Exhibit 10.20
EXECUTION COPY
SECURITY AGREEMENT
By
MID-WESTERN AIRCRAFT SYSTEMS, INC.,
MID-WESTERN AIRCRAFT SYSTEMS HOLDINGS, INC.,
ONEX WIND FINANCE LP,
THE SUBSIDIARIES PARTY HERETO,
as Grantors,
CITICORP NORTH AMERICA, INC.,
as Collateral Agent
----------
Dated as of June 16, 2005
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions.................................................... 2
SECTION 1.01. Uniform Commercial Code Defined Terms................... 2
SECTION 1.02. Credit Agreement Defined Terms.......................... 2
SECTION 1.03. Definition of Certain Terms Used Herein................. 2
SECTION 1.04. Rules of Construction................................... 8
ARTICLE II Authority of Collateral Agent................................. 8
SECTION 2.01 General Authority of the Collateral Agent over the
Collateral.............................................. 8
SECTION 2.02. Exercise of Powers...................................... 8
SECTION 2.03. Remedies Not Exclusive.................................. 8
SECTION 2.04. Waiver and Estoppel..................................... 9
SECTION 2.05. Limitation by Law....................................... 9
SECTION 2.06. Rights of Secured Parties in Respect of Obligations..... 10
ARTICLE III Security Interest............................................ 10
SECTION 3.01. Security Interest....................................... 10
SECTION 3.02. No Assumption of Liability.............................. 10
ARTICLE IV Representations and Warranties................................ 11
SECTION 4.01. Title and Authority..................................... 11
SECTION 4.02. Validity of Security Interest and Filings............... 11
SECTION 4.03. Limitations on and Absence of Other Liens............... 12
SECTION 4.04. Other Actions........................................... 12
SECTION 4.05. No Conflicts, Consents, etc............................. 15
ARTICLE V Covenants...................................................... 15
SECTION 5.01. Protection of Security.................................. 15
SECTION 5.02. Further Assurances...................................... 15
SECTION 5.03. Taxes; Encumbrances..................................... 16
SECTION 5.04. Continuing Obligations of the Grantors.................. 16
SECTION 5.05. Use and Disposition of Collateral....................... 16
SECTION 5.06. Insurance............................................... 16
SECTION 5.07. Certain Covenants and Provisions Regarding Patent,
Trademark and Copyright Collateral...................... 16
ARTICLE VI Remedies...................................................... 18
i
Page
----
SECTION 6.01. Remedies upon Default................................... 18
SECTION 6.02. Application of Proceeds................................. 19
SECTION 6.03. Grant of License to Use Intellectual Property........... 19
ARTICLE VII Collateral Account........................................... 20
SECTION 7.01. Establishment of Collateral Account..................... 20
ARTICLE VIII Miscellaneous............................................... 21
SECTION 8.01. Notices................................................. 21
SECTION 8.02. Survival of Agreement................................... 21
SECTION 8.03. Binding Effect.......................................... 21
SECTION 8.04. Successors and Assigns.................................. 21
SECTION 8.05. GOVERNING LAW........................................... 21
SECTION 8.06. Waivers; Amendment; Several Agreement................... 21
SECTION 8.07. WAIVER OF JURY TRIAL.................................... 22
SECTION 8.08. Severability............................................ 22
SECTION 8.09. Counterparts............................................ 22
SECTION 8.10. Headings................................................ 23
SECTION 8.11. Jurisdiction; Consent to Service of Process............. 23
SECTION 8.12. Termination............................................. 23
SECTION 8.13. Additional Grantors..................................... 24
SECTION 8.14. Financing Statements.................................... 24
SECTION 8.15. Collateral Agent Appointed Attorney-in-Fact............. 25
ANNEXES
Annex I Form of Supplement
Annex II Form of Perfection Certificate
Annex III Form of Securities Account Control Agreement
Annex IV Form of Deposit Account Control Agreement
Annex V-A Form of Copyright Security Agreement
Annex V-B Form of Patent Security Agreement
Annex V-C Form of Trademark Security Agreement
ii
SECURITY AGREEMENT
This SECURITY AGREEMENT (as amended, amended and restated, supplemented or
otherwise modified from time to time, this "Agreement") dated as of June 16,
2005 among MID-WESTERN AIRCRAFT SYSTEMS, INC., a Delaware corporation ("U.S.
Borrower"), ONEX WIND FINANCE LP, a Delaware limited partnership ("Additional
Borrower" and, together with the U.S. Borrower, "Borrowers"), MID-WESTERN
AIRCRAFT SYSTEMS HOLDINGS, INC., a Delaware corporation ("Parent"), each
Subsidiary of the U.S. Borrower and each Additional Borrower Subsidiary listed
on the signature pages hereto (collectively, together with each Subsidiary that
becomes a party hereto pursuant to Section 8.13 of this Agreement and Parent,
the "Guarantors" and, together with Borrowers, the "Grantors") and CITICORP
NORTH AMERICA, INC. ("Citicorp"), as Collateral Agent (in such capacity, and
together with any successors in such capacity, the "Collateral Agent") for the
Secured Parties.
RECITALS
A. Borrowers, Parent, Citicorp, as Administrative Agent (in such capacity
and together with any successors in such capacities, the "Administrative
Agent"), the Collateral Agent, The Bank of Nova Scotia and Royal Bank of Canada,
as Co-Syndication Agents, Citigroup Global Markets Inc., as Sole Lead Arranger
and Bookrunner, (in such capacities, and together with any successors in such
capacities, the "Lead Arranger"), The Bank of Nova Scotia and Royal Bank of
Canada, as co-arrangers (in such capacity, and together with any successors in
such capacity and the Lead Arranger, the "Arrangers") and the lenders party
thereto (the "Lenders") have entered into that certain credit agreement, dated
as of June 16, 2005 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"). The term "Credit Agreement"
shall also include and refer to any increase in the amount of indebtedness under
the Credit Agreement and any refinancing or replacement of the Credit Agreement
(whether under a bank facility, securities offering or otherwise) or one or more
successor or replacement facilities whether or not with a different group of
agents or lenders.
B. Parent Guarantor and each Subsidiary Loan Party have, pursuant to the
Guarantee Agreement, dated as of the date hereof, among other things,
unconditionally guaranteed the obligations of the U.S. Borrower under the Credit
Agreement, and Parent Guarantor, the U.S. Borrower, each Subsidiary Loan Party
and each Additional Borrower Subsidiary have, pursuant to the Guarantee
Agreement, dated as of the date hereof, among other things, unconditionally
guaranteed the obligations of the Additional Borrower under the Credit
Agreement.
C. Borrowers and each Guarantor will receive substantial benefits from the
execution, delivery and performance of the obligations under the Credit
Agreement and are, theretofore, willing to enter into this Agreement.
D. It is contemplated that, to the extent permitted by the Credit
Agreement, one or more of the Grantors may enter with any Qualified Counterparty
into one or more Hedging Agreements relating to Loans.
E. Contemporaneously with the execution and delivery of this Agreement,
Borrowers and the Guarantors have executed and delivered to the Collateral Agent
a Pledge Agreement (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Pledge Agreement").
F. This Agreement is given by each Grantor in favor of the Collateral Agent
for the benefit of the Secured Parties to secure the payment and performance of
all of the Obligations; provided that this Agreement is given by each Additional
Borrower Party in favor of the Collateral Agent for the benefit of the Secured
Parties to secure the payment and performance only of those Obligations of any
and all of the Additional Borrower Parties.
NOW THEREFORE, in consideration of the foregoing and other benefits
accruing each Grantor, the receipt and sufficiency of which are hereby
acknowledged, each Grantor hereby makes the following representations and
warranties to the Collateral Agent for the benefit of the Secured Parties (and
each of their respective successors and assigns), as follows:
ARTICLE I
Definitions
SECTION 1.01. Uniform Commercial Code Defined Terms. Unless otherwise
de-fined herein, terms used herein that are defined in the UCC shall have the
meanings assigned to them in the UCC, including the following which are
capitalized herein:
"Accounts"; "Bank"; "Certificates of Title"; "Chattel Paper";
"Commercial Tort Claim"; "Commodity Account"; "Commodity Contract";
"Commodity Customer"; "Commodity Intermediary"; "Deposit Accounts";
"Documents"; "Electronic Chattel Paper"; "Entitlement Holder"; "Entitlement
Order"; "Equipment"; "Financial Asset"; "Fixtures"; "Goods"; "Instruments"
(as defined in Article 9 rather than Article 3); "Inventory"; "Investment
Property"; "Letter-of-Credit Rights"; "Letters of Credit"; "Securities";
"Securities Account"; "Securities Intermediary"; "Security Entitlement";
"Supporting Obligations"; and "Tangible Chattel Paper".
SECTION 1.02. Credit Agreement Defined Terms. Capitalized terms used but
not otherwise defined herein that are defined in the Credit Agreement shall have
the meanings given to them in the Credit Agreement.
SECTION 1.03. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales.
2
"Additional Borrower" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Books and Records" shall mean all instruments, files, records, ledger
sheets and documents evidencing, covering or relating to any of the Collateral.
"Borrowers" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Charges" shall mean any and all property and other taxes, assessments and
special assessments, levies, fees and all governmental charges imposed upon or
assessed against, and all claims (including, without limitation, landlords',
carriers', mechanics', maritime, workmen's, repairmen's, laborers',
materialmen's, suppliers' and warehousemen's Liens and other claims arising by
operation of law) against, all or any portion of the Collateral.
"Collateral" shall mean with respect to each of the Grantors all of the
following, in each case, whether now owned or hereafter acquired:
(a) Accounts Receivable;
(b) Books and Records;
(c) cash and Deposit Accounts;
(d) Chattel Paper;
(e) Collateral Account and Collateral Account Funds;
(f) Commercial Tort Claims described on Schedule 13 to the Perfection
Certificate;
(g) Documents;
(h) Equipment;
(i) Fixtures;
(j) General Intangibles;
(k) Goods;
(l) Instruments;
(m) Inventory;
(n) Investment Property;
(o) Letter-of-Credit Rights;
3
(p) Letters of Credit;
(q) Supporting Obligations;
(r) Intellectual Property;
(s) Motor Vehicles;
(t) to the extent not covered by clauses (a) through (s) of this
definition, all other personal property, whether tangible or intangible;
and
(u) Proceeds of any and all of the foregoing;
provided that, notwithstanding the foregoing, "Collateral" shall not include any
(i) Securities Collateral (as defined in the Pledge Agreement) or other
collateral for the Obligations pledged under the Pledge Agreement or (ii)
Excluded Property.
"Collateral Account" shall mean that collateral account established
pursuant to Article VII of this Agreement.
"Collateral Account Funds" shall mean, collectively, the following from
time to time on deposit in the Collateral Account: all funds, investments
(including, without limitation, all Permitted Investments) and all certificates
and instruments from time to time representing or evidencing such investments;
all notes, certificates of deposit, checks and other instruments from time to
time hereafter delivered to or otherwise possessed by the Collateral Agent for
or on behalf of any Grantor in substitution for, or in addition to, any or all
of the Collateral; and all interest, dividends, 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 items constituting Collateral.
"Collateral Agent" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Collateral Estate" shall have the meaning assigned to such term in Section
2.01.
"Commodity Account Control Agreement" shall mean a commodity account
control agreement in a form that is reasonably satisfactory to the
Administrative Agent.
"Control" shall mean (i) in the case of each Deposit Account, "control," as
such term is defined in Section 9-104 of the UCC, (ii) in the case of any
Security Entitlement, "control," as such term is defined in Section 8-106(d) of
the UCC, and (iii) in the case of any Commodity Contract, "control," as such
term is defined in Section 9-106(b) of the UCC.
"Control Agreement" shall mean, collectively, the Deposit Account Control
Agreement, the Securities Account Control Agreement and the Commodity Account
Control Agreement.
"Copyright License" shall mean each written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor
4
or which such Grantor otherwise has the right to license, or granting any right
to such Grantor under any Copyright now or hereafter owned by any third party,
and all rights of such Grantor under any such agreement.
"Copyrights" shall mean, collectively, with respect to each Grantor, all
copyrights (whether statutory or common law, whether registered or unregistered
and whether published or unpublished) and all copyright registrations and
applications made by such Grantor in the United States, in each case, whether
now owned or hereafter created or acquired by or assigned to such Grantor,
including, without limitation, the copyrights, registrations and applications
listed in Schedule 12(b) of the Perfection Certificate, together with any and
all (i) rights and privileges arising under applicable law with respect to such
Grantor's use of such copyrights, (ii) reissues, renewals, continuations and
extensions thereof, (iii) income, fees, royalties, damages, claims and payments
now or hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof and (iv) rights to xxx for past, present or future infringements
thereof.
"Credit Agreement" shall have the meaning assigned to such term in the
Recitals of this Agreement.
"Deposit Account Control Agreement" shall mean an agreement substantially
in the form annexed hereto as Annex IV or such other form that is reasonably
satisfactory to the Collateral Agent.
"Excluded Equity" shall mean any Voting Stock in excess of 65% of the total
outstanding Voting Stock of any Foreign Subsidiary held by any Grantor.
"Excluded Property" shall mean, collectively, (i) any permit, lease,
license, contract, instrument or other agreement held by any Grantor that
prohibits or requires the consent of any Person as a condition to the creation
by such Grantor of a security interest or Lien thereon or that would be breached
or give the other party the right to terminate it as a result thereof, or any
permit, lease, license contract or other agreement held by any Grantor to the
extent that any Requirement of Law, applicable thereto prohibits the creation of
a security interest or Lien thereon or that would be breached or give the other
party the right to terminate it as a result thereof, but only, in each case, to
the extent, and for so long as, such prohibition is not terminated or rendered
unenforceable or otherwise deemed ineffective by the UCC (including Sections
9-406(a), 9-407(a), 9-408(a) and 9-409 of the UCC) or any other applicable
Requirement of Law, (ii) Equipment owned by any Grantor that is subject to a
purchase money Lien or a capital lease which is permitted by the Credit
Agreement if the contract or other agreement in which such Lien is granted (or
in the documentation providing for such capital lease) prohibits or requires the
consent of any Person as a condition to the creation of any other Lien on such
Equipment or that would be breached or give the other party the right to
terminate it as a result thereof and (iii) Excluded Equity; provided, however,
"Excluded Property" shall not include any Proceeds, substitutions or
replacements of Excluded Property (unless such Proceeds, substitutions or
replacements would constitute Excluded Property).
"General Intangibles" shall mean, collectively, all "general intangibles,"
as such term is defined in the UCC, and in any event shall include, without
limitation, all choses in action and
5
causes of action and all other intangible personal property of any Grantor of
every kind and nature now owned or hereafter acquired by any Grantor, including
all rights and interests in partnerships, limited partnerships, limited
liability companies and other unincorporated entities, corporate or other
business records, indemnification claims, contract rights (including rights
under leases, whether entered into as lessor or lessee, Hedging Agreements and
other agreements), Intellectual Property, goodwill, registrations, franchises
and tax refund claims. For avoidance of doubt, General Intangibles shall include
all rights of Grantors (including, without limitation, any voting rights) under
the IRB Agreements and the Acquisition Documents.
"Grantors" shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
"Guarantors" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Intellectual Property" shall mean all Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing, now owned in the United States by a Grantor, or hereafter acquired by
any Grantor.
"Lenders" shall have the meaning assigned to such term in the Recitals of
this Agreement.
"License" shall mean any domestic Patent License, Trademark License or
Copyright License including, without limitation, those listed on Schedules 12(a)
and 12(b) of the Perfection Certificate.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter acquired
in the United States by a Grantor: (a) all letters patent, all registrations and
recordings thereof, and all applications for letters patent, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office, including those listed on Schedule 12(a) of the Perfection
Certificate, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Pledge Agreement" shall have the meaning assigned to such term in the
Recitals of this Agreement.
6
"Pledged Securities" shall have the meaning assigned to such term in the
Pledge Agreement.
"Proceeds" shall mean, collectively, all "proceeds," as such term is
defined in the UCC, and in any event shall include, without limitation, any
consideration received from the sale, exchange, license, lease or other
disposition of any asset or property that constitutes Collateral, any value
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other Person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property that constitutes Collateral, and shall include
(a) all cash and negotiable instruments received by or held on behalf of the
Collateral Agent, (b) any claim of any Grantor against any third party for (and
the right to xxx and recover for and the rights to damages or profits due or
accrued arising out of or in connection with) (i) past, present or future
infringement of any Patent now or hereafter owned by any Grantor, or licensed
under a Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by any Grantor or licensed under a
Trademark License or injury to the goodwill associated with or symbolized by any
Trademark now or hereafter owned by any Grantor, (iii) past, present or future
breach of any License and (iv) past, present or future infringement of any
Copyright now or hereafter owned by any Grantor or licensed under a Copyright
License and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Securities Account Control Agreement" shall mean an agreement
substantially in the form annexed hereto as Annex III or such other form that is
reasonably satisfactory to the Collateral Agent.
"Security Interest" shall have the meaning assigned to such term in Section
3.01(a).
"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or that any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired in the United States by a Grantor: (a) all trademarks, service marks,
trade names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office or any State of the United States, and all extensions or
renewals thereof, including those listed on Schedule 12(a) of the Perfection
Certificate, (b) all goodwill associated therewith or symbolized thereby and (c)
all other assets, rights and interests that uniquely reflect or embody such
goodwill.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of New York; provided, however, that if by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of the
Collateral Agent's and the Secured Parties'
7
security interest in any item or portion of the Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code as in effect on
the date hereof in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions relating to such provisions.
"U.S. Borrower" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
SECTION 1.04. Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) where the context requires, provisions relating to any Collateral,
when used in relation to a Grantor, shall refer to such Grantor's
Collateral or any relevant part thereof.
ARTICLE II
Authority of Collateral Agent
SECTION 2.01. General Authority of the Collateral Agent over the
Collateral. The Collateral Agent hereby agrees that it holds and will hold all
of its right, title and interest in, to and under the Security Documents and the
Collateral granted to the Collateral Agent hereunder and thereunder whether now
existing or hereafter arising (all such right, title and interest being
hereinafter referred to as the "Collateral Estate") under and subject to the
conditions set forth in this Agreement; and the Collateral Agent further agrees
that it will hold such Collateral Estate for the benefit of the Secured Parties,
for the enforcement of the payment of all Obligations (subject to the
limitations and priorities set forth herein and in the respective Security
Documents) and as security for the performance of and compliance with the
covenants and conditions of this Agreement and each of the Security Documents.
SECTION 2.02. Exercise of Powers. All of the powers, remedies and rights of
the Collateral Agent as set forth in this Agreement may be exercised by the
Collateral Agent in respect of any Security Document as though set forth in full
therein and all of the powers, remedies and rights of the Collateral Agent as
set forth in any Security Document may be exercised by the Collateral Agent from
time to time as herein and therein provided.
SECTION 2.03. Remedies Not Exclusive. No remedy conferred upon or reserved
to the Collateral Agent herein or in the Security Documents is intended to be
exclusive of any other
8
remedy or remedies, but every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or in any Security Document or
now or hereafter existing at law or in equity or by statute.
No delay or omission by the Collateral Agent to exercise any right, remedy
or power hereunder or under any Security Document shall impair any such right,
remedy or power or shall be construed to be a waiver thereof, and every right,
power and remedy given by this Agreement or any Security Document to the
Collateral Agent may be exercised from time to time and as often as may be
deemed expedient by the Collateral Agent.
If the Collateral Agent shall have proceeded to enforce any right, remedy
or power under this Agreement or any Security Document and the proceeding for
the enforcement thereof shall have been discontinued or abandoned for any reason
or shall have been determined adversely to the Collateral Agent, then the
Grantors, the Collateral Agent and the other Secured Parties shall, subject to
any determination in such proceeding, severally and respectively be restored to
their former positions and rights hereunder or thereunder with respect to the
Collateral Estate and in all other respects, and thereafter all rights, remedies
and powers of the Collateral Agent shall continue as though no such proceeding
had been taken.
SECTION 2.04. Waiver and Estoppel. Subject to the terms of the Security
Documents, each Grantor agrees, to the extent it may lawfully do so, that it
will not at any time in any manner whatsoever claim, or take the benefit or
advantage of, any appraisement, valuation, stay, extension, moratorium, turnover
or redemption law, or any law permitting it to direct the order in which the
Collateral shall be sold, now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance or enforcement of this
Agreement or any Security Document and hereby waives all benefit or advantage of
all such laws and covenants that it will not hinder, delay or impede the
execution of any power granted to the Collateral Agent in this Agreement or any
Security Document but will suffer and permit the execution of every such power
as though no such law were in force; provided that nothing contained in this
Section 2.04 shall be construed as a waiver of any rights of the Grantors under
any applicable federal bankruptcy law or state insolvency law.
Each Grantor, to the extent it may lawfully do so, on behalf of itself and
all who may claim through or under it, including without limitation any and all
subsequent creditors, vendees, assignees and licensors, waives and releases all
rights to demand or to have any marshaling of the Collateral upon any sale,
whether made under any power of sale granted herein or in any Security Document
or pursuant to judicial proceedings or upon any foreclosure or any enforcement
of this Agreement or any Security Document and consents and agrees that all the
Collateral may at any such sale be offered and sold as an entirety.
Each Grantor waives, to the extent permitted by applicable law,
presentment, demand, protest and any notice of any kind (except notices
explicitly required hereunder or under any Security Document) in connection with
this Agreement and the Security Documents and any action taken by the Collateral
Agent with respect to the Collateral.
SECTION 2.05. Limitation by Law. All rights, remedies and powers provided
in this Agreement or any Security Document may be exercised only to the extent
that the exercise
9
thereof does not violate any applicable provision of law, and all the provisions
hereof are intended to be subject to all applicable mandatory provisions of law
which may be controlling and to be limited to the extent necessary so that they
will not render this Agreement invalid, unenforceable in whole or in part or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 2.06. Rights of Secured Parties in Respect of Obligations.
Notwithstanding any other provision of this Agreement or any Security Document,
the right of each Secured Party to receive payment of the Obligations held by
such Secured Party when due (whether at the stated maturity thereof, by
acceleration or otherwise), as expressed in the instruments evidencing or
agreements governing such Obligations or to institute suit for the enforcement
of such payment on or after such due date, shall not be impaired or affected
without the consent of such Secured Party given in the manner prescribed by the
instruments evidencing or agreements governing such Obligations.
ARTICLE III
Security Interest
SECTION 3.01. Security Interest. (a) As security for the payment and
performance, as the case may be, in full of the Obligations, each Grantor hereby
collaterally assigns, mortgages, pledges and hypothecates to the Collateral
Agent, for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent for the ratable benefit of the Secured Parties, a security
interest in, all of such Grantor's right, title and interest in, to and under
the Collateral of such Grantor; provided that such collateral assignment,
mortgage, pledge and hypothecation by each Additional Borrower Party and such
grant of a security interest in the Collateral by each Additional Borrower Party
shall only secure the payment and performance, as the case may be, in full of
the Obligations of the Additional Borrower Parties. The Liens granted in this
clause (a) to secure the Obligations are referred to herein as the "Security
Interest".
(b) Without limiting the foregoing, the Collateral Agent is hereby
authorized to file one or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent and Trademark
Office, United States Copyright Office or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Grantor, without the signature of any Grantor, and
naming any Grantor or the Grantors as debtors and the Collateral Agent as
secured party.
SECTION 3.02. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.
10
ARTICLE IV
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 4.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant
the Security Interest here-under and has full power and authority to grant to
the Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other Person other
than any consent or approval which has been obtained.
SECTION 4.02. Validity of Security Interest and Filings.
(a) The Security Interest constitutes a legal and valid security interest
in all the Collateral securing the payment and performance of the Obligations
(or, in the case of the Security Interest granted by the Additional Borrower
Parties, securing the payment and performance of only the Obligations of the
Additional Borrower Parties). As of the date hereof, all information set forth
herein and in the Perfection Certificate, including the Schedules annexed hereto
and thereto is correct and complete in all material respects. Fully completed
UCC financing statements (including fixture filings as applicable) containing a
description of the Collateral have been delivered to the Collateral Agent for
filing in each governmental, municipal or other office specified in Schedule 7
to the Perfection Certificate. Upon (i) the filing of such UCC financing
statements with the appropriate filing offices of each jurisdiction specified in
Schedule 7 to the Perfection Certificate and (ii) the taking of possession or
control by the Collateral Agent of the Collateral to the extent possession or
control by the Collateral Agent is required by this Agreement, the Collateral
Agent for the benefit of the applicable Secured Parties will have a perfected
security interest in respect of all Collateral, to the extent such security
interest can be perfected under the UCC by such filings, taking possession or
control. The Security Interest is and shall be prior to any other Lien on any of
the Collateral, other than Permitted Liens.
(b) With respect to all Collateral consisting of United States registered
Patents, United States registered Trademarks and United States registered
Copyrights registered in the name of any Grantor as of the date hereof, fully
executed security agreements in the form of Annex V-A, V-B and V-C hereto
containing a description of all Collateral consisting of Intellectual Property
with respect to United States registered Copyrights, United States registered
Patents, and United States registered Trademarks (and Trademarks for which
United States registration applications are pending), respectively, have been
delivered to the Collateral Agent for registration with the United States Patent
and Trademark Office and for recordation with the United States Copyright Office
pursuant to 35 U.S.C. Section 261 or 17 U.S.C. Section 205 and the regulations
thereunder, as applicable. Upon the recordation of such security agreements with
the United States Patent and Trademark Office and United States Copyright
Office, as applicable, and the filing of proper UCC financing statements with
the appropriate filing offices of each jurisdiction specified in Schedule 7 to
the Perfection Certificate, the Collateral Agent for the
11
benefit of the Secured Parties will have a perfected security interest in
respect of all Collateral consisting of Patents, Trademarks and Copyrights
registered in the name of any Grantor as of the date hereof.
SECTION 4.03. Limitations on and Absence of Other Liens. The Collateral is
owned by the Grantors free and clear of any Lien, except for Permitted Liens.
The Grantors have not filed or consented to the filing of (a) any financing
statement or analogous document under the UCC or any other applicable laws
covering any Collateral, (b) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with the United States Patent and Trademark Office and the United
States Copyright Office or (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document, assignment, security agreement or
similar instrument is still in effect, except, in each case, for Permitted Liens
and Liens which are no longer in effect.
SECTION 4.04. Other Actions. In order to further ensure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Collateral Agent's security interest in the Collateral, each Grantor agrees,
in each case at such Grantor's own expense, to take the following actions with
respect to the following Collateral:
(a) Instruments and Tangible Chattel Paper. As of the date hereof,
each Instrument and each item of Tangible Chattel Paper specified in
Schedule 11 to the Perfection Certificate has been properly endorsed,
assigned and delivered to the Collateral Agent, and, if necessary,
accompanied by instruments of transfer or assignment duly executed in
blank. If any amount individually in excess of $250,000 or in the aggregate
in excess of $1,000,000 payable under or in connection with any of the
Collateral shall be evidenced by any Instrument or Tangible Chattel Paper,
the Grantor acquiring such Instrument or Tangible Chattel Paper shall
forthwith endorse, assign and deliver the same to the Collateral Agent,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Collateral Agent may from time to time reasonably specify;
provided, however, that so long as no Event of Default shall have occurred
and be continuing, the Collateral Agent shall return such Instrument or
Tangible Chattel Paper to such Grantor from time to time, to the extent
necessary for collection in the ordinary course of such Grantor's business;
provided, further, that the Collateral Agent shall return such Instrument
or Tangible Chattel Paper to such Grantor if all amounts due pursuant such
Instrument or Tangible Chattel Paper have been paid in full.
(b) Deposit Accounts and Investment Property. (i) Each Grantor hereby
represents and warrants that as of the date hereof (1) it does not maintain
any Deposit Accounts other than the Collateral Account established and
maintained pursuant to this Agreement and the accounts listed in Schedule
14 of the Perfection Certificate, (2) it does not maintain any Securities
Accounts or Commodity Accounts other than those listed in Schedule 14 of
the Perfection Certificate and (3) it does not hold, own or have any
interest in any certificated securities or uncertificated securities other
than those constituting Securities Collateral or other collateral under the
Pledge Agreement, those
12
maintained in Securities Accounts or Commodity Accounts listed in Schedule
14 of the Perfection Certificate and Excluded Equity.
(ii) In the event the Grantors have cash, Investment Property or
other funds maintained in any Deposit Accounts (except for (A) Deposit
Accounts used solely to make payroll payments and (B) Deposit Accounts
having an average daily balance of less than $2,500,000 in the aggregate
together with all such other Deposit Accounts under this clause (B) that
are not subject to the Collateral Agent's Control) and/or Securities
Accounts, Borrower shall promptly notify the Collateral Agent and the
Grantors shall promptly enter into Control Agreements in favor of the
Collateral Agent with the banks, Securities Intermediaries or Commodity
Intermediaries with which such Deposit Accounts and Securities Accounts are
maintained granting to the Collateral Agent Control over such accounts. The
Collateral Agent agrees with each Grantor that, in the case of a Deposit
Account subject to the Collateral Agent's Control, the Collateral Agent
shall not give any instructions directing the disposition of funds from
time to time credited to any Deposit Account or withhold any withdrawal
rights from such Grantor with respect to funds from time to time credited
to any Deposit Account or, in the case of a Securities Account or Commodity
Account subject to the Collateral Agent's Control, the Collateral Agent
shall not give any Entitlement Orders or instructions or directions to any
Securities Intermediary or Commodity Intermediary, and shall not withhold
its consent to the exercise of any withdrawal or dealing rights by such
Grantor, unless, in each case, an Event of Default has occurred and is
continuing or, after giving effect to any withdrawal, would occur.
(iii) If any Grantor shall at any time hold or acquire any
certificated securities constituting Investment Property that are not
Pledged Securities under the Pledge Agreement, such Grantor shall
immediately endorse, assign and deliver the same to the Collateral Agent,
accompanied by such instruments of transfer or assignment duly executed in
blank, all in form and substance reasonably satisfactory to the Collateral
Agent; provided, that in no event shall Grantor be required to pledge any
Excluded Equity. If any securities now or hereafter acquired by any Grantor
constituting Investment Property that are not Pledged Securities under the
Pledge Agreement are uncertificated and are not held in accounts required
to be subject to a control agreement pursuant to clause (ii) of this
Section 4.04(b), such Grantor shall promptly notify the Collateral Agent
thereof and shall use commercially reasonable efforts to cause the issuer
to agree to comply with instructions from the Collateral Agent as to such
securities, without further consent of any Grantor pursuant to an issuer's
acknowledgement in form and substance reasonably acceptable to the
Collateral Agent.
(iv) As between the Collateral Agent and the Grantors, the
Grantors shall bear the investment risk with respect to the Investment
Property, and the risk of loss of, damage to or the destruction of the
Investment Property, whether in the possession of, or maintained as a
security entitlement or deposit by, or subject to the control of, the
Collateral Agent, a Securities Intermediary, a Commodity Intermediary, any
Grantor or any other Person; provided, however, that nothing contained in
this Section 4.04(b) shall release or relieve any Securities Intermediary
or Commodity Intermediary of its duties
13
and obligations to the Grantors or any other Person under any Control
Agreement or under applicable law.
(v) Each Grantor shall promptly pay all Charges and fees with
respect to the Investment Property pledged by it under this Agreement,
except that no such Charge or fee need be paid if such Grantor is permitted
under the Credit Agreement to not pay such Charge or fee or if the amount
or validity thereof is currently being contested in good faith by
appropriate proceedings, reserves in conformity with GAAP with respect
thereto have been provided on the books of such Grantor and such
proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any
interest therein. After the occurrence and during the continuance of an
Event of Default, in the event any Grantor shall fail to make such payment
contemplated in the immediately preceding sentence, the Collateral Agent
may do so for the account of such Grantor and the Grantors shall promptly
reimburse and indemnify the Collateral Agent from all costs and expenses
incurred by the Collateral Agent under this Section 4.04(b)(v).
(c) Electronic Chattel Paper and Transferable Records. If any amount
individually in excess of $250,000 or in the aggregate in excess of
$1,000,000 payable under or in connection with any of the Collateral shall
be evidenced by any Electronic Chattel Paper or any "transferable record,"
as that term is defined in Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act, or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, the
Grantor acquiring such Electronic Chattel Paper or transferable record
shall promptly notify the Collateral Agent thereof and shall take such
action as the Collateral Agent may reasonably request to vest in the
Collateral Agent control under UCC Section 9-105 of such Electronic Chattel
Paper or control under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction,
of such transferable record. The Collateral Agent agrees with such Grantor
that the Collateral Agent will arrange, pursuant to procedures reasonably
satisfactory to the Collateral Agent and so long as such procedures will
not result in the Collateral Agent's loss of control, for the Grantor to
make alterations to the Electronic Chattel Paper or transferable record
permitted under UCC Section 9-105 or, as the case may be, Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act of
Section 16 of the Uniform Electronic Transactions Act for a party in
control to allow without loss of control, unless an Event of Default has
occurred and is continuing or would occur after taking into account any
action by such Grantor with respect to such Electronic Chattel Paper or
transferable record.
(d) Letter-of-Credit Rights. If any Grantor is at any time a
beneficiary under a Letter of Credit now or hereafter issued in favor of
such Grantor in an amount individually in excess of $250,000 or in the
aggregate in excess of $1,000,000, such Grantor shall promptly notify the
Collateral Agent and such Grantor shall use commercially reasonable efforts
to (unless the Collateral Agent requests otherwise) pursuant to an
agreement in form and substance reasonably satisfactory to the Collateral
Agent, either (i) arrange for the issuer and any confirmer of such Letter
of Credit to
14
consent to an assignment to the Collateral Agent of the proceeds of any
drawing under the Letter of Credit or (ii) arrange for the Collateral Agent
to become the transferee beneficiary of such Letter of Credit.
(e) Commercial Tort Claims. As of the date hereof each Grantor hereby
represents and warrants that as of the date hereof it holds no Commercial
Tort Claims other than those listed on Schedule 13 to the Perfection
Certificate. If any Grantor shall at any time hold or acquire a Commercial
Tort Claim having a value individually in excess of $250,000 or in the
aggregate in excess of $1,000,000 such Grantor shall promptly notify the
Collateral Agent thereof and grant to the Collateral Agent in writing
signed by such Grantor a security interest therein and in the Proceeds
thereof, all upon the terms of this Agreement, with such writing to be in
form and substance satisfactory to the Collateral Agent.
(f) Motor Vehicles. Upon the request of the Collateral Agent during
the existence of an Event of Default, each Grantor shall deliver to the
Collateral Agent originals of the certificates of title or ownership for
the motor vehicles (and any other Equipment covered by Certificates of
Title or ownership) owned by it with the Collateral Agent listed as a
lienholder therein. Such requirement shall apply to the Grantors if any
such motor vehicle (or any such other Equipment) has a fair market value
over $50,000.
SECTION 4.05. No Conflicts, Consents, etc. In the event that an Event of
Default has occurred and is continuing and the Collateral Agent desires to
exercise any remedies, voting or consensual rights or attorney-in-fact powers
set forth in this Agreement and determines it necessary to obtain any approvals
or consents of any Governmental Authority or any other Person therefor, then,
upon the reasonable request of the Collateral Agent, such Grantor agrees to use
commercially reasonable efforts to assist and aid the Collateral Agent to obtain
as soon as practicable any necessary approvals or consents for the exercise of
any such remedies, rights and powers.
ARTICLE V
Covenants
SECTION 5.01. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to protect the
Security Interest of the Collateral Agent in the Collateral and the priority
thereof against any Lien other than Permitted Liens.
SECTION 5.02. Further Assurances. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith or therewith.
15
SECTION 5.03. Taxes; Encumbrances. During the continuance of an Event of
Default at its option, the Collateral Agent may (i) discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral except to the extent the same
constitute Permitted Liens, and (ii) pay for the maintenance and preservation of
the Collateral to the extent any Grantor fails to do so as required by this
Agreement and each Grantor jointly and severally agrees to reimburse the
Collateral Agent on demand for any payment made or any expense incurred by the
Collateral Agent pursuant to the foregoing authorization; provided, however,
that nothing in this Section 5.03 shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
other Loan Documents.
SECTION 5.04. Continuing Obligations of the Grantors. Each Grantor jointly
and severally agrees to indemnify and hold harmless the Collateral Agent and the
Secured Parties from and against any and all liability for the observance and
performance (to the extent such performance by the Collateral Agent or the
Secured Parties, as applicable, is permitted hereunder) by the Collateral Agent
or any Secured Party of all conditions and obligations to be observed and
performed by each Grantor under each contract, agreement or instrument relating
to the Collateral, all in accordance with the terms and conditions thereof,
except to the extent resulting from the gross negligence or willful misconduct
of the Collateral Agent or the Secured Parties.
SECTION 5.05. Use and Disposition of Collateral. None of the Grantors shall
grant any Lien in respect of the Collateral other than Liens securing the
Obligations and Permitted Liens.
SECTION 5.06. Insurance. The Grantors, at their own expense, shall maintain
or cause to be maintained insurance required under Section 5.04 of the Credit
Agreement.
SECTION 5.07. Certain Covenants and Provisions Regarding Patent, Trademark
and Copyright Collateral.
(a) Each Grantor agrees that it will not do any act, or knowingly omit to
do any act, whereby any Patent that is in such Grantor's reasonable judgment
material to the conduct of the Loan Parties' business, taken as a whole, may
become invalidated or dedicated to the public.
(b) Each Grantor will, for each Trademark that is in such Grantor's
reasonable judgment material to the conduct of the Loan Parties' business, taken
as a whole, use its commercially reasonable efforts to (i) maintain such
Trademark in full force free from any claim of abandonment or invalidity for
nonuse, (ii) maintain the quality of products and services offered under such
Trademark, (iii) display such Trademark with notice of Federal or foreign
registration to the extent necessary and sufficient to establish and preserve
its rights under applicable law and (iv) not knowingly use or knowingly permit
the use of such Trademark in violation of any third party rights.
16
(c) Each Grantor will, for each work covered by a Copyright that is in such
Grantor's reasonable judgment material to the conduct of the Loan Parties'
business, taken as a whole, publish, reproduce, display, adopt and distribute
such work with such appropriate copyright notice as necessary and sufficient to
establish and preserve its maximum rights under applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent as soon as practicable
if it knows or has reason to know that any Patent, Trademark or Copyright that
is in such Grantor's reasonable judgment material to the conduct of the business
of the Loan Parties, taken as a whole, may become abandoned, lost or dedicated
to the public, or of any adverse determination or development including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or United States Copyright Office
regarding such Grantor's ownership of any Patent, Trademark or Copyright
material to the conduct of its business, or its right to register the same, or
to keep and maintain the same.
(e) In the event that any Grantor, either itself or through any agent,
employee, licensee or designee, files an application for or, following the
Effective Date, becomes the registered owner of, any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States, such Grantor
shall with the delivery of its quarterly financial statements notify the
Collateral Agent thereof, and shall execute and deliver any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably request
to evidence the Collateral Agent's security interest in such Patent, Trademark
or Copyright or application therefor, and each Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such writings
solely for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable until this Agreement is terminated.
(f) Each Grantor will take all necessary steps that are consistent with its
reasonable business judgment in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States to maintain and pursue each
material application relating to the Patents, Trademarks and/or Copyrights (and
to obtain the relevant grant or registration) and to maintain each issued Patent
and each registration of the Trademarks or Copyrights that in such Grantor's
reasonable judgment is material to the conduct of the business of the Loan
Parties, taken as a whole, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with its reasonable business judgment, to initiate
opposition, interference and cancellation proceedings against third parties.
(g) To each Grantor's knowledge, on and as of the date hereof, such Grantor
is not infringing upon any Patent, Trademark or Copyright of any other Person
other than such infringement that, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect and no proceedings
have been instituted or are pending against such Grantor or, to such Grantor's
knowledge, threatened, and no claim against such Grantor has been received by
such Grantor, alleging any such violation.
17
(h) Upon and during the continuance of an Event of Default, each Grantor
shall upon the written request of the Collateral Agent use its commercially
reasonable efforts to obtain all requisite consents or approvals by the licensor
of each Copyright License, Patent License or Trademark License to effect the
assignment of all of such Grantor's right, title and interest thereunder to the
Collateral Agent or its designee.
Notwithstanding anything herein to the contrary, any Grantor may, for
commercially reasonable cause, abandon, fail to maintain or allow to become lost
or dedicated to the public any Patent, Trademark or Copyright if doing so would
not violate Section 5.03 of the Credit Agreement.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. After the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent (or, to the extent delivery of such
Collateral would be commercially impracticable, make such Collateral available),
and it is agreed that the Collateral Agent shall have the right to take any of
or all the following actions at the same or different times: (a) with respect to
any Collateral consisting of Intellectual Property, on demand, to cause the
Security Interest to become an assignment, transfer and conveyance of any of or
all such Collateral by the applicable Grantors to the Collateral Agent, or to
license or sublicense, whether general, special or otherwise, and whether on an
exclusive or nonexclusive basis, any such Collateral throughout the world on
such terms and conditions and in such manner as the Collateral Agent shall
determine (other than in violation of applicable law or any then existing
licensing arrangements to the extent that waivers cannot be obtained), and (b)
with or without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and, generally, to
exercise any and all rights afforded to a secured party under the UCC or other
applicable law. Without limiting the generality of the foregoing, each Grantor
agrees that the Collateral Agent shall have the right, subject to the
requirements of applicable law, to sell or otherwise dispose of all or any part
of the Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
18
The Collateral Agent shall give a Grantor ten (10) Business Days' prior
written notice (which each Grantor agrees is reasonable notice within the
meaning of Section 9-611 of the UCC) of the Collateral Agent's intention to make
any sale or other disposition of such Grantor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice of such sale. At any such sale, the Col-lateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
Obligation then due and payable to such Secured Party from any Grantor as a
credit against the purchase price, and such Secured Party may, upon compliance
with the terms of sale, hold, retain and dispose of such property without
further accountability to any Grantor therefor. For purposes hereof, a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof; the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and no Grantor shall be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement all Events
of Default shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section shall be deemed to conform to the commercially
reasonable standards as provided in Section 9-611 of the UCC.
SECTION 6.02. Application of Proceeds. The proceeds of any sale of
Collateral pursuant to Section 6.01, as well as any Collateral consisting of
cash, shall be applied by the Collateral Agent as provided in Section 7.06 of
the Credit Agreement.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor
19
hereby grants to the Collateral Agent a nonexclusive license (exercisable
without payment of royalty or other compensation to the Grantors during the
existence of an Event of Default) to use, license or sublicense any of the
Collateral, except to the extent that such license may not be granted as a
result of an exclusive license arrangement, consisting of Intellectual Property
now owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of such
license by the Collateral Agent shall be exercised, at the option of the
Collateral Agent, after the occurrence and during the continuation of an Event
of Default; provided that any license or sublicense entered into by the
Collateral Agent with a Person other than an Agent, Lender or Arranger under the
Loan Documents in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Collateral Account
SECTION 7.01. Establishment of Collateral Account. The Collateral Agent is
hereby authorized to establish and maintain in the name of such Collateral Agent
and pursuant to a Control Agreement, a restricted deposit account designated
"Mid-Western Aircraft Systems, Inc. Collateral Account". Each Grantor shall
deposit into the Collateral Account from time to time all amounts required to be
deposited in the Collateral Account by the Credit Agreement and any amounts
specifically required to be deposited therein by any other Loan Documents.
The balance from time to time in the Collateral Account shall constitute
part of the Collateral and shall not constitute payment of the Obligations until
applied as hereinafter provided. At any time following the occurrence and during
the continuance of an Event of Default, the Collateral Agent may in its
discretion apply or cause to be applied the balance from time to time
outstanding to the credit of the Collateral Account to the payment of the
Obligations in the manner specified in the Credit Agreement.
The Collateral Agent shall have exclusive dominion and control, including
the exclusive right of withdrawal, over the Collateral Account. Each deposit in
the Collateral Account shall be held during the existence of an Event of Default
by the Collateral Agent as collateral for the payment and performance of the
obligations of Grantors under the Loan Documents. If any Grantor is required
hereunder to deposit an amount of cash collateral into the Collateral Account as
a result of the occurrence of an Event of Default, such amount together with
interest income (if any) (to the extent not applied as provided herein or in any
other Loan Document) shall be returned to such Grantor within three Business
Days after all Defaults or Events of Default have been cured or waived.
Other than any interest earned on the investment of such deposits, which
investments shall be made at Grantors' risk and expense, such deposits shall not
bear interest. Interest or profits, if any, on such investments shall accumulate
in such account.
20
ARTICLE VIII
Miscellaneous
SECTION 8.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 10.01 of the Credit Agreement. All communications and
notices hereunder to any Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to Borrowers.
SECTION 8.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the Lenders' issuance
of and participations in Letters of Credit, regardless of any investigation made
by the Secured Parties or on their behalf, and shall continue in full force and
effect until this Agreement shall terminate.
SECTION 8.03. Binding Effect. This Agreement shall become effective as to
any Grantor when a counterpart hereof executed on behalf of such Grantor shall
have been delivered to the Collateral Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall be binding
upon such Grantor and the Collateral Agent and their respective successors and
assigns, and shall inure to the benefit of such Grantor, the Collateral Agent
and the other Secured Parties and their respective successors and assigns,
except that no Grantor shall have the right to assignor transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly permitted by any of
the other Loan Documents.
SECTION 8.04. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 8.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.06. Waivers; Amendment; Several Agreement. (a) No failure or
delay of the Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Collateral
Agent hereunder and of the other Secured Parties under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the
21
purpose for which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor or any other Grantor to any other or further notice
or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into among Borrowers, the Collateral Agent and the Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any
consents required in accordance with Section 10.08 of the Credit Agreement.
(c) This Agreement shall be construed as a separate agreement with respect
to each Grantor and may be amended, modified, supplemented, waived or released
with respect to any Grantor without the approval of any other Grantor and
without affecting the obligations of any other Grantor hereunder.
SECTION 8.07. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.07.
SECTION 8.08. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions. It is understood and agreed
among the parties that this Agreement shall create separate security interests
in the Collateral securing the Obligations (or in the case of the Additional
Borrower Parties, the Obligations of the Additional Borrower Parties) as
provided in Section 3.01, and that any determination by any court with
jurisdiction that the security interest securing any Obligation or class of
Obligations is invalid for any reason shall not in and of itself invalidate the
security interest securing any other Obligations hereunder.
SECTION 8.09. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute a single contract and shall become effective as
provided in Section 8.04. Delivery of
22
an executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
SECTION 8.10. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 8.11. Jurisdiction; Consent to Service of Process.
(a) Each party hereto 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 or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court. Each of the
parties hereto 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 the Collateral Agent or any other Secured Party may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which 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 or the other Loan Documents in any
New York State or Federal court referred to in paragraph (c) of this Section.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for in Section 10.15 of the Credit Agreement. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 8.12. Termination.
(a) This Agreement and the Security Interest (i) shall terminate when all
the Obligations (other than contingent indemnification obligations that are not
then due and payable) have been paid in full, the Lenders have no further
commitment to lend under the Credit Agreement or to issue or participate in
Letters of Credit and the LC Exposure has been reduced to zero or collateralized
(at which time the Collateral Agent shall execute and deliver to the Grantors,
at the Grantors' expense, all UCC termination statements and other documents
which the Grantors shall reasonably request to evidence such termination and
shall return to the Grantors any Collateral held by the Collateral Agent) and
(ii) shall continue to be effective or shall be reinstated, as the case may be,
if at any time any payment in respect of any Obligation is
23
rescinded or must otherwise be restored by any Secured Party upon any bankruptcy
or reorganization of any Grantor or otherwise. Any execution and delivery of
termination statements or documents pursuant to this Section 8.12(a) shall be
without recourse to or warranty by the Collateral Agent. A Subsidiary Loan Party
shall automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Subsidiary Loan Party shall be automatically
released in the event that the Equity Interests of such Subsidiary Loan Party
shall be sold, transferred or otherwise disposed of such that such Person is no
longer a Subsidiary in accordance with the terms of each Loan Document. The
Additional Borrower Parties shall automatically be released from their
obligations hereunder and the Security Interest in the Collateral of the
Additional Borrower Parties shall be automatically released in the event the
Additional Borrower assigns its obligations under the Credit Agreement to the
U.S. Borrower in accordance with Section 10.19 of the Credit Agreement.
(b) Upon any sale or other transfer or disposition by any Grantor of any
Collateral (other than to another Grantor) that is permitted under each Loan
Document or, upon the effectiveness of any written consent to the release of the
security interest granted hereby in any Collateral pursuant to Section 10.08 of
the Credit Agreement, the Security Interest in such Collateral shall be
automatically released. In connection with such release, the Collateral Agent
shall execute and deliver to any Grantor, at such Grantor's expense, all UCC
termination statements and other documents that such Grantor shall reasonably
request to evidence such termination or release and shall return to such Grantor
any Collateral owned by such Grantor that is in the Collateral Agent's
possession. Any execution and delivery of UCC termination statements and similar
documents pursuant to this Section 8.12(b) shall be without recourse to or
warranty by the Collateral Agent.
SECTION 8.13. Additional Grantors. To the extent any Domestic Subsidiary
shall be required to become a Grantor pursuant to the Credit Agreement, upon
execution and delivery by the Collateral Agent and such Domestic Subsidiary of
an instrument in the form of Annex I hereto, such Domestic Subsidiary shall
become a Grantor hereunder with the same force and effect as if originally named
as a Grantor herein. Each such Domestic Subsidiary shall at such time deliver to
the Collateral Agent a completed Perfection Certificate. The execution and
delivery of any such instrument shall not require the consent of any other
Grantor hereunder. The rights and obligations of each Grantor hereunder shall
remain in full force and effect notwithstanding the addition of any new Grantor
as a party to this Agreement.
SECTION 8.14. Financing Statements. Each Grantor hereby irrevocably
authorizes the Collateral Agent at any time and from time to time to file in any
relevant jurisdiction any initial financing statements and amendments thereto
that contain the information required by Article 9 of the Uniform Commercial
Code of each applicable jurisdiction for the filing of any financing statement
or amendment relating to the Collateral, including (i) whether such Grantor is
an organization, the type of organization and any organizational identification
number issued to such Grantor, (ii) any financing or continuation statements or
other documents without the signature of such Grantor where permitted by law,
including the filing of a financing statement describing the Collateral as "all
assets now owned or hereafter acquired by the Grantor or in which Grantor
otherwise has rights" and (iii) in the case of a financing statement filed as a
fixture filing or covering Collateral constituting minerals or the like to be
extracted or timber to be cut, a sufficient description of the real property to
which such Collateral relates. Each Grantor
24
agrees to provide all information described in the immediately preceding
sentence to the Collateral Agent promptly upon request. Copies of such financing
statements, as filed, should be sent promptly to Borrowers at their address for
notices pursuant to Section 8.01.
SECTION 8.15. Collateral Agent Appointed Attorney-in-Fact. Each Grantor
hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem necessary
or advisable to accomplish the purposes hereof, which appointment is irrevocable
until this Agreement is terminated and coupled with an interest. Without
limiting the generality of the foregoing, the Collateral Agent shall have the
right, after the occurrence and during the continuance of an Event of Default,
with full power of substitution either in the Collateral Agent's name or in the
name of such Grantor, (a) to receive, endorse, assign or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to the Collateral or any part thereof; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Collateral; (c) to ask for, demand, xxx for, collect, receive and give
acquittance for any and all moneys due or to become due under and by virtue of
any Collateral; (d) to sign the name of any Grantor on any invoice or xxxx of
lading relating to any of the Collateral; (e) to send verifications of Accounts
to any Account Debtor; (f) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (g) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; (h) to notify, or to require any Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent; and (i) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agreement, as fully and completely as though the
Collateral Agent were the absolute owner of the Collateral for all purposes;
provided, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for gross negligence or
willful misconduct.
25
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
MID-WESTERN AIRCRAFT SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer,
Vice President, Secretary and Treasurer
MID-WESTERN AIRCRAFT SYSTEMS HOLDINGS, INC.
By:: /s/ Xxxxx Xxxxxx
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer, Vice President,
Secretary and Treasurer
ONEX WIND FINANCE LP
By: its general partner, 1648701 Ontario Inc.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxx
Title: Representative
ONEX WIND FINANCE LLC
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxx
Title: Director
3101447 NOVA SCOTIA COMPANY
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Financial Officer
By: /s/ Xxxx Xxxxxx
-------------------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
[Security Agreement]
26
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
MID-WESTERN AIRCRAFT SYSTEMS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MID-WESTERN AIRCRAFT SYSTEMS
HOLDINGS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ONEX WIND FINANCE LP
By: its general partner,
1648701 Ontario Inc.
By:
------------------------------------
Name:
----------------------------------
Title: Representative
ONEX WIND FINANCE LLC
By: /s/ Xxxxxx Xxxx
------------------------------------
Name: Xxxxxx X. Xxxx
Title: Director
3101447 NOVA SCOTIA COMPANY
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[Security Agreement]
00
XXXXXXXX XXXXX XXXXXXX, INC.,
as Collateral Agent
By: /s/ Xxxxx Wirdnam
------------------------------------
Name: Xxxxx X. Wirdnam
Title: Vice President
28
