transfers) then the obligations of each Guarantor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, any
bankruptcy, insolvency or similar law).
26. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
19
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
OBLIGORS: XXXXX & LORD INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice-President
XXXXX & LORD, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice-President
G & L SERVICE COMPANY, NORTH
AMERICA, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Vice-President
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
FIRST UNION NATIONAL BANK,
as Agent
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: Senior Vice President
