EXHIBIT 4.3
EXECUTION COPY
SECURITY AGREEMENT
Dated December 12, 2002
From
The Grantors referred to herein
as Grantors
to
WILMINGTON TRUST COMPANY
as Corporate Trustee
and
Xxxxx X. Xxxxxx
as Individual Trustee
TABLE OF CONTENTS
Section Page
Section 1. Grant of Security................................................4
Section 2. Security for Obligations.........................................7
Section 3. Grantors Remain Liable...........................................7
Section 4. Delivery and Control of Security Collateral......................7
Section 5. Maintaining the Account Collateral...............................9
Section 6. Maintaining Letter-of-Credit Rights.............................10
Section 7. Representations and Warranties..................................11
Section 8. Further Assurances..............................................13
Section 9. Post-Closing Changes; Collections on Assigned Agreements,
Receivables and Related Contracts...............................15
Section 10. Voting Rights; Dividends; Etc...................................16
Section 11. As to the Assigned Agreements...................................17
Section 12. Payments Under the Assigned Agreements; Letters of Credit.......17
Section 13. Transfers and Other Liens; Additional Shares....................18
Section 14. Collateral Trustees May Perform.................................18
Section 15. Remedies........................................................18
Section 16. Indemnity and Expenses..........................................20
Section 17. Amendments; Waivers; Additional Grantors; Etc...................21
Section 18. Notices, Etc....................................................21
Section 19. Continuing Security Interest; Assignments under the
Credit Agreement................................................22
Section 20. Release; Termination............................................22
Section 21. Security Interest Absolute......................................22
Section 22. Additional Secured Obligations..................................23
Section 23. Execution in Counterparts.......................................24
Section 24. Limitation of Liability.........................................24
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Section 25. Governing Law...................................................24
Section 26. Submission to Jurisdiction and Waiver...........................24
Schedules
Schedule I - Location, Chief Executive Office, Place Where Agreements
Are Maintained, Type Of Organization, Jurisdiction Of
Organization And Organizational Identification Number
Schedule II - Pledged Equity and Pledged Debt
Schedule III - Assigned Agreements
Schedule IV - Changes in Name, Location, Etc.
Schedule V - Account Collateral
Schedule VI - Securities Accounts
Schedule VII - Excluded Receivables
Schedule VIII - Other Deposit Accounts and Other Securities Accounts
Exhibits
Exhibit A - Form of Security Agreement Supplement
Exhibit B - Form of Account Control Agreement (Deposit
Account/Securities Account)
Exhibit C - Form of Consent and Agreement
Exhibit D - Form of Securities Account Control Agreement
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SECURITY AGREEMENT
SECURITY AGREEMENT dated December 12, 2002 made by The AES Corporation, a
Delaware corporation (the "Borrower"), the other Persons listed on the
signature pages hereof and the Additional Grantors (as defined in Section 17)
(the Borrower, the Persons so listed and the Additional Grantors being,
collectively, the "Grantors"), to Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as corporate trustee
(together with any successor corporate trustee appointed pursuant to Article
VII of the Collateral Trust Agreement (as hereinafter defined), the "Corporate
Trustee"), and Xxxxx X. Xxxxxx, an individual residing in the State of
Delaware, not in his individual capacity but solely as individual trustee
(together with any successor individual trustee appointed pursuant to
ArticleVII of the Collateral Trust Agreement, the "Individual Trustee"; and,
together with the Corporate Trustee, the "Collateral Trustees"), as trustees
under the Collateral Trust Agreement dated December 12, 2002 (as such agreement
may be amended, supplemented or otherwise modified hereafter from time to time,
the "Collateral Trust Agreement") among the Grantors and the Collateral
Trustees.
PRELIMINARY STATEMENTS.
(1) The Borrower has entered into an Amended and Restated Credit,
Reimbursement and Exchange Agreement dated as of December 12, 2002 (said
agreement, as it may hereafter be amended, amended and restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement"; terms
defined therein and not otherwise defined herein shall have the meanings
specified therein) with the Subsidiary Guarantors party thereto, the Banks
party thereto (the "Banks"), the Revolving Fronting Banks and the Drax LOC
Fronting Bank party thereto, and Citicorp USA, Inc., as Administrative Agent
for the Bank Parties (in such capacity, the "Agent") and as Collateral Agent
for the Bank Parties (in such capacity, the "Credit Agreement Collateral
Agent"; and together with the Agent, the "Agents").
(2) In order to induce the Banks, the Revolving Fronting Banks, the Drax
LOC Fronting Banks and the Agents to enter into the Credit Agreement, the
Grantors have agreed to grant a continuing security interest in and to the
Collateral (as hereinafter defined) to the Collateral Trustees for the ratable
benefit of the Lender Parties to secure the Obligations of the Borrower (the
"Loan Parties") under the Credit Agreement and the Notes issued pursuant
thereto.
(3) The Borrower will enter into an Indenture to be dated as of December
13, 2002 (as amended, supplemented or otherwise modified and in effect on the
date hereof and as the same may hereafter be further amended, modified,
extended, renewed, replaced, restated or supplemented from time to time
pursuant to the terms thereof, the "Exchange Note Indenture") with Xxxxx Fargo
Bank Minnesota, National Association (the "Exchange Note Trustee") to exchange
the Borrower's (i) 8.75% Senior Notes due 2002 and (ii) the 7.375% Remarketable
or Redeemable Securities due 2013 for the 10% Senior Secured Exchange Notes due
2005 to be issued on December 13, 2002 (the "Exchange Notes", and together with
the Exchange Note Indenture (only to the extent relating to the Exchange
Notes), the "Exchange Note Agreements").
(4) In order to induce the Exchange Note Trustee to enter into the
Exchange Note Indenture, the Grantors have agreed to grant a continuing
security interest in and to the Collateral to the Collateral Trustees for the
ratable benefit of the Exchange Note Holders to secure the Obligations of the
Borrower under the Exchange Note Agreements.
(5) The Borrower has entered into a Sponsor Agreement dated as of March 7,
2000 (as amended, supplemented or otherwise modified and in effect on the date
hereof and as the same may hereafter be further amended, modified, extended,
renewed, replaced, restated or supplemented from time to time pursuant to the
terms thereof, the "Sponsor Agreement") with BankBoston, N.A., Nassau Branch,
as agent (the "Sul Agent"), pursuant to which the Borrower has agreed to
guarantee the obligations of AES Cayman Guaiba, Ltd. under a Credit Agreement
dated as of March 6, 2001 (as amended, supplemented or otherwise modified and
in effect on the date hereof and as the same may hereafter be further amended,
modified, extended, renewed, replaced, restated or supplemented from time to
time pursuant to the terms thereof, the "Sul Credit Agreement") with
BankBoston, N.A., Nassau Branch, Banc of America Securities, LLC,
Unibanco-Uniao de Bancos Brasilieros S.A. and WestLB AG, New York Branch and
the lenders named therein (collectively, the "Sul Guaranteed Parties"), in an
amount of up to a maximum aggregate amount of $50,000,000 (together with any
other agreement or instrument delivered in connection with such guaranty, the
"Sul Guarantee").
(6) In order to satisfy certain conditions of the Sul Guarantee, the
Grantors have agreed to grant a continuing security interest in and to the
Collateral to the Collateral Trustees for the ratable benefit of the Sul
Guarantee Parties to secure the Obligations of the Borrower under the Sul
Guarantee.
(7) The Borrower has entered into a Gas Transportation Agreement dated as
of July 21, 2000 with Florida Public Utilities Company pursuant to which Fleet
National Bank (the "Lake Worth LOC Bank") issued in favor of Florida Public
Utilities Company irrevocable standby letter of credit number 1S1280134
(together with the application and agreement therefor dated on or about July 6,
2001, the "Lake Worth Letter of Credit") in an aggregate amount not to exceed
$5,490,449.
(8) In order to satisfy certain conditions under the Lake Worth Letter of
Credit, the Grantors have agreed to grant a continuing security interest in and
to the Collateral to the Collateral Trustees for the ratable benefit of the
Lake Worth LOC Bank to secure the obligation of Lake Worth Generation LLC
("Lake Worth"), a Subsidiary of the Borrower, to reimburse the Lake Worth LOC
Bank for any drawings under the Lake Worth Letter of Credit in an amount of up
to a maximum aggregate amount of $5,490,449.
(9) It is a condition precedent to (a) the continuation of the Loans by
the Banks and the making of Revolving Credit Loans by the Revolving Credit Loan
Banks, (b) the issuance (or be deemed to have issued) of Revolving Letters of
Credit by the Revolving Fronting Banks, (c) the deemed issuance of the Drax
Letter of Credit and the making of Drax Loans in respect of Drax L/C Drawings
by the Drax LOC Fronting Banks, (d) the entry into the Secured Hedge Agreements
by the Hedge Banks from time to time, (e) the entry into the Secured Treasury
Management Service Agreements by a Bank Party or any Affiliate thereof, (f) the
entry into the Exchange Note Indenture by the Exchange Note Trustee, (g) the
satisfaction by
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Borrower of its obligations under the Sul Guarantee and (h) the satisfaction by
Lake Worth of its obligations under the Lake Worth Letter of Credit, that the
Grantors shall have granted the assignment and security interest and made the
pledge and assignment contemplated by this Agreement.
(10) The Collateral Trustees have agreed, pursuant to the terms of the
Collateral Trust Agreement, to accept the pledge and assignment, and the grant
of a security interest, under this Agreement as security for the Secured
Obligations (as defined in the Collateral Trust Agreement).
(11) Each Grantor will derive substantial direct and indirect benefit from
the transactions contemplated by the Secured Agreements.
(12) The Borrower has the security entitlements (the "Pledged Security
Entitlements") with respect to all the financial assets (the "Pledged Financial
Assets") credited from time to time to the Borrower's securities accounts (the
"Securities Accounts") set forth and as otherwise described in Schedule VI
hereto with the Persons named therein (each a "Securities Intermediary").
(13) Each Grantor is the owner of the shares of stock or other Equity
Interests (the "Initial Pledged Equity") set forth opposite such Grantor's name
on and as otherwise described in Part I of Schedule II hereto and issued by the
Persons named therein and the Borrower is the owner of the indebtedness (the
"Initial Pledged Debt") set forth opposite the Borrower's name on and as
otherwise described in Part II of Schedule II hereto and issued by the obligors
named therein.
(14) The Borrower has opened a Collateral Account (as defined in the
Collateral Trust Agreement), under the control of the Corporate Trustee and
subject to the terms of this Agreement and the other Shared Collateral
Documents.
(15) The Borrower maintains deposit accounts (the "Deposit Accounts") with
banks, in the name of the Borrower and subject to the terms of this Agreement,
as described in Schedule V hereto.
(16) Terms defined in the Credit Agreement or the Collateral Trust
Agreement and not otherwise defined in this Agreement are used in this
Agreement as defined in the Credit Agreement or the Collateral Trust Agreement.
Further, unless otherwise defined in this Agreement, the Credit Agreement or
the Collateral Trust Agreement, terms defined in Article 8 or 9 of the UCC (as
defined below) and/or in the Federal Book Entry Regulations (as defined below)
are used in this Agreement as such terms are defined in such Article 8 or 9
and/or the Federal Book Entry Regulations. "UCC" means the Uniform Commercial
Code as in effect, from time to time, in the State of New York; provided that,
if perfection or the effect of perfection or non-perfection or the priority of
any security interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, "UCC"
means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority. The term "Federal Book
Entry Regulations" means (a) the
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federal regulations contained in Subpart B ("Treasury/Reserve Automated Debt
Entry System (TRADES)") governing book-entry securities consisting of U.S.
Treasury bonds, notes and bills and Subpart D ("Additional Provisions") of 31
C.F.R. Part 357, 31 C.F.R. ss. 357.2, ss. 357.10 through ss. 357.14 and ss.
357.41 through ss. 357.44 and (b) to the extent substantially identical to the
federal regulations referred to in clause (a) above (as in effect from time to
time), the federal regulations governing other book-entry securities.
NOW, THEREFORE, in consideration of the premises and in order to (1)
induce (a) the Banks to continue the Loans and the Revolving Credit Loan Banks
to make Revolving Credit Loans, (b) the Revolving Fronting Banks to issue (or
be deemed to have issued) Revolving Letters of Credit, (c) the Drax LOC
Fronting Bank to be deemed to have issued the Drax Letter of Credit and to make
Drax Loans in respect of Drax L/C Drawings, (d) the Hedge Banks to enter into
Secured Hedge Agreements from time to time, (e) the entry into the Secured
Treasury Management Service Agreements by a Bank Party or an Affiliate thereof
and, (f) the Exchange Note Trustee to enter into the Exchange Note Indenture
and (2) satisfy certain conditions of the Sul Guarantee and the Lake Worth
Letter of Credit, each Grantor hereby agrees with the Collateral Trustees for
their benefit and in trust for the ratable benefit of the Representatives and
the Secured Holders as follows:
Section 1. Grant of Security. Each Grantor, in order to secure the Secured
Obligations, hereby assigns and pledges to the Collateral Trustees for their
benefit and in trust for the equitable and ratable benefit of the
Representatives and the Secured Holders, and hereby grants to the Collateral
Trustees for their benefit and in trust for the equitable and ratable benefit
of the Representatives and the Secured Holders, a lien on and security interest
in, such Grantor's right, title and interest in and to the following, in each
case, as to each type of property described below, whether now owned or
hereafter acquired by such Grantor, wherever located, and whether now or
hereafter existing or arising (collectively, the "Collateral"):
(a) in the case of the Borrower, all accounts, chattel paper
(including, without limitation, tangible chattel paper and electronic
chattel paper), instruments (including, without limitation, promissory
notes), general intangibles (including, without limitation, payment
intangibles) and other obligations of any kind, whether or not arising out
of or in connection with the sale or lease of goods or the rendering of
services and whether or not earned by performance, and all rights now or
hereafter existing in and to all supporting obligations and in and to all
security agreements, mortgages, Liens, leases, letters of credit and other
contracts securing or otherwise relating to the foregoing property, in
each case only to the extent such accounts, chattel paper, instruments,
general intangibles and other obligations are owed to the Borrower from a
Subsidiary of the Borrower (other than the Subsidiaries listed on Schedule
VII) (any and all of such accounts, chattel paper, instruments, general
intangibles and other obligations, to the extent not referred to in clause
(b), (c) or (d) below, being the "Receivables", and any and all such
supporting obligations, security agreements, mortgages, Liens, leases,
letters of credit and other contracts being the "Related Contracts");
(b) the following (the "Security Collateral"):
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(i) the Initial Pledged Equity and the certificates, if any,
representing the Initial Pledged Equity, and all dividends,
distributions, return of capital, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Initial Pledged Equity and all subscription warrants, rights or
options issued thereon or with respect thereto;
(ii) in the case of the Borrower, the Initial Pledged Debt and
the instruments, if any, evidencing the Initial Pledged Debt, and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Initial Pledged Debt;
(iii) all additional shares of stock and other Equity Interests
of or in any issuer of the Initial Pledged Equity or any successor
entity from time to time acquired by such Grantor in any manner and
all additional shares of stock or Equity Interests of or in any new
direct Subsidiary (other than a Non-Pledged Subsidiary) of such
Grantor formed or acquired by such Grantor in any manner after the
date of this Agreement (such shares and other Equity Interests,
together with the Initial Pledged Equity, being the "Pledged
Equity"), and the certificates, if any, representing such additional
shares or other Equity Interests, and all dividends, distributions,
return of capital, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such shares or other Equity Interests
and all subscription warrants, rights or options issued thereon or
with respect thereto;
(iv) all additional indebtedness from time to time owed to the
Borrower by any obligor of the Initial Pledged Debt or any successor
entity (such indebtedness, together with the Initial Pledged Debt,
being the "Pledged Debt") and the instruments, if any, evidencing
such indebtedness, and all interest, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness;
(v) in the case of the Borrower, the Securities Accounts, all
Pledged Security Entitlements with respect to all Pledged Financial
Assets from time to time credited to the Securities Accounts, and all
Pledged Financial Assets, and all dividends, distributions, return of
capital, interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such Pledged Security Entitlements or
such Pledged Financial Assets and all subscription warrants, rights
or options issued thereon or with respect thereto; and
(vi) all other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements and (C) securities
accounts) in which the Borrower has now, or acquires from time to
time hereafter, any right, title or interest in any manner, and the
certificates or
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instruments, if any, representing or evidencing such investment
property, and all dividends, distributions, return of capital,
interest, distributions, value, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such investment property
and all subscription warrants, rights or options issued thereon or
with respect thereto;
provided, however, that if any time after the date of this Agreement the
Borrower obtains the appropriate consents and regulatory approvals with
respect to AES Oasis Xxxxx Inc. and AES Oasis Holdco Inc., the Equity
Interests in AES Oasis Xxxxx, Inc. and AES Oasis Holdco, Inc. shall be
pledged to the extent permissible at such time;
(c) in the case of the Borrower each of the agreements listed on
Schedule III hereto (collectively, the "Assigned Agreements"), including,
without limitation, (i) all rights of the Borrower to receive moneys due
and to become due under or pursuant to the Assigned Agreements, (ii) all
rights of the Borrower to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned Agreements, (iii) claims
of the Borrower for damages arising out of or for breach of or default
under the Assigned Agreements and (iv) the right of the Borrower to
terminate the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder (all such
Collateral being the "Agreement Collateral");
(d) the following (collectively, the "Account Collateral"):
(i) in the case of the Borrower, the Deposit Accounts and all
funds and financial assets from time to time credited thereto
(including, without limitation, all Cash Equivalents, all interest,
dividends, distributions, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such funds and financial assets,
and all certificates and instruments, if any, from time to time
representing or evidencing the Deposit Accounts);
(ii) all promissory notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time delivered to
or otherwise possessed by the Collateral Trustees for or on behalf of
the Borrower, including, without limitation, those delivered or
possessed in substitution for or in addition to any or all of the
then existing Account Collateral; and
(iii) all interest, dividends, distributions, cash, instruments
and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
the then existing Account Collateral; and
(e) all proceeds of, collateral for, income, and other payments now
or hereafter due and payable with respect to, and supporting obligations
relating to, any and all of the Collateral (including, without limitation,
proceeds, collateral and supporting obligations that constitute property
of the types described in clauses (a) through (d) of this Section 1 and
this clause (e)) and, to the extent not otherwise included, all
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(A) payments under insurance (whether or not the Collateral Trustees are
the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral, (B) tort claims, including, without limitation, all
commercial tort claims and (C) cash.
Notwithstanding the foregoing provisions of this Section 1 or of any other
Secured Agreement, the grant of a security interest as provided herein shall
not extend to, and the term "Collateral" shall not include, as to each Grantor,
more than 65% of the outstanding voting stock of any CFC (the "Excluded
Assets").
Section 2. Security for Obligations. This Agreement secures the payment of
all of the Secured Obligations of the Borrower. Without limiting the generality
of the foregoing, this Agreement secures, as to each Grantor, the payment of
all amounts that constitute part of the Secured Obligations and would be owed
by such Grantor to any Secured Holder but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Grantor.
Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor's Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Trustees of any of the rights hereunder shall not release any
Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral and (c) none of the Collateral Trustees,
any Representative or any Secured Holder shall have any obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Agreement or any other Secured Agreement, nor shall any of the Collateral
Trustees, any Representative or any Secured Holder be obligated to perform any
of the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder or thereunder.
Section 4. Delivery and Control of Security Collateral. (a) All
certificates or instruments representing or evidencing Security Collateral
shall be delivered to and held by or on behalf of the Collateral Trustees
pursuant to this Agreement and the Collateral Trust Agreement and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Trustees. The Collateral Trustees
shall have the right, at any time after the occurrence and during the
continuance of a Collateral Trust Agreement Default, in their discretion and
without notice to any Grantor, to transfer to or to register in the name of the
Collateral Trustees or any of their nominees any or all of the Security
Collateral, subject only to the revocable rights specified in Section 10, and
subject to the Remedies Limitations (as defined in Section 7(i)). In addition,
the Collateral Trustees shall have the right at any time, after the occurrence
and during the continuance of a Collateral Trust Agreement Default, to exchange
certificates or instruments representing or evidencing Security Collateral for
certificates or instruments of smaller or larger denominations. Also, the
Collateral Trustee shall have the right at any time, after the occurrence and
during the continuance of a Collateral Trust Agreement Default, to convert
Security Collateral consisting of financial assets credited to the Securities
Accounts to Security Collateral consisting of financial assets held directly by
the Collateral Trustee.
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(b) With respect to any Security Collateral in which any Grantor has any
right, title or interest and that constitutes an uncertificated security,
subject to the Remedies Limitations, such Grantor will cause the issuer thereof
either (i) to register the Collateral Trustees as the registered owners of such
security or (ii) to agree in an authenticated record with such Grantor and the
Collateral Trustees that such issuer will comply with instructions with respect
to such security originated by the Collateral Trustees without further consent
of such Grantor, such authenticated record to be in form and substance
satisfactory to the Collateral Trustees. With respect to any Security
Collateral in which any Grantor has any right, title or interest and that is
not an uncertificated security, upon the request of the Collateral Trustees,
such Grantor will notify each such issuer of Pledged Equity that such Pledged
Equity is subject to the security interest granted hereunder and the Borrower
will notify each such issuer of Pledged Debt that such Pledged Debt is subject
to the security interest granted hereunder.
(c) With respect to any Security Collateral in which the Borrower has any
right, title or interest and that constitutes a security entitlement in which
the Collateral Trustees are not the entitlement holders, the Borrower will
cause the securities intermediary with respect to such security entitlement
either (i) to identify in its records the Collateral Trustees as the
entitlement holders of such security entitlement against such securities
intermediary or (ii) to agree in an authenticated record with the Borrower and
the Collateral Trustees that such securities intermediary will comply with
entitlement orders (that is, notifications communicated to such securities
intermediary directing transfer or redemption of the financial asset to which
such Grantor has a security entitlement) originated by the Collateral Trustees
upon the occurrence and during the continuance of a Collateral Trust Agreement
Default, without further consent of such Grantor, such authenticated record to
be in substantially the form of Exhibit D hereto or otherwise in form and
substance satisfactory to the Collateral Trustees (such agreement being a
"Securities Account Control Agreement").
(d) The Borrower agrees that it will not add any securities intermediary
that maintains a securities account for the Borrower or open any new securities
account with any then existing Securities Intermediary unless (i) the
Collateral Trustees and the Required Representatives shall have received at
least 10 days' prior written notice of such additional securities intermediary
or such new securities account and (ii) the Collateral Trustees shall have
received, in the case of a Securities Account that is maintained by a
Securities Intermediary that is not the Corporate Trustee, a Securities Account
Control Agreement authenticated by such new securities intermediary and the
Borrower, or a supplement to an existing Securities Account Control Agreement
with such then existing Securities Intermediary, covering such new securities
account (and, upon the receipt by the Collateral Trustees of such Securities
Account Control Agreement or supplement, Schedule VI hereto shall be
automatically amended to include such new Securities Account). The Borrower
agrees that it will not terminate any Securities Account, except that the
Borrower may terminate a Securities Account, if it gives the Collateral
Trustees and the Required Representatives at least 10 days' prior written
notice of such termination (and, upon such termination, Schedule VI hereto
shall be automatically amended to delete such Securities Intermediary and
Securities Account). The Borrower will not change or add any securities
intermediary that maintains any securities account in which any of the
Collateral is credited or carried, or change or add any such securities
account, in each case without first complying with the provisions of this
Section 4 in order to continuously perfect the security interest granted
hereunder in such Collateral.
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(e) The Borrower shall, with respect to each Securities Account set forth
on Part B of Schedule VIII hereto (the "Other Securities Accounts"), within 7
days of the date of this Agreement (x) terminate such Other Securities Account,
at which time Schedule VI and Part B of Schedule VIII hereto shall be
automatically amended to delete such Securities Account and Other Securities
Account, respectively or (y) enter into a Securities Account Control Agreement
with respect to such Other Securities Account, at which time Part B of Schedule
VIII shall be automatically amended to delete such Other Securities Account.
(f) Upon any termination by the Borrower of any Securities Account by the
Borrower, or any Securities Intermediary with respect thereto, the Borrower
will immediately transfer all funds and property held in such terminated
Securities Account to another Securities Account listed in Schedule VI.
(g) Upon the occurrence and during the continuance of a Collateral Trust
Agreement Default, the Collateral Trustees shall have the right to originate a
Notice of Exclusive Control (as such term is defined in the applicable
Securities Account Control Agreement) with respect to any Securities Account
and thereafter shall have the sole and exclusive right to direct the
disposition of the funds and assets with respect to any such Securities
Account.
Section 5. Maintaining the Account Collateral. So long as any of the
Secured Obligations remain outstanding, any Revolving Letter of Credit or the
Drax Letter of Credit shall be outstanding, or any Revolving Credit Loan Bank
has a Revolving Credit Loan Commitment:
(a) The Borrower will maintain all Account Collateral only with the
Corporate Trustee or with banks (the "Pledged Account Banks") that have
agreed, in a record authenticated by the Borrower, the Collateral Trustees
and the Pledged Account Banks, to (i) comply with instructions originated
by the Collateral Trustees directing the disposition of funds in the
Account Collateral without the further consent of the Borrower upon the
receipt by the applicable Pledge Account Bank of a Notice of Exclusive
Control (as defined in the applicable Account Control Agreement referred
to below) and (ii) waive or subordinate in favor of the Collateral
Trustees all claims of the Pledged Account Banks (including, without
limitation, claims by way of a security interest, lien or right of setoff
or right of recoupment but subject to such exceptions as may be agreed) to
the Account Collateral, which authenticated record shall be substantially
in the form of Exhibit B hereto, or shall otherwise be in form and
substance satisfactory to the Collateral Trustees (the "Account Control
Agreement").
(b) The Borrower will cause each Person obligated at any time to make
any payment to the Borrower for any reason (an "Obligor") to make such
payment to a Deposit Account.
(c) The Borrower agrees that it will not add any bank that maintains
a deposit account for the Borrower or open any new deposit account with
any then existing Pledged Account Bank unless (i) the Collateral Trustees
and the Required Representatives shall have received at least 10 days'
prior written notice of such additional bank or such new deposit account
and (ii) the Collateral Trustees shall have received, in the case of a
bank or Pledged Account Bank that is not the Corporate
9
Trustee, an Account Control Agreement authenticated by such new bank and
the Borrower, or a supplement to an existing Account Control Agreement
with such then existing Pledged Account Bank, covering such new deposit
account (and, upon the receipt by the Collateral Trustees of such Account
Control Agreement or supplement, Schedule V hereto shall be automatically
amended to include such new Deposit Account). The Borrower agrees that it
will not terminate any bank as a Pledged Account Bank or terminate any
Account Collateral, except that the Borrower may terminate a Deposit
Account, and terminate a bank as a Pledged Account Bank with respect to a
Deposit Account, if it gives the Collateral Trustees and the Required
Representatives at least 10 days' prior written notice of such termination
(and, upon such termination, Schedule V hereto shall be automatically
amended to delete such Pledged Account Bank and Deposit Account). The
Borrower will not change or add any bank that maintains any deposit
account in which any of the Account Collateral is credited or carried, or
change or add any such deposit account, in each case without first
complying with the provisions of this Section 5 in order to continuously
perfect the security interest granted hereunder in such Account
Collateral.
(d) Upon any termination by the Borrower of any Deposit Account by
the Borrower, or any Pledged Account Bank with respect thereto, the
Borrower will immediately (i) transfer all funds and property held in such
terminated Deposit Account to another Deposit Account listed in Schedule V
and (ii) notify all Obligors that were making payments to such Deposit
Account to make all future payments to another Deposit Account listed in
Schedule V hereto, in each case so that the Collateral Trustees shall have
a continuously perfected security interest in such Account Collateral,
funds and property.
(e) The Borrower shall, with respect to each Deposit Account set
forth on Part A of Schedule VIII hereto (the "Other Deposit Accounts"),
within 7 days of the date of this Agreement (x) terminate such Other
Deposit Account, at which time Schedule V and Part A of Schedule VIII
hereto shall be automatically amended to delete such Deposit Account and
Other Deposit Account, respectively or (y) enter into an Account Control
Agreement with respect to such Other Deposit Account, at which time Part A
of Schedule VIII shall be automatically amended to delete such Other
Deposit Account.
(f) Upon the occurrence and during the continuance of a Collateral
Trust Agreement Default, the Collateral Trustees shall have the right to
originate a Notice of Exclusive Control (as such term is defined in the
applicable Account Control Agreement) with respect to any Deposit Account
and thereafter shall have the sole and exclusive right at such time to
direct the disposition of funds with respect to the applicable the Deposit
Accounts.
Section 6. Maintaining Letter-of-Credit Rights. So long as any of the
Secured Obligations remain outstanding, any Revolving Letter of Credit or the
Drax Letter of Credit shall be outstanding, or any Revolving Credit Loan Bank
has a Revolving Credit Loan Commitment, each Grantor will maintain all
letter-of-credit rights assigned to the Collateral Trustees so that the
Collateral Trustees have control of the letter-of-credit rights in the manner
specified in Section 9-107 of the UCC.
10
Section 7. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a) Such Grantor's exact legal name, as defined in Section 9-503(a)
of the UCC, is correctly set forth in Schedule I hereto. Such Grantor is
located (within the meaning of Section 9-307 of the UCC) in the state or
jurisdiction set forth on Schedule I hereto. In the case of the Borrower,
the Borrower has its chief executive office and the office in which it
maintains the original copies of each Assigned Agreement and Related
Contract to which the Borrower is a party and all originals of all chattel
paper that evidence Receivables of the Borrower, in the state or
jurisdiction set forth in Schedule I hereto. The information set forth in
Schedule I hereto with respect to such Grantor is true and accurate in all
respects. Such Grantor has not previously changed its name, location,
chief executive office, place where it maintains its agreements, type of
organization, jurisdiction of organization or organizational
identification number from those set forth in Schedule I hereto except as
disclosed in Schedule IV hereto.
(b) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for the security interest created under this Agreement or
permitted under the Credit Agreement. No effective financing statement or
other instrument similar in effect covering all or any part of such
Collateral or listing such Grantor or any trade name of such Grantor as
debtor is on file in any recording office, except such as may have been
filed in favor of the Collateral Trustees relating to the Secured
Agreements.
(c) The Pledged Equity pledged by such Grantor hereunder has been
duly authorized and validly issued and is fully paid and non-assessable.
With respect to the Pledged Equity that is an uncertificated security,
subject to the Remedies Limitations, such Grantor has caused the issuer
thereof either (i) to register the Collateral Trustees as the registered
owners of such security or (ii) to agree in an authenticated record with
such Grantor and the Collateral Trustees that such issuer will comply with
instructions with respect to such security originated by the Collateral
Trustees without further consent of such Grantor. If such Grantor is an
issuer of Pledged Equity, such Grantor confirms that it has received
notice of such security interest. In the case of the Borrower, the Pledged
Debt pledged by the Borrower hereunder has been duly authorized,
authenticated or issued and delivered, is the legal, valid and binding
obligation of the issuers thereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally and subject to general principles of equity, regardless
of whether considered in a proceeding in equity or at law, is evidenced by
one or more promissory notes (which notes have been delivered to the
Collateral Trustees) and as of the date hereof is not in default. All
Security Collateral consisting of certificated securities and instruments
have been delivered to the Collateral Trustees.
(d) The Initial Pledged Equity pledged by such Grantor constitutes
the percentage of the issued and outstanding Equity Interests of the
issuers thereof indicated on Schedule II hereto. In the case of the
Borrower, the Initial Pledged Debt constitutes all of the outstanding
indebtedness owed to the Borrower by the issuers thereof and is
outstanding in the principal amount indicated on Schedule II hereto.
11
(e) In the case of the Borrower, the Assigned Agreements to which the
Borrower is a party, true and complete copies of which have been furnished
to the Collateral Trustees, have been duly authorized, executed and
delivered by all parties thereto, have not been amended, amended and
restated, supplemented or otherwise modified, are in full force and effect
and are binding upon and enforceable against the Borrower, and to the
Borrower's knowledge, all parties thereto in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law. There exists no default as of the date hereof under any
Assigned Agreement to which the Borrower is a party by any party thereto.
Other than the Borrower, each party to the Assigned Agreements listed on
Schedule III hereto which requires such parties' consent for assignment
and to which the Borrower is a party has executed and delivered to the
Borrower a consent, in substantially the form of Exhibit C hereto or
otherwise in form and substance satisfactory to the Collateral Trustees,
to the assignment of the Agreement Collateral to the Collateral Trustees
pursuant to this Agreement.
(f) In the case of the Borrower, the Borrower has no deposit
accounts, other than the Account Collateral listed on Schedule V hereto,
as such Schedule V may be amended from time to time pursuant to Section
5(d), and legal, binding and enforceable Account Control Agreements are in
effect for each deposit account that constitutes Account Collateral (other
than Account Collateral consisting of Deposit Accounts maintained with the
Corporate Trustees or the Other Deposit Accounts), except to the extent
such Account Control Agreements are not required by Section 5(a). The
Borrower has instructed all existing Obligors to make all payments to a
Deposit Account.
(g) In the case of the Borrower, the Borrower has no deposit
accounts, other than the Other Deposit Accounts listed on Part A of
Schedule VIII hereto, as Part A of Schedule VIII hereto may be amended
from time to time pursuant to Section 5(d), which are not the subject of a
legal, binding and enforceable Account Control Agreement.
(h) In the case of the Borrower, the Borrower has no securities
accounts, other than the Securities Accounts listed on Schedule VI hereto,
as such Schedule VI may be amended from time to time pursuant to Section
4(d), and legal, binding and enforceable Securities Account Control
Agreements are in effect for each securities account that constitutes
Security Collateral (other than Security Collateral maintained with the
Corporate Trustee in the Collateral Account or the Other Securities
Accounts), except to the extent such Securities Account Control Agreements
are not required by Section 4(c).
(i) In the case of the Borrower, the Borrower has no securities
accounts, other than the Other Securities Accounts listed on Part B of
Schedule VIII hereto, as Part B of Schedule VIII hereto may be amended
from time to time pursuant to Section 4(e), which are not the subject of a
legal, binding and enforceable Securities Account Control Agreement.
(j) All filings and other actions (including, without limitation,
actions necessary to obtain control of Collateral as provided in Sections
9-104, 9-105, 9-106 and
12
9-107 of the UCC) necessary to perfect the security interest in the
Collateral of such Grantor created under this Agreement have been duly
made or taken and are in full force and effect, and this Agreement creates
in favor of the Collateral Trustees for the benefit of the Representatives
and the Secured Holders a valid and, together with such filings and other
actions, perfected first priority security interest in the Collateral of
such Grantor, securing the payment of the Secured Obligations.
(k) (i) The execution, delivery, recordation, filing or performance
by such Grantor of this Agreement, (ii) the grant by such Grantor of the
Liens granted by it pursuant to this Agreement, (iii) the perfection or
maintenance of the Liens created under this Agreement (including the first
priority nature thereof), (iv) the exercise by the Collateral Trustees of
their voting or other rights provided for in this Agreement and (v) the
exercise by the Collateral Trustees of their remedies in respect of the
Collateral pursuant to this Agreement and the other Shared Collateral
Documents, will not require any consent, approval, authorization or other
order of, or any notice to or filing with, any court, regulatory body,
administrative agency or other governmental body (other (x) than such
filings required in order to perfect any security interest granted by this
Agreement, (y) the actions described in Section 4 with respect to the
Security Collateral, which actions have been taken and are in full force
and effect and (z) any other consent, approval, authorization, order,
notice or filing, the failure of which to make or obtain could not
reasonably be expected to have a Material Adverse Effect), and will not
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Borrower or any of the
Pledged Subsidiaries or any agreement, indenture or other instrument to
which the Borrower or any of the Pledged Subsidiaries is a party or by
which the Borrower or any of the Pledged Subsidiaries or any of the
Borrower's or any of the Pledged Subsidiaries' respective property is
bound, or violate or conflict with any laws, administrative regulations or
rulings or court decrees applicable to the Borrower, any of the Pledged
Subsidiaries or the Borrower's or any of the Pledged Subsidiaries'
respective property, except for any violation, breach, conflict or default
that could not reasonably be expected to have a Material Adverse Effect
and except that in each of the foregoing cases, (A) any foreclosure or
other exercise of remedies by the Collateral Trustees will require
additional approvals and consents that have not been obtained from foreign
and domestic regulators and from lenders to, and suppliers, customers or
other contractual counterparties of one or more Subsidiaries, and the
failure to obtain such approval or consent could result in a default
under, or breach of, agreements or other legal obligations of such
Subsidiary and (B) disposition of any of the Security Collateral may be
subject to the receipt of regulatory approvals and to laws affecting the
offering and sale of securities generally (the exceptions described in the
foregoing clauses (A) and (B) are referred to as "Remedies Limitations").
Section 8. Further Assurances. (a) Subject to the Remedies Limitations,
each Grantor agrees that from time to time, at the expense of such Grantor,
such Grantor will promptly execute and deliver, or otherwise authenticate, all
further instruments and documents, and take all further action that may be
necessary or desirable, or that the Collateral Trustees may request and that is
within the power of such Grantor, consistent with its currently existing
contractual and other legal obligations, in order to perfect any pledge,
assignment or security interest granted or purported to be granted by such
Grantor hereunder or to enable the Collateral
13
Trustees to exercise and enforce their rights and remedies hereunder and under
the other Shared Collateral Documents with respect to any Collateral of such
Grantor. Without limiting the generality of the foregoing, each Grantor will
promptly with respect to Collateral of such Grantor: (i) xxxx conspicuously
each chattel paper included in Receivables, each Related Contract and, at the
request of the Collateral Trustees, each of its records pertaining to such
Collateral with a legend, in form and substance satisfactory to the Collateral
Trustees, indicating that such chattel paper, Related Contract, Assigned
Agreement or Collateral is subject to the security interest granted hereby;
provided, however, that no such legend shall be required if such Collateral is
delivered to the Collateral Trustees pursuant to clause (ii) below, (ii) if any
such Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Collateral Trustees hereunder such
note or instrument or chattel paper duly indorsed or accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Collateral Trustees, (iii) execute or authenticate and file
such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Collateral Trustees may request, in order to perfect the security interest
granted or purported to be granted by such Grantor hereunder, (iv) deliver and
pledge to the Collateral Trustees for the ratable benefit of the
Representatives and the Secured Holders certificates representing Security
Collateral that constitutes certificated securities, accompanied by undated
stock or bond powers executed in blank, (v) take all action necessary to ensure
that the Collateral Trustees have control of Collateral consisting of deposit
accounts, investment property, letter-of-credit rights and transferable records
as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC, and (vi)
deliver to the Collateral Trustees evidence that all other action that the
Collateral Trustees may deem reasonably necessary or desirable in order to
perfect the security interest created by such Grantor under this Agreement and
the other Shared Collateral Documents has been taken.
(b) (i) Each Grantor hereby authorizes the Collateral Trustees to file one
or more financing or continuation statements relating to all or any part of the
Collateral of such Grantor, and amendments thereto to correct the name and
address of the Grantor or the Collateral Trustees or to correct the description
of the Collateral contained therein to be consistent with the description of
the Collateral contained in this Agreement, in each case without the signature
of such Grantor where permitted by law and which shall be filed by the
Collateral Trustees upon the receipt of an instruction letter from the Required
Representatives requesting the taking of such action and attaching the form of
financing statement. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(ii) Each Grantor ratifies its authorization for the Collateral Trustees
to have filed such financing statements, continuation statements or amendments,
to the extent such amendments are permitted pursuant to clause (i) above, filed
prior to the date hereof.
(c) Each Grantor will furnish to the Collateral Trustees from time to time
statements and schedules further identifying and describing the Collateral of
such Grantor and such other reports in connection with such Collateral as the
Collateral Trustees may reasonably request, all in reasonable detail.
14
Section 9. Post-Closing Changes; Collections on Assigned Agreements,
Receivables and Related Contracts. (a) No Grantor will change its name, type of
organization, jurisdiction of organization, organizational identification
number or location from those set forth in Section 7(a) of this Agreement
without first giving at least 30 days' prior written notice to the Collateral
Trustees and taking all action required by the Collateral Trustees for the
purpose of perfecting or protecting the security interest granted by this
Agreement. The Borrower will not change the location of the place where it
keeps the originals of the Assigned Agreements and Related Contracts to which
the Borrower is a party and all originals of all chattel paper that evidence
Receivables of the Borrower from the locations therefor specified in Section
7(a) without first giving the Collateral Trustees 30 days' prior written notice
of such change. No Grantor will become bound by a security agreement
authenticated by another Person (determined as provided in Section 9-203(d) of
the UCC) without giving the Collateral Trustees 30 days' prior written notice
thereof and taking all action required by the Collateral Trustees to ensure
that the perfection and first priority nature of the Collateral Trustees'
security interest in the Collateral will be maintained. Each Grantor will hold
and preserve its records relating to the Collateral, including, without
limitation, the Assigned Agreements and Related Contracts, and will permit
representatives of the Collateral Trustees at any time during normal business
hours to inspect and make abstracts from such records and other documents. If
the Grantor does not have an organizational identification number and later
obtains one, it will forthwith notify the Collateral Trustees of such
organizational identification number.
(b) Except as otherwise provided in this subsection (b), each Grantor will
continue to collect, at its own expense, all amounts due or to become due such
Grantor under the Assigned Agreements, Receivables and Related Contracts. In
connection with such collections, such Grantor may take (and, at the Collateral
Trustees' direction, will take) such action as such Grantor may deem necessary
or advisable to enforce collection of the Assigned Agreements, Receivables and
Related Contracts; provided, however, that the Collateral Trustees shall have
the right at any time, upon the occurrence and during the continuance of an
Collateral Trust Agreement Default and upon written notice to such Grantor of
its intention to do so, to notify the Obligors under any Assigned Agreements,
Receivables and Related Contracts of the assignment of such Assigned
Agreements, Receivables and Related Contracts to the Collateral Trustees and to
direct such Obligors to make payment of all amounts due or to become due to
such Grantor thereunder directly to the Collateral Trustees and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Assigned Agreements, Receivables and Related Contracts, to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done, and to otherwise exercise all rights
with respect to such Assigned Agreements, Receivables and Related Contracts,
including, without limitation, those set forth set forth in Section 9-607 of
the UCC. After receipt by any Grantor of the notice from the Collateral
Trustees referred to in the proviso to the preceding sentence, (i) all amounts
and proceeds (including, without limitation, instruments) received by such
Grantor in respect of the Assigned Agreements, Receivables and Related
Contracts of such Grantor shall be received in trust for the benefit of the
Collateral Trustees hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Trustees in the same
form as so received (with any necessary indorsement) to be held as cash
collateral in the Collateral Account and either (A) released to such Grantor so
long as no Collateral Trust Agreement Default shall have occurred and be
continuing or (B) upon the occurrence and during the continuance of a
Collateral Trust Agreement Default, the Collateral Trustees shall, upon
15
receipt of a written notice from the Required Representatives, apply such cash
collateral as provided in the Collateral Trust Agreement and (ii) such Grantor
will not adjust, settle or compromise the amount or payment of any Receivable
or amount due on any Assigned Agreement or Related Contract, release wholly or
partly any Obligor thereof, or allow any credit or discount thereon. No Grantor
will permit or consent to the subordination of its right to payment under any
of the Assigned Agreements, Receivables and Related Contracts to any other
indebtedness or obligations of the Obligor thereof.
Section 10. Voting Rights; Dividends; Etc. (a) So long as no Collateral
Trust Agreement Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose; provided, however, that such
Grantor will not exercise or refrain from exercising any such right if
such action would have a material adverse effect on the value of the
Security Collateral or any part thereof.
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest and other distributions paid in respect of the
Security Collateral of such Grantor if and to the extent that the payment
thereof is not otherwise prohibited by the terms of the Applicable
Agreements; provided, however, that any and all dividends, interest and
other distributions paid or payable other than in cash in respect of, and
instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Security Collateral,
shall be, and shall be forthwith delivered to the Collateral Trustees to
hold as Security Collateral and shall, if received by such Grantor, be
received in trust for the benefit of the Collateral Trustees, be
segregated from the other property or funds of such Grantor and be
forthwith delivered to the Collateral Trustees as Security Collateral in
the same form as so received (with any necessary indorsement).
(iii) The Collateral Trustees will execute and deliver (or cause to
be executed and delivered) to each Grantor all such proxies and other
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Collateral Trust
Agreement Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 10(a)(i) shall, upon notice to
such Grantor by the Collateral Trustees, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 10(a)(ii) shall
automatically cease, and, subject to the Remedies Limitations, all such
rights shall thereupon become vested in the Collateral Trustees, who shall
thereupon have the sole right to exercise or refrain from exercising such
voting and other consensual rights and to receive and hold as
16
Collateral such dividends, interest and other distributions and shall
deposit the same into the Collateral Account; and
(ii) All dividends, interest and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of
this Section 10(b) shall be received in trust for the benefit of the
Collateral Trustees, shall be segregated from other funds of such Grantor
and shall be forthwith paid over to the Collateral Trustees to be
deposited into the Collateral Account.
Section 11. As to the Assigned Agreements. (a) The Borrower will at its
expense:
(i) perform and observe all terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements to which it is a party in full force and effect, enforce the
Assigned Agreements to which it is a party in accordance with the terms
thereof and take all such action to such end as may be requested from time
to time by the Collateral Trustees; and
(ii) furnish to the Collateral Trustees promptly upon receipt thereof
copies of all notices, requests and other documents received by the
Borrower under or pursuant to the Assigned Agreements to which it is a
party, and from time to time (A) furnish to the Collateral Trustees such
information and reports regarding the Assigned Agreements and such other
Collateral of the Borrower as the Collateral Trustees may reasonably
request and (B) upon request of the Collateral Trustees make to each other
party to any Assigned Agreement to which it is a party such demands and
requests for information and reports or for action as the Borrower is
entitled to make thereunder.
(b) The Borrower agrees that it will not, except to the extent otherwise
permitted under the Applicable Agreements:
(i) cancel or terminate any Assigned Agreement to which it is a party
or consent to or accept any cancellation or termination thereof;
(ii) amend, amend and restate, supplement or otherwise modify any
such Assigned Agreement or give any consent, waiver or approval
thereunder;
(iii) waive any default under or breach of any such Assigned
Agreement; or
(iv) take any other action in connection with any such Assigned
Agreement that would impair the value of the interests or rights of the
Borrower thereunder or that would impair the interests or rights of any
Applicable Holder.
Section 12. Payments Under the Assigned Agreements; Letters of Credit. (a)
The Borrower agrees, and has effectively so instructed each other party to each
Assigned Agreement to which it is a party, that all payments due or to become
due under or in connection with such Assigned Agreement will be made directly
to a Deposit Account.
17
(b) Upon the occurrence of a Collateral Trust Agreement Default, each
Grantor will, promptly upon request by the Collateral Trustees, (i) notify (and
such Grantor hereby authorizes the Collateral Trustees to notify) the issuer
and each nominated person with respect to each of the Related Contracts
consisting of letters of credit that the proceeds thereof have been assigned to
the Collateral Trustees hereunder and any payments due or to become due in
respect thereof are to be made directly to the Collateral Trustees or their
designee and (ii) arrange for the Collateral Trustees to become the transferee
beneficiaries of letters of credit.
Section 13. Transfers and Other Liens; Additional Shares. (a) Each Grantor
agrees that it will not (i) sell, assign or otherwise dispose of, or grant any
option with respect to, any of the Collateral, other than sales, assignments
and other dispositions of Collateral, and options relating to Collateral,
permitted under the terms of the Applicable Agreements or (ii) create or suffer
to exist any Lien upon or with respect to any of the Collateral of such Grantor
except for the pledge, assignment and security interest created under this
Agreement, and permitted under the Credit Agreement or any other Applicable
Agreements.
(b) Each Grantor agrees that it will (i) cause each issuer of the Pledged
Equity pledged by such Grantor not to issue any Equity Interests or other
securities in substitution for the Pledged Equity issued by such issuer, except
to such Grantor and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional Equity Interests or
other securities of each issuer of the Pledged Equity issued to such Grantor.
Section 14. Collateral Trustees May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Trustees may, but
without any obligation to do so and without notice, themselves perform, or
cause performance of, such agreement, and the expenses of the Collateral
Trustees incurred in connection therewith shall be payable by such Grantor
under Section 16.
Section 15. Remedies. If a Collateral Trust Agreement Default shall have
occurred and be continuing:
(a) Subject to the Remedies Limitations, the Collateral Trustees may
with the consent of the Required Representatives, and shall at the request
of the Required Representatives, exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon
default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may: (i) require each Grantor to, and each Grantor
hereby agrees that it will at its expense and upon request of the
Collateral Trustees forthwith, assemble all or part of the Collateral as
directed by the Collateral Trustees and make it available to the
Collateral Trustees at a place and time to be designated by the Collateral
Trustees that is reasonably convenient to all parties, (ii) without notice
except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Collateral
Trustees' offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Trustees may deem
commercially reasonable, and (iii) exercise any and all rights and
remedies of any of the Grantors under or in connection with the
Collateral, or otherwise in respect of the Collateral, including, without
limitation, (A) any and all rights of such Grantor to demand
18
or otherwise require payment of any amount under, or performance of any
provision of, the Assigned Agreements, the Receivables, the Related
Contracts and the other Collateral, (B) withdraw, or cause or direct the
withdrawal, of all funds with respect to the Account Collateral and (C)
exercise all other rights and remedies with respect to the Assigned
Agreements, the Receivables, the Related Contracts and the other
Collateral, including, without limitation, those set forth in Section
9-607 of the UCC. Each Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Collateral
Trustees shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. The Collateral Trustees may adjourn
any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Any cash held by or on behalf of the Collateral Trustees and all
cash proceeds received by or on behalf of the Collateral Trustees in
respect of any sale of, collection from, or other realization upon all or
any part of the Collateral may, in the discretion of the Collateral
Trustees, be held by the Collateral Trustees as collateral for, and/or
then or at any time thereafter applied (after payment of any amounts
payable to the Collateral Trustees pursuant to Section 16) in whole or in
part by the Collateral Trustees for the ratable benefit of the
Representatives and the Secured Holders against, all or any part of the
Secured Obligations, in accordance with the terms of the Collateral Trust
Agreement.
(c) All payments received by the Borrower under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Collateral Trustees, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Collateral Trustees in the same form as so received (with any
necessary indorsement).
(d) The Collateral Trustees may, without notice to the Borrower
except as required by law and at any time or from time to time, charge,
set-off and otherwise apply all or any part of the Secured Obligations
against any funds held in the Collateral Account or in any other deposit
account of the Borrower in accordance with clause (b) above.
(e) If the Collateral Trustees shall determine to exercise their
right to sell all or any of the Security Collateral of any Grantor
pursuant to this Section 15, each Grantor agrees that, upon request of the
Collateral Trustees and subject to the Remedies Limitations, such Grantor
will, at its own expense:
(i) execute and deliver, and cause each issuer of such Security
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents,
and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Collateral Trustees, advisable to
register such Security Collateral under the provisions of the
Securities Act of 1933 (as amended from time to time, the
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"Securities Act"), to cause the registration statement relating
thereto to become effective and to remain effective for such period
as prospectuses are required by law to be furnished and to make all
amendments and supplements thereto and to the related prospectus
that, in the opinion of the Collateral Trustees, are necessary or
advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto;
(ii) use its best efforts to qualify the Security Collateral
under the state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of such Security
Collateral, as requested by the Collateral Trustees;
(iii) cause each such issuer of such Security Collateral to make
available to its security holders, as soon as practicable, an
earnings statement that will satisfy the provisions of Section 11(a)
of the Securities Act;
(iv) provide the Collateral Trustees with such other information
and projections as may be necessary or, in the opinion of the
Collateral Trustees, advisable to enable the Collateral Trustees to
effect the sale of such Security Collateral; and
(v) do or cause to be done all such other acts and things as may
be necessary to make such sale of such Security Collateral or any
part thereof valid and binding and in compliance with applicable law.
(f) The Collateral Trustees are authorized, in connection with any
sale of the Security Collateral pursuant to this Section 16, to deliver or
otherwise disclose to any prospective purchaser of the Security
Collateral: (i) any registration statement or prospectus, and all
supplements and amendments thereto, prepared pursuant to subsection (e)(i)
above, (ii) any information and projections provided to it pursuant to
subsection (e)(iv) above and (iii) any other information in its possession
relating to such Security Collateral.
(g) Each Grantor acknowledges the impossibility of ascertaining the
amount of damages that would be suffered by the Secured Holders by reason
of the failure by such Grantor to perform any of the covenants contained
in subsection (e) above and, consequently, agrees that, if such Grantor
shall fail to perform any of such covenants, it will pay, as liquidated
damages and not as a penalty, an amount equal to the value of the Security
Collateral on the date the Collateral Trustees shall demand compliance
with subsection (e) above.
Section 16. Indemnity and Expenses. (a) Each Grantor agrees to indemnify,
defend and save and hold harmless the Collateral Trustees, each Representative
and each Secured Holder and each of their Affiliates and their respective
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against, and shall pay on demand, any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or awarded
against
20
any Indemnified Party, in each case arising out of or in connection with or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement) or any other Shared Collateral Document except to the extent
such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
(b) Each Grantor will upon demand pay to the Collateral Trustees the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of their counsel and of any experts and agents,
that the Collateral Trustees may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any of
the Collateral of such Grantor, (iii) the exercise or enforcement of any of the
rights of the Collateral Trustees, the Representatives or the other Secured
Holders hereunder or (iv) the failure by such Grantor to perform or observe any
of the provisions hereof.
Section 17. Amendments; Waivers; Additional Grantors; Etc. (a) No
amendment or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor herefrom, shall in any event be effective unless the
same shall (i) be in writing and signed by the Collateral Trustees and (ii)
otherwise comply with Section 9.01 of the Collateral Trust Agreement, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of the Collateral
Trustees, the Representatives or any other Secured Holders to exercise, and no
delay in exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery, or authentication, by any Person of a
security agreement supplement in substantially the form of Exhibit A hereto
(each a "Security Agreement Supplement"), (i) such Person shall be referred to
as an "Additional Grantor" and shall be and become a Grantor hereunder, and
each reference in this Agreement and the other Secured Agreements to "Grantor"
shall also mean and be a reference to such Additional Grantor, and each
reference in this Agreement and the other Secured Agreements to "Collateral"
shall also mean and be a reference to the Supplemental Collateral (as defined
in the Security Agreement Supplement) of such Additional Grantor and (ii) the
supplemental schedules IV attached to each Security Agreement Supplement shall
be incorporated into and become a part of and supplement Schedules IV,
respectively, hereto, and the Collateral Trustees may attach such supplemental
schedules to such Schedules; and each reference to such Schedules shall mean
and be a reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.
Section 18. Notices, Etc. All notices, demands, requests, and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopier or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered to, in the case of any Representative, or the
Collateral Trustees, addressed to each at their respective address specified in
the Collateral Trust Agreement, in the case of the Borrower, addressed to it at
its address specified in the Credit Agreement and, in the case of each Grantor
other than the Borrower, addressed to it at its address set forth opposite such
Grantor's name on the signature pages hereto or on the signature page to the
Security Agreement Supplement pursuant to which it
21
became a party hereto; or, as to any party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and other communications shall, when mailed, telegraphed, telecopied or
telexed, be effective when deposited in the mails, delivered to the telegraph
company, telecopied or confirmed by telex answerback, respectively, addressed
as aforesaid; except that notices and other communications to the Collateral
Trustees shall not be effective until received by the Collateral Trustees.
Delivery by telecopier of an executed counterpart of any amendment or waiver of
any provision of this Agreement or of any Security Agreement Supplement or
Schedule hereto shall be effective as delivery of an original executed
counterpart thereof.
Section 19. Continuing Security Interest; Assignments under the Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until all of the
Collateral is released, and this Agreement is terminated, in accordance with
Section 8.02 of the Collateral Trust Agreement, (b) be binding upon each
Grantor, its successors and assigns and (c) inure, together with the rights and
remedies of the Collateral Trustees hereunder, to the benefit of the Collateral
Trustees, the Representatives on behalf of themselves and on behalf of the
Secured Holders and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), any Bank Party may
assign or otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement (including, without limitation, all or any portion of
its Revolving Credit Loan Commitment, the Loans owing to it and the Note or
Notes, if any, held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Bank Party in the Shared Collateral Documents or otherwise, in each case as
provided in Section 10.06 of the Credit Agreement.
Section 20. Release; Termination. The Collateral Trustees shall release all
or any portion of the Collateral solely on terms and subject to the conditions
set forth in Article 8 of the Collateral Trust Agreement.
Section 21. Security Interest Absolute The obligations of each Grantor
under this Agreement are independent of the Secured Obligations or any other
obligations of any other Loan Party under or in respect of the Credit Agreement
Documents and the Shared Collateral Documents, and a separate action or actions
may be brought and prosecuted against each Grantor to enforce this Agreement,
irrespective of whether any action is brought against such Grantor or any other
Loan Party or whether such Grantor or any other Loan Party is joined in any such
action or actions. All rights of the Collateral Trustees, the Representatives
and the other Secured Holders and the pledge, assignment and security interest
hereunder and under the other Shared Collateral Documents, and all obligations
of each Grantor hereunder, shall be irrevocable, absolute and unconditional
irrespective of, and each Grantor hereby irrevocably waives (to the maximum
extent permitted by applicable law) any defenses it may now have or may
hereafter acquire in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Secured Agreement or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
Obligations of any other Loan
22
Party under or in respect of the Secured Agreements or any other amendment
or waiver of or any consent to any departure from any Secured Agreement,
including, without limitation, any increase in the Secured Obligations
resulting from the extension of additional credit to any Loan Party or any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any Collateral
or any other collateral, or any taking, release or amendment or waiver of
or consent to departure from any guaranty, for all or any of the Secured
Obligations;
(d) any manner of application of any Collateral or any other
collateral, or proceeds thereof, to all or any of the Secured Obligations,
or any manner of sale or other disposition of any Collateral or any other
collateral for all or any of the Secured Obligations or any other
Obligations of any other Grantor under or in respect of the Secured
Agreements or any other assets of any Grantor or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Grantor or any of its Subsidiaries;
(f) any failure of any Secured Holder to disclose to any Grantor any
information relating to the business, condition (financial or otherwise),
operations, performance, assets, nature of assets, liabilities or prospects
of any other Grantor now or hereafter known to such Secured Holder (each
Grantor waiving any duty on the part of the Secured Holders to disclose
such information);
(g) the failure of any other Person to execute this Agreement or any
other Shared Collateral Document, guaranty or agreement or the release
(other than as provided in Section 20) or reduction of liability of any
Grantor or other grantor or surety with respect to the Secured Obligations;
or
(h) any other circumstance (including, without limitation, any statute
of limitations) or any existence of or reliance on any representation by
any Secured Holder that might otherwise constitute a defense available to,
or a discharge of, such Grantor or any other Grantor or a third party
grantor of a security interest.
This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by the Collateral Trustees, any
Representative or any Secured Holder upon the insolvency, bankruptcy or
reorganization of any Grantor or otherwise, all as though such payment had not
been made.
Section 22. Additional Secured Obligations. Each of the Grantors, the
Collateral Trustees, the Representatives and the Secured Holders acknowledges
and agrees that the Collateral hereunder may secure additional Obligations of
the Borrower in respect of the incurrence of new Debt by the Borrower or the
refinancing, extension, or renewal of certain Debt of the Borrower, in each
case, only as permitted by the terms and conditions of the Credit Agreement.
Upon the execution and delivery to the Collateral Trustees of an acknowledgement
by the Persons to whom the obligations referred to in the immediately preceding
sentence are owed, in form and substance satisfactory to the Collateral
Trustees, that (i) such Persons
23
acknowledge the terms and conditions of this Agreement and agree to be bound
thereby and (ii) such Persons agree to pay their ratable share of the fees and
expenses of the Collateral Trustees and to ratably indemnify the Collateral
Trustees, in each case, on terms and conditions similar to those contained in
the Credit Agreement, such Persons shall become "Secured Holders" hereunder and
shall be entitled to share ratably in the Collateral for all purposes hereunder.
Section 23. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
Section 24. Limitation of Liability. Each Grantor, and by its acceptance of
this Agreement, the Collateral Trustees, the Representatives and the Secured
Holders, hereby confirms that it is the intention of all such Persons that this
Agreement and the Obligations of the Grantors hereunder not constitute a
fraudulent conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign,
federal or state law to the extent applicable to this Agreement and the
Obligations of the Grantors hereunder. To effectuate the foregoing intention,
the Collateral Trustees, the Representatives and the Secured Holders and the
Grantors hereby irrevocably agree that the Obligations of the Grantors under
this Agreement at any time shall be limited to the maximum amount as will result
in the Obligations of the Grantors under this Agreement not constituting a
fraudulent transfer or conveyance.
Section 25. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 26. Submission to Jurisdiction and Waiver.
(a) Each Grantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New
York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement and the other
Secured Agreements to which it is or is to be a party, or for recognition
or enforcement of any judgment, and each Guarantor hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or,
to the extent permitted by law, in such federal court. Each Grantor agrees
that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law. Nothing in this Agreement shall affect
any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any jurisdiction.
(b) Each Grantor irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement to which it is or
is to be a party in any New York State or federal court. Each
24
Grantor hereby irrevocably waives, to the fullest extent permitted by law,
the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court.
(c) EACH GRANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOANS OR
THE ACTIONS OF ANY BANKS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
[SIGNATURE PAGES IMMEDIATELY FOLLOW]
25
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
THE AES CORPORATION
By:
-----------------------
Title:
Acknowledged on the date hereof by:
WILMINGTON TRUST COMPANY,
as Corporate Trustee
By:
----------------------------------
Title:
XXXXX X. XXXXXX,
as Individual Trustee
By:
----------------------------------
Title:
XXXXX FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Exchange Note Trustee
By:
----------------------------------
Title:
CITICORP USA, INC.,
as Administrative Agent
By:
----------------------------------
Title:
BANKBOSTON, N.A., NASSAU BRANCH,
as Sul Agent
By:
----------------------------------
Title:
FLEET NATIONAL BANK,
as Lake Worth LOC Bank
By:
----------------------------------
Title:
