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EXHIBIT 10.19
SUBSIDIARY SECURITY AGREEMENT
TENNESSEE MINING, INC.
THIS SECURITY AGREEMENT (this "Agreement") is made as of November 11,
1997 by Tennessee Mining, Inc., a Kentucky corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., individually and as agent for the other Lenders
that hereafter become parties to the Credit Agreement referenced below
("Secured Party").
W I T N E S S E T H:
WHEREAS, Xxxxxxxxx Enterprises, Inc., a Kentucky corporation
("Xxxxxxxxx"), entered into a Credit Agreement dated as of October 8, 1997 with
Secured Party (the "Original Credit Agreement"), pursuant to which NationsBank
made loans to Xxxxxxxxx, and funds were advanced to Xxxxxxxxx pursuant to that
certain promissory note dated October 8, 1997 and executed by Xxxxxxxxx in the
original principal amount of $50,000,000 payable to the order to NationsBank
(the "Original Promissory Note");
WHEREAS, as a condition precedent to Secured Party's obligations to
advance funds pursuant to the Original Credit Agreement, Debtor (then a wholly
owned subsidiary of Xxxxxxxxx) executed that certain Guaranty dated as of
October 8, 1997 in favor of Secured Party (the "Original Guaranty") and that
certain Subsidiary Security Agreement dated as of October 8, 1997 in favor of
Secured Party (the "Original Security Agreement");
WHEREAS, contemporaneously with the execution and delivery hereof,
Xxxxxxxxx has sold all of its assets, including but not limited to all of the
outstanding capital stock of Debtor, to AEI Holding Company, Inc., a Delaware
corporation ("Borrower"), and Borrower has assumed substantially all of the
outstanding indebtedness and obligations of Xxxxxxxxx, including but not
limited to all indebtedness and obligations of Xxxxxxxxx owing to NationsBank
and Secured Party under the Original Credit Agreement and the Original
Promissory Note;
WHEREAS, Borrower, Agent, and Lenders have entered into that certain
Credit Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Debtor (the Credit Agreement amended and restated the Original Credit
Agreement in its entirety);
WHEREAS, Borrower has executed (i) that certain Promissory Note of
even date herewith payable to the order of NationsBank in the original
principal amount of $30,000,000 on or before the Maturity Date and (ii) that
certain Promissory Note of even
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date herewith payable to the order of The Provident Bank in the original
principal amount of $20,000,000 on or before the Maturity Date (such promissory
notes, as from time to time amended, and all promissory notes given in
substitution, renewal or extension therefor or thereof, in whole or in part,
being herein collectively called the "Notes"), which Notes renewed and extended
the Original Promissory Note;
WHEREAS, pursuant to the Credit Agreement, Debtor is concurrently
herewith giving to Agent for the benefit of Lenders a Guaranty of even date
herewith which amends and restates in its entirety the Original Guaranty
(herein, as from time to time amended, supplemented or restated, called the
"Guaranty");
WHEREAS, it is a condition precedent to Lenders' obligations to
advance funds pursuant to the Credit Agreement that Debtor shall execute and
deliver to Secured Party an amendment and restatement of the Original Security
Agreement;
WHEREAS, Borrower owns all of the issued and outstanding shares of
capital stock of Debtor;
WHEREAS, the board of directors of Debtor has determined that Debtor's
execution, delivery and performance of this Agreement may reasonably be
expected to benefit Debtor, directly or indirectly, and is in the best
interests of Debtor;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to extend such credit under the Credit Agreement, Debtor hereby
agrees with Secured Party, for the benefit of Lenders and Secured Party, as
follows:
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", and "Credit Agreement" shall have the meanings indicated
above, and the following terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Collateral Account" has the meaning given it in Section 4.1(e).
"Commitment" means the agreement or commitment by Lenders to make
loans or otherwise extend credit to Debtor under the Credit Agreement, and any
other agreement, commitment, statement of terms or other document contemplating
the making of loans or advances or other extension of credit by Lenders to or
for the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.
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"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor, including but
not limited to the Operating Equipment.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property. The General Intangibles include, among other items, all Intellectual
Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses,
Trademarks, and Trademark Licenses.
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a)
all movable property and other goods held for sale or lease, all movable
property and other goods furnished or to be furnished under contracts of
service, all raw materials and work in process, and all materials and supplies
used or consumed in a business, including but not limited to all coal and other
minerals after extraction, all stockpiles thereof and related products, (b) all
movable property and other goods which are part of a product or mass, (c) all
movable property and other goods which are returned to or repossessed by the
seller, lessor, or supplier thereof, (d) all goods and substances in which any
of the foregoing is commingled or to which any of the foregoing is added, and
(e) all accessions to, products of, and documents for any of the foregoing.
"Issuer" means any issuer of Subsidiary Shares and any successor of
such Issuer.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC)
and shall include, without limitation, all Subsidiary Shares.
"Lenders" means the Persons who are from time to time "Lenders" as
defined in the Credit Agreement.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to
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the general creditors of any owner thereof, including without limitation any
lien, mortgage, security interest, pledge, deposit, production payment, rights
of a vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien,
or any other charge or encumbrance for security purposes, whether arising by
law or agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business. "Lien" also means any
filed financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Lockbox" has the meaning given it in Section 4.1(e).
"Obligation Documents" means the Credit Agreement, the Notes, the Loan
Documents, and all other documents and instruments under, by reason of which,
or pursuant to which any or all of the Secured Obligations are evidenced,
governed, secured, or otherwise dealt with, and all other agreements,
certificates, and other documents, instruments and writings heretofore or
hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted to
Secured Party or Lenders a Lien upon any property as security for the Secured
Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence
on such invention or not, and whether a patent or application for patent on
such invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or other country, or any political subdivision thereof. (b) all
reissues, divisions, continuations, continuations-in-part, renewals and
extensions thereof, (c) all claims for, and rights to xxx for, past or future
infringements of any of the foregoing, and (d) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, appropriately completed to the satisfaction of Secured Party and
duly executed by the indicated officer or officers of Debtor.
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"Permitted Liens" means any Liens expressly permitted under Section
7.2 of the Credit Agreement.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or owing
by any third party under any indemnity, warranty, or guaranty with respect to
such property, and any condemnation or requisition payments with respect to
such property, in each case whether now existing or hereafter arising.
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been
(or are to be) sold, leased, or exchanged or for services which have been (or
are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether such accounts
or other rights to payment are evidenced by or characterized as accounts
receivable, contract rights, book debts, notes, drafts or other obligations of
indebtedness, (b) all Documents and Instruments of any kind relating to such
accounts or other rights to payment or otherwise arising out of or in
connection with the sale, lease or exchange of goods or other personal property
or the rendering of services, (c) all rights in, to, or under all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, rights to payment, Documents, or Instruments, (d) all rights in,
to and under any purchase orders, service contracts, or other contracts out of
which such accounts and other rights to payment arose (or will arise on
performance), and (e) all rights in or pertaining to any goods arising out of
or in connection with any such purchase orders, service contracts, or other
contracts, including rights in returned or repossessed goods and rights of
replevin, repossession, and reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor, Borrower and
each Other
Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Secured Party" means the Person named as such at the beginning of
this Agreement, together with its successors and assigns as the "Agent" under
the Credit Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which
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is directly or indirectly (through one or more intermediaries) controlled by or
owned fifty percent or more by such Person.
"Subsidiary Shares" means all of the following issued by any
Subsidiary of Debtor; (a) all shares of capital stock , (b) all units of
membership interest, (c) all certificates representing any such shares and
units, (d) all options and other rights, contractual or otherwise, at any time
existing with respect to such shares and units, and (e) all dividends, cash,
instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or units.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (c) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues, extensions and renewals thereof, (e) all claims for,
and rights to xxx for, past or future infringements of any of the foregoing,
and (f) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments
for past or future infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of
Texas on the date hereof.
Section 1.2. Other Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All capitalized terms used in
this Agreement which are defined in the Credit Agreement and not otherwise
defined herein shall have the same meanings herein as set forth therein. All
terms used in this Agreement which are defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the same meanings herein
as set forth therein, except where the context otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any
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such agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party and grants to Secured Party a continuing security interest, for the
benefit of Lenders, in and to all right, title and interest of Debtor in and to
any and all of the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
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(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer software, computer
hardware, computer disks and tapes and other storage media, printouts and other
materials and records) of Debtor pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(k) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, indebtedness and liabilities, whether now
existing or hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Debtor, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time to time owing by Debtor under or in respect of the
Credit Agreement, the Notes or any of the other Obligation Documents.
(b) Guaranteed Indebtedness. The payment by Debtor, when due and
payable, of all amounts from time to time owing by Debtor under or in respect
of the Guaranty or any of the other Obligation Documents to which Debtor is a
party, and the due performance by Debtor of all of its other respective
obligations under or in respect of the Guaranty and such other Obligation
Documents.
(c) Interest Rate Xxxxxx. The payment and performance of any and all
present or future obligations of Debtor according to the terms of any present
or future interest rate or currency rate swap, rate cap, rate floor, rate
collar, exchange transaction, forward rate agreement, or other exchange rate
protection agreements or any option with respect to any such transaction now
existing or hereafter entered into between Debtor, any Subsidiary of Debtor,
and one or more parties constituting any Lender (or any affiliate of any
Lender).
(d) Other Indebtedness. All loans and future advances made by Lenders
to Debtor and all other debts, obligations and liabilities of every kind and
character of Debtor now or hereafter existing in favor of Lenders, whether such
debts, obligations or liabilities be direct or indirect, primary or secondary,
joint or several, fixed or contingent, and whether originally payable to
Lenders or to a third party and subsequently acquired by Lenders and whether
such debts,
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obligations or liabilities are evidenced by notes, open account, overdraft,
endorsement, security agreement, guaranty or otherwise (it being contemplated
that Debtor may hereafter become indebted to Lenders in further sum or sums but
Lenders shall have no obligation to extend further indebtedness by reason of
this Agreement).
(e) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(f) Performance. The due performance and observance by Debtor of all
of its other obligations from time to time existing under or in respect of any
of the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby acknowledges
that the Secured Obligations are owed to the various Lenders and that each
Lender is entitled to the benefits of the Liens given under this Agreement. It
is the intention of the Debtor, Secured Party and each Lender that this
Agreement not constitute a fraudulent transfer or fraudulent conveyance under
any state or federal law that may be applied hereto. Debtor and, by their
acceptance hereof, Secured Party and each Lender hereby acknowledge and agree
that, notwithstanding any other provision of this Agreement: (a) the
indebtedness secured hereby shall be limited to the maximum amount of
indebtedness that can be incurred or secured by Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law, and (b) the Collateral pledged by Debtor hereunder shall be limited to the
maximum amount of Collateral that can be pledged by Debtor without rendering
this Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party and Lenders as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and any Permitted
Liens. No effective financing statement or other registration or instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office except any which have been filed in favor of Secured Party
relating to this Agreement and any which have been filed to perfect or protect
any Permitted Lien. None of the Collateral is in
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the possession of any Person other than Debtor or Secured Party, except for
Collateral being transported in the ordinary course of business.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its rights
or remedies hereunder, will (i) conflict with any provision of (a) any domestic
or foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result
in or require the creation of any Lien, charge or encumbrance upon any assets
or properties of Debtor or of any Related Person except for Permitted Liens
expressly contemplated in the Obligation Documents. Except as expressly
contemplated in the Obligation Documents, no consent, approval, authorization
or order of, and no notice to or filing with any court, governmental authority,
or third party is required in connection with the grant by Debtor of the
security interest herein, or the exercise by Secured Party of its rights and
remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security interest in
favor of Secured Party in the Collateral, which security interest secures all
of the Secured Obligations.
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who
is otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing
to Debtor, do not in the aggregate exceed five percent (5%) of the aggregate
face amount of all such General Intangibles, and (ii) in the case of other
General Intangibles, do not materially impair the value to Debtor or the
enforcement by Debtor of such General Intangibles.
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(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument
has only one original counterpart which constitutes collateral within the
meaning of the UCC or the law of any applicable jurisdiction, and all such
original counterparts (other than checks delivered in payment of Receivables in
the ordinary course of business) have been delivered into the possession of
Secured Party.
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien (other than Permitted Liens), (iii) has been related to, attached
to, or used in connection with any real property so as to constitute a fixture
upon such real property (except for real property which is subject to a Lien in
favor of Secured Party), (iv) is now kept or is intended to be kept at any
location other than as set forth in the Perfection Certificate (except for
goods in transit in the ordinary course of Debtor's business), (v) is installed
in or affixed to other goods so as to be an accession to such other goods
(unless such other goods are included in the Collateral), or (vi) has been
produced in violation of the Fair Labor Standards Act, as amended. All such
goods are insured to the extent required under the Credit Agreement.
(k) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
(j) Subsidiary Shares. Debtor has delivered to Secured Party all
certificates evidencing Subsidiary Shares. All such certificates are valid and
genuine and have not been altered. All shares, units and other securities
constituting the Subsidiary Shares have been duly authorized and validly
issued, are fully paid and non-assessable, and were not issued in violation of
the preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound. All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Subsidiary Shares (or
rights in respect thereof) have been paid. No restrictions or conditions exist
with respect to the transfer, voting or capital of any Subsidiary Shares. The
Subsidiary Shares constitute the percentage of the class of issued shares of
capital stock which is indicated on Exhibit B. No Issuer of any Subsidiary
Shares has any outstanding stock rights, rights to subscribe, options, warrants
or convertible securities outstanding or any other rights outstanding whereby
any Person would be entitled to have issued to him capital stock of such
Issuer.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this
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Section 3.2 from the date hereof and so long as any part of the Secured
Obligations or the Commitment is outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (i) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business, unless Debtor shall have
first (1) notified Secured Party of such change at least twenty (20) days prior
to the effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party's security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party's security interests and rights under this Agreement or the
perfection or priority thereof. In any notice furnished pursuant to this
subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of
Secured Party's security interest in the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further
action, in order: (i) to confirm and validate this Agreement and Secured
Party's rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in
any other provisions hereof, (iii) to perfect, register and protect the
security interests and rights created or purported to be created hereby or to
maintain or upgrade in rank the priority of such security interests and rights,
(iv) to enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, or (v) to otherwise give Secured Party
the full benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) xxxx its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment
of such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of
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13
the Collateral and the books and records of or relating to the Collateral at
any time during normal business hours, and to make photocopies and photographs
thereof, and to write down and record any information which such
representatives obtain; provided that such actions do not unreasonably
interfere with Debtor's business..
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business,
properties, or financial condition, and (ii) statements and schedules
identifying and describing the Collateral and other reports and information
requested in connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral (except Collateral which is sold in
accordance with Section 7.5 of the Credit Agreement), free and clear of all
Liens, encumbrances or adverse claims except for the security interest created
by this Agreement and any Permitted Liens, and Debtor will not grant or allow
any such Liens, encumbrances or adverse claims to exist. Debtor will not grant
or allow to remain in effect, and Debtor will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement and any which have been filed
to perfect or protect any Permitted Lien. Debtor will defend Secured Party's
right, title and special property and security interest in and to the
Collateral against the claims of any Person. Except as expressly allowed in
Section 3.3 below for Inventory and Equipment, Debtor (i) will insure that all
of the Collateral -- whether goods, Documents, Instruments, or otherwise -- is
and remains in the possession of Debtor or Secured Party (or a bailee selected
by Secured Party who is holding such Collateral for the benefit of Secured
Party), except for goods being transported in the ordinary course of business,
and (ii) will not sell, assign (by operation of law or otherwise), transfer,
exchange, lease or otherwise dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will)
take such action (not otherwise forbidden hereunder) as Debtor or Secured Party
may deem necessary or advisable to enforce collection or performance of each
such Receivable. Except for actions and omissions in the ordinary course of
business which do
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not in the aggregate cause losses or reductions in excess of five percent (5%)
of the aggregate face amount of all such Receivables outstanding at any time,
Debtor (i) will duly perform and cause to be performed all of its obligations
with respect to the goods or services, the sale or lease or rendering of which
gave rise or will give rise to each such Receivable, and (ii) will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any such Receivable, or by any
written instrument, or otherwise) take or allow any action or omission which
causes any such Receivable to become subject to any contra-accounts, setoffs,
defenses, counterclaims, discounts, allowances, rebates, credits or adjustments
by or available to account debtors obligated on such Receivable, unless such
action involves a good faith contest (promptly instituted and diligently
concluded) to the validity of amounts claimed to be owed to another Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's
direction, will) take such action (not otherwise forbidden hereunder) as Debtor
or Secured Party may deem necessary or advisable to enforce collection or
performance of each such General Intangible. Unless the failure to do so is the
result of a good faith contest (promptly and diligently concluded) of the
validity of such obligations, Debtor will duly perform and cause to be
performed all of its obligations under any contracts, instruments, and
agreements which are, or which are related to, any material General Intangibles
of Debtor. Debtor will not (whether through failure to duly perform its
obligations under any contracts, instruments, and agreements which are related
to any such General Intangibles, or by any written instrument, or otherwise)
take or allow any action or omission which causes any such General Intangibles
to become subject to any contra-accounts, setoffs, defenses, counterclaims,
discounts, allowances, rebates, credits or adjustments by or available to
account debtors obligated on such General Intangibles, except for those which
(i) in the case of such General Intangibles under which money is owing to
Debtor, do not in the aggregate exceed five percent (5%) of the aggregate face
amount of all such General Intangibles, and (ii) in the case of other General
Intangibles included within the Collateral, do not materially impair the value
or enforcement of such General Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual
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Property (or any similar request) with the United States Patent and Trademark
Office, or any similar office or agency of the United States, any State thereof
or other country, or any political subdivision thereof, Debtor will give
Secured Party notice of such intended filing and will, upon Secured Party's
request, execute, deliver and file any agreements, instruments, registrations
and filings which Secured Party may request to confirm Secured Party's security
interest therein and to put such security interest of record in such office.
Debtor hereby appoints Secured Party as its agent and attorney in fact to do
the same, and hereby ratifies and confirms all actions of Secured Party as such
agent and attorney in fact, and hereby acknowledges that such agency and power
of attorney are irrevocable and coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral
to have only one original counterpart. Upon request by Secured Party, Debtor
will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral. Debtor will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any Documents or Instruments
which are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission which causes any Documents or
Instruments which are included within the Collateral to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Secured Party, Debtor will xxxx each chattel paper
which is included within the Collateral with a legend indicating that such
chattel paper is subject to the security interest granted by this Agreement.
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of
Secured Party, Debtor will not allow any Inventory included within the
Collateral to be covered by any Document. Debtor will not cause or permit the
removal of any item of Inventory from Debtor's possession, control and risk of
loss, and Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any Inventory, other than in
connection with the following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the
benefit of Secured Party.
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(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.
Debtor will promptly furnish to Secured Party a statement respecting any loss
or damage to any of such Equipment with an aggregate value in excess of
$500,000. Except for transportation of Equipment in the ordinary course of
business, Debtor will not allow any Equipment included within the Collateral to
be located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Equipment. Debtor will not cause or permit the removal of any item of
Equipment from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any Equipment, other than in connection with the
following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (i) in
the ordinary course of business or (ii) which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the
benefit of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral,
Debtor will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
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17
deliver to Secured Party all such certificates of title and similar evidences
of ownership, all applications therefor, and all other documents needed or
helpful in registering Secured Party's security interest in such Collateral on
such certificates of title, other evidences of ownership, and applications and
in otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement.)
(ii) All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any necessary endorsement
or shall be accompanied by fully executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
(iii) If Debtor shall receive, by virtue of its being or having been an
owner of any Subsidiary Shares, any (i) stock certificate (including
any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reorganization,
reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spinoff or split-off), promissory note or other
instrument or writing; (ii) option or right, whether as an addition
to, substitution for, or in exchange for, any Subsidiary Shares, or
otherwise; (iii) dividends payable in cash (except such dividends
permitted to be retained by Debtor pursuant to Section 4.10 hereof, or
(iv) dividends or other distributions in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive the
same in trust for the benefit of Secured Party, shall segregate it from
Debtor's other property, and shall promptly deliver it to Secured Party
in the exact form received, with any necessary endorsement or
appropriate stock powers duly executed in blank, to be held by Secured
Party as Collateral.
(iv) Status of Subsidiary Shares. The certificates evidencing the
Subsidiary Shares shall at all times be valid and genuine and shall
not be altered. The Subsidiary Shares at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, and shall
not be issued in violation of the preemptive rights of any Person or
of any agreement by which Debtor or the Issuer thereof is bound and
shall not be subject to any restrictions with respect to transfer,
voting or Capital of such Subsidiary Shares.
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(v) Notices from Issuer. Debtor will promptly deliver to Secured Party
a copy of each notice or other communication received by Debtor from
any Issuer in respect of any Investment Property.
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic
or other reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
(b) Power of Attorney. Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact and proxy, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument which
Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement including any action or instrument: (i) to request or instruct
each Issuer (and each registrar, transfer agent, or similar Person acting on
behalf of each Issuer) including any action or instrument: (i) to request or
instruct each to register the pledge or transfer of the Collateral to Secured
Party; (ii) to otherwise give notification to any Issuer, registrar, transfer
agent, financial intermediary, or other Person of Secured Party's security
interests hereunder; (iii) to obtain and adjust any insurance required to be
paid to Secured Party pursuant hereto; (iv) to ask, demand, collect, xxx for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (v) to receive,
indorse and collect any drafts or other Instruments or Documents; (vi) to
enforce any obligations included among the Collateral; and (vii) to file any
claims or take any action or institute any proceedings which Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Debtor or Secured Party with respect to any
of the Collateral. Debtor hereby acknowledges that such power of attorney and
proxy are coupled with an interest, are irrevocable, and are to be used by
Secured Party for the sole benefit of Lenders.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
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19
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct
such Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of any provision hereof which was otherwise violated by such
Collateral being held by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, upon
the occurrence and during the continuance of a Default or an Event of Default,
to notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party and, upon such notification and at the expense of Debtor and to the
extent permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to above in this subsection: all amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment upon the occurrence and during the continuance of a Default
or Event of Default shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Debtor and shall be
forthwith paid over to Secured Party in the same form as so received (with any
necessary indorsement) to be, at Secured Party's discretion, either (A) held as
cash collateral and released to Debtor upon the remedy of all Defaults and
Events of Default, or (B) while any Event of Default is continuing, applied as
specified in Section 4.3.
(f) Collection and Collateral Account. There is hereby established
with Secured Party a cash collateral account (the "Collateral Account") in the
name and under the control of Secured Party into which there shall be deposited
from time to time the cash proceeds of the Collateral (and of any other
collateral under other Obligation Document) required to be delivered to Secured
Party pursuant to the following subsections of this Section 4.1 or pursuant to
any other provision of this Agreement or any other Obligation Document. Debtor
and Secured Party shall deal with the Collateral Account as follows:
(i) Concurrently with the execution hereof (or promptly
thereafter), Debtor shall instruct all account debtors and other
Persons obligated to make payments to Debtor on any Receivables,
General Intangibles, Instruments, or other rights to payment included
within the Collateral to make such payments either (A) directly to
Secured Party, in which case Debtor shall instruct that such payments
be remitted to a post office box ("Lockbox) which shall be in the name
and under the control of Secured Party, or (B) if Secured Party
agrees, to one or more banks acceptable to Secured Party, in which
case
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Debtor shall instruct that such payments be remitted to a post office
box in the name and under the control of such bank which is subject to
the terms of a lockbox agreement in a form satisfactory to Agent, duly
executed by Debtor and such bank, pursuant to which Debtor shall have
irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to Secured
Party for deposit into the Collateral Account or as Secured Party may
otherwise instruct such bank. All such payments made to Secured Party
shall be deposited in the Collateral Account. In addition to the
foregoing, Debtor agrees that if the proceeds of any Collateral
(including any payments with respect to which instructions have been
given as provided above) shall be received by it, Debtor shall as
promptly as possible deposit such proceeds into the Collateral
Account. Until so deposited, all such proceeds shall be held in trust
by Debtor for Secured Party and shall not be commingled with any other
funds or property of Debtor, and Debtor will not adjust, settle or
compromise the amount or payment of any such Receivable, General
Intangible, Instrument, or other right to payment or release wholly or
partly any account debtor or obligor thereof or allow any credit or
discount thereon.
(ii) As long as no Default or Event of Default has occurred
or is continuing, amounts on deposit in the Collateral Account shall,
upon receipt by Secured Party, be deposited by Secured Party in
Borrower's operating account maintained with Secured Party.
(iii) If a Default or an Event of Default has occurred or is
continuing, Secured Party shall, at Secured Party's discretion, either
(A) continue to hold the balance of the Collateral Account and all
Liquid Investments as Collateral, or (B) apply any or all of the
balance from time to time standing to the credit of the Collateral
Account (subject to collection) as specified in Section 4.3 and
liquidate any or all Liquid Investments and apply the proceeds thereof
as specified in Section 4.3.
(iv) Amounts on deposit in the Collateral Account pursuant
to subsection (iii) shall either remain on deposit therein or be
invested and re-invested from time to time in such Liquid Investments
as Secured Party shall determine, which Liquid Investments shall be
held in the name and be under the control of Secured Party in a
securities account established by Secured Party with one of its
Affiliates until liquidated and applied as provided in subsection
(iii). Any income received by Secured Party with respect to the
balance from time to time standing to the credit of the Collateral
Account, including any interest on or proceeds of Liquid Investments,
shall also remain, or be deposited, in the Collateral Account. All
right, title and interest in and to the amounts on deposit from time
to time in the Collateral Account, together with any Liquid
Investments from time to time made pursuant to this section shall vest
in Secured Party, shall constitute part of the Collateral hereunder,
and shall not constitute payment of the Secured Obligations until
applied thereto as herein provided.
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21
(v) As used in this section, "Liquid Investment" means any
investment in the name of Secured Party (and, in the opinion of
counsel to Secured Party, appropriately subject to a perfected
security interest in favor of Secured Party) which matures within one
month after it is acquired by Secured Party and is either (A) a
certificate of deposit or time deposit issued by Secured Party or (B)
an obligation entitled to the full faith and credit of the United
States which is in book-entry form and subject to pledge under
applicable state law and Treasury regulations.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it (together with all
books, records and information of Debtor relating thereto) available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Company's books,
records, and information relating to the Collateral, and (iii) store or
transfer any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and, in connection
with such preparation and disposition, use without charge any copyright,
trademark, trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all of
the Collateral has been sold or until the Secured Obligations have been paid
and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
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22
(f) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any public sale;
(g) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor 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. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party 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.
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
(i) Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as Secured Party shall in its sole
discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which
relate to Patents or Trademarks included in the Collateral and take or
refrain from taking any action under any thereof, and DEBTOR HEREBY
RELEASES SECURED PARTY AND THE LENDERS FROM, AND AGREES TO HOLD
SECURED PARTY AND THE LENDERS FREE AND HARMLESS FROM AND AGAINST, ANY
CLAIMS AND EXPENSES ARISING OUT OF ANY LAWFUL ACTION SO TAKEN OR
OMITTED TO BE TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing
Trademarks or the products or services made or rendered in connection
with Patents, and
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its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to Secured Party.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may (subject to the rights of Lenders under the Credit
Agreement) elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party 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 Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances,
or adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party or Lenders to
collect such deficiency.
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Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY
OR ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection
and preservation of this security interest created under this Agreement, (iii)
the administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended, however, to prevent Secured Party
from resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party or any Lender to proceed against any other Person, to exhaust any
Collateral or other security for the Secured Obligations, to have any Other
Liable Party joined with Debtor in any suit arising out of the Secured
Obligations or this Agreement, or to pursue any other remedy in Secured Party's
power. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time. Debtor further waives any defense arising by reason of any disability or
other defense of any Other Liable Party or by reason of the cessation from any
cause whatsoever of the liability of any Other Liable Party. This Agreement
shall continue irrespective of the fact that the liability of any Other Liable
Party may have ceased and irrespective of the validity or enforceability of any
other Obligation Document to which Debtor or any Other Liable Party may be a
party, and notwithstanding any death, incapacity, reorganization, or bankruptcy
of
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any Other Liable Party or any other event or proceeding affecting any Other
Liable Party. Until all of the Secured Obligations shall have been paid in
full, Debtor shall have no right to subrogation and Debtor waives the right to
enforce any remedy which Secured Party or any Lender has or may hereafter have
against any Other Liable Party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by Secured
Party. Debtor authorizes Secured Party and each Lender, without notice or
demand, without any reservation of rights against Debtor, and without in any
way affecting Debtor's liability hereunder or on the Secured Obligations, from
time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive
and release any or all of such other property, (b) apply the Collateral or such
other property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (c) renew, extend for any period, accelerate,
modify, compromise, settle or release any of the obligations of any Other
Liable Party in respect to any or all of the Secured Obligations or other
security for the Secured Obligations, (d) waive, enforce, modify, amend or
supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, Secured
Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with Secured Party, or to act
as separate agent or agents on behalf of the Lenders, with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment. In so doing
Secured Party may, in the name and on behalf of Debtor, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.5.
Section 4.10. Voting Rights, Dividends, Etc. in Respect of Subsidiary
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Subsidiary Shares; provided, however, that any and all
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(i) dividends and interest 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 Subsidiary Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Subsidiary Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Subsidiary Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Subsidiary Shares and shall, if received by Debtor, be received in trust for
the benefit of Secured Party, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Secured Party in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the
dividends and interest payments which it would otherwise be authorized
to receive and retain pursuant to subsection (a) of this section shall
automatically cease, and all such rights shall thereupon become vested
in Secured Party which shall thereupon have the sole right to receive
and hold as Subsidiary Shares such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Subsidiary Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Subsidiary Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Subsidiary Shares, and,
in connection therewith, to deposit and deliver any and all of the
Subsidiary Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Subsidiary Shares in the exact form
received, to be held by Secured Party as Collateral.
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Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Subsidiary Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Obligation Document.
Section 4.11. Private Sale of Subsidiary Shares. Debtor recognizes
that Secured Party may deem it impracticable to effect a public sale of all or
any part of the Subsidiary Shares and that Secured Party may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and
not with a view to the distribution or resale thereof. Debtor acknowledges that
any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the Issuer of such securities to
register such securities for public sale under the Securities Act of 1933, as
amended. Debtor further acknowledges and agrees that any offer to sell such
securities which has been (a) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of Dallas, Texas (to the extent that such an offer may be so
advertised without prior registration under the Securities Act), or (b) made
privately in the manner described above to not less than fifteen (15) bona fide
offerees shall be deemed to involve a "public sale" for the purposes of Section
9.504(c) of the UCC (or any successor or similar, applicable statutory
provision) as then in effect in the State of Texas, notwithstanding that such
sale may not constitute a "public offering" under the Securities Act of 1933,
as amended, and that Secured Party may, in such event, bid for the purchase of
such securities.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing. In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Lenders as required in the Credit Agreement.
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Section 5.3. Preservation of Rights. No failure on the part of Secured
Party or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Obligation Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right.
Neither the execution nor the delivery of this Agreement shall in any manner
impair or affect any other security for the Secured Obligations. The rights and
remedies of Secured Party provided herein and in the other Obligation Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law or otherwise. The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or contingent
on any attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein or by law shall be construed as
relieving any Other Liable Party from liability on the Secured Obligations or
any deficiency thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing, Secured Party and
any Lender may (except as otherwise provided in the Credit Agreement) pledge,
assign or otherwise transfer any or all of their respective rights under any or
all of the Obligation Documents to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted herein or otherwise. None of the rights or duties of Debtor hereunder
may be assigned or otherwise transferred without the prior written consent of
Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the termination
or expiration of the Credit Agreement and any other commitment of Lenders to
extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor
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to Secured Party, this Agreement and the security interest created hereby shall
terminate and all rights to the Collateral shall revert to Debtor. Secured
Party will thereafter, upon Debtor's request and at Debtor's expense, (a)
return to Debtor such of the Collateral in Secured Party's possession as shall
not have been sold or otherwise disposed of or applied pursuant to the terms
hereof, and (b) execute and deliver to Debtor such documents as Debtor shall
reasonably request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of TEXAS applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Texas.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document". This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Credit
Agreement governing such Loan Documents.
Section 5.12. Amendment and Restatement. This Agreement amends and
restates in its entirety the Original Security Agreement, and all of the terms
hereof shall supersede the terms and provisions thereof. This Agreement renews
and extends all Liens existing by virtue of the Original Security Agreement,
but the terms, provisions and conditions of such Liens shall hereafter be
governed in all respects by this Agreement.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement
as of the date first above written.
TENNESSEE MINING, INC.
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: SVP
