Execution Copy
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KINETEK INDUSTRIES, INC.,
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U.S. BANK NATIONAL ASSOCIATION,
as Trustee
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SECURITY AGREEMENT
Dated: April 12, 2002
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made as of the 12th day of April,
2002, by and among U.S. BANK NATIONAL ASSOCIATION, as Trustee under those
certain Indentures, identified below, a national banking association with an
office at 000 Xxxx Xxxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxxxx 00000 and KINETEK
INDUSTRIES, INC., a Delaware corporation with its chief executive office and
principal place of business at ArborLake Centre, Suite 550, 0000 Xxxx Xxxx Xxxx,
Xxxxxxxxx, Xxxxxxxx 00000 ("Kinetek" or "Issuer"). Capitalized terms used in
this Agreement have the meanings assigned to them in Appendix A, General
Definitions.
W I T N E S S E T H:
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WHEREAS, as of the date hereof Kinetek has issued (i) those certain 5%
Senior Secured Notes due 2007 in the original principal amount of $15,000,000
and (ii) those certain 10% Senior Secured Notes due 2007, in the original
principal amount of $ 11,000,000 (collectively, the "Notes" and each, a
"Note") pursuant to the terms of those two certain Indentures, each dated as
of even date herewith by and among U.S. Bank National Association, as Trustee
(the "Trustee"), and Kinetek as Issuer and the Guarantors identified below
(collectively the "Indentures");
WHEREAS, Advanced D.C. Motors, Inc., a New York corporation, Electrical
Design and Control Company, a Delaware corporation, The Imperial Electric
Corporation, a Delaware corporation, Xxxxxx-Xxxxx Industries, Inc., an
Illinois corporation, Motion Control Engineering, Inc., a California
corporation, Gear Research, Inc., a Delaware corporation, Kinetek, Inc., a
Delaware corporation, Motion Holdings, Inc., a Delaware corporation, Advanced
D.C. Holdings, Inc., a Delaware corporation and FIR Group Holdings, Inc., a
Delaware Corporation (collectively, the "Guarantors") have each guaranteed
payment and performance of the Indenture and the Notes pursuant to certain
guarantees contained in the Indentures (collectively, the "Guaranties"); and
WHEREAS, subject to the terms and conditions hereof, the parties desire
that the obligations of Kinetek under the Indentures and the Notes, and the
other obligations identified herein, be secured by liens and security interests
granted herein, that are subordinate to the Senior Lender Liens as set forth in
the Intercreditor Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
agree as hereinafter set forth.
SECTION 1. SECURITY INTERESTS
1.1. Security Interest in Collateral.
To secure the prompt payment and performance to Trustee of the
Obligations for the benefit of the Note Holders, the Issuer hereby grants to
Trustee for its benefit and the benefit of each Holder of the Notes, a
continuing Lien upon all of the Issuer's assets, including all of the
following Property and interests in Property of the Issuer (collectively, the
"Collateral"), whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper, (including Electronic Chattel Paper and
Tangible Chattel Paper);
(iv) Computer Hardware and Software and all rights with respect
thereto, including, any and all licenses, options, warranties,
service contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal rights and
indemnifications, and any substitutions, replacements, additions or
model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment Intangibles and
Software;
(xii) Goods (including all of its Equipment, Fixtures and
Inventory), and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor;
(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property;
(xvii) money (of every jurisdiction whatsoever);
(xviii) Letter-of-Credit Rights;
(xix) Payment Intangibles;
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(xx) Security Entitlements;
(xxi) Software;
(xxii) Supporting Obligations;
(xxiii) Uncertificated Securities; and
(xxiv) Commercial Tort Claims; and
(xxv) to the extent not included in the foregoing, all other
personal property of any kind or description;
together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, or evidencing,
embodying, incorporating or referring to any of the foregoing, and all Proceeds,
products, offspring, rents, issues, profits and returns of and from any of the
foregoing; provided, that (a) the grant under this Section 1.1 shall not include
more than 65% of the Securities of any Foreign Subsidiary and (b) the foregoing
shall not include (and the grant, assignment and transfer of a security interest
as provided herein shall not extend to) (i) "intent-to use" trademarks at all
times prior to the first use thereof, whether by the actual use thereof in
commerce, the recording of a statement of use with the United States Patent and
Trademark Office or otherwise or (ii) any General Intangibles or Intellectual
Property which in accordance with applicable licenses or other agreements
applicable thereto terminate or become terminable if a security interest is
granted therein (a "Terminable Intangible"); provided, further, that the
foregoing shall include any and all Accounts, Chattel Paper, Payment Intangibles
and Instruments arising under any and all such Terminable Intangibles.
1.2. Other Collateral.
1.2.1. Commercial Tort Claims. The Issuer shall promptly notify
Trustee in writing upon incurring or otherwise obtaining a Commercial
Tort Claim after the date hereof involving an amount in excess of
$200,000 against any third party and, upon request of Trustee, promptly
enter into an amendment to this Agreement and do such other acts or
things deemed appropriate by Trustee to give Trustee a security interest
in any such Commercial Tort Claim. The Issuer represents and warrants
that as of the date of this Agreement, to its knowledge, neither the
Issuer nor any Guarantor possesses any Commercial Tort Claims.
1.2.2. Other Collateral. The Issuer shall promptly notify Trustee in
writing upon acquiring or otherwise obtaining any Collateral after the
date hereof consisting of Deposit Accounts, Investment Property,
Letter-of-Credit Rights or Chattel Paper and, within 10 days after
request by Trustee, execute such other documents, and do such other acts
or things deemed appropriate by Trustee to provide to Trustee or its
agent "control" (within the meaning of the applicable Uniform Commercial
Code) or possession with respect to such Collateral; including without
limitation, executing and delivering and causing the relevant depositary
bank to execute and deliver an Account Control Agreement, promptly notify
Trustee in writing upon acquiring or otherwise obtaining any Collateral
after the date hereof consisting of Instruments and, within 10 days after
request by Trustee, execute such other documents, and do such other acts
or things deemed appropriate by Trustee to provide Trustee or its agent
control or possession with respect to such Instruments and with respect
to Collateral in the possession of a third party, other than Certificated
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Securities and Goods covered by a Document, use its best efforts to
obtain an acknowledgement from the third party that it is holding the
Collateral for the benefit of Trustee in addition to the Senior Agent.
The provisions of this subsection 1.2.2 shall not apply to more than 65%
of the Securities of any Foreign Subsidiary. Notwithstanding the
foregoing or any other provision in this Agreement or any other Security
Document to the contrary, neither this Agreement nor any other Security
Document shall require a pledge of any of the securities or other
ownership interests of De Sheng Electric Motor Co., Ltd., upon the
acquisition of the same.
1.3. Lien Perfection; Further Assurances.
Issuer shall, and at any time and from time to time upon the written
request of the Trustee, the Issuer shall, in each case at the Issuer's
expense, promptly execute such UCC-1 financing statements as are required by
the UCC and such other instruments, assignments or documents as are necessary
to perfect Trustee's Lien upon any of the Collateral and shall take such other
action as may be required to perfect or to continue the perfection of
Trustee's Lien upon the Collateral. Issuer shall pay, or reimburse Trustee
for, all costs and fees of preparing and having filed UCC-1 financing
statements, amendments thereto and other documents, and of taking such other
actions, to perfect and to continue Trustee's Lien on any and all Collateral,
including without limitation the initial perfection thereof. Unless prohibited
by applicable law, the Issuer hereby authorizes Trustee to execute and file
any such financing statement, including, without limitation, financing
statements that indicate the Collateral (i) as all assets of the Issuer or
words of similar effect, or (ii) as being of an equal or lesser scope, or with
greater or lesser detail, than as set forth in Section 1.1, on the Issuer's
behalf. The Issuer also hereby ratifies its authorization for Trustee to have
filed in any jurisdiction any like financing statements or amendments thereto
if filed prior to the date hereof. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu
thereof. At Trustee's request, the Issuer shall also promptly execute or cause
to be executed and shall deliver to Trustee or its agent any and all
documents, instruments and agreements deemed necessary by Trustee, to give
effect to or carry out the terms or intent of the Other Agreements. The
provisions of this Section 1.3 (i) shall not require that any leasehold
mortgages be provided other than upon Trustee's reasonable request therefor
and (ii) shall not apply to the motor vehicles owned by the Issuer to the
extent that the fair market value of the motor vehicles owned by the Issuer
and the Guarantors does not exceed $300,000 in the aggregate.
1.4. Lien on Realty.
The due and punctual payment and performance of the Obligations shall
also be secured by the Lien created by the Mortgages upon all real Property
identified therein. Each Mortgage shall be executed by the Issuer or the
applicable Guarantor, as mortgagor in favor of Trustee. Each Mortgage shall be
duly recorded, at Issuer's expense, in each office where such recording is
required to constitute a fully perfected second Lien (subject only to the Lien
in favor of the Senior Agent) on the real Property covered thereby. The Issuer
shall deliver to Trustee, at Issuer's expense, mortgagee title insurance
policies issued by a title insurance company reasonably satisfactory to
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Trustee, which policies shall be in form and substance satisfactory to Trustee
and shall insure a valid second Lien in favor of Trustee (subject only to the
Lien in favor of the Senior Agent), for the benefit of itself and Holders of
the Notes, on the Property covered by each Mortgage, subject only to those
exceptions acceptable to Trustee and its counsel. The Issuer shall deliver to
Trustee such other documents, including, without limitation, as-built survey
prints of the real Property, as Trustee and its counsel may request relating
to the real Property subject to the Mortgages. Trustee agrees that final
survey prints of the real Property existing as of December 14, 2001, and final
title insurance policies reflecting the delivery of such surveys, all in form
or substance reasonably satisfactorily to Trustee, may be delivered to Trustee
within 30 days after the date hereof. Notwithstanding the foregoing provisions
of this Section 1.4, the Issuer may xxxxx x Xxxx in real Property acquired by
the Issuer after the date hereof to a mortgagee other than Trustee, so long as
(a) the fair market value of such real Property does not exceed (1) $500,000
individually or (2) $1,000,000 in the aggregate, together with all other real
Property owned the Issuer that is not subject to the Lien of a Mortgage and
(b) such Lien granted to a mortgagee other than Trustee secures Indebtedness
that is incurred pursuant to and in accordance with subsection 8.2.3(xiv) of
the Senior Loan Agreement.
1.5 Subordination.
Notwithstanding any other provision contained herein, the Lien granted by
the Issuer to the Trustee, and any other rights of the Trustee with respect to
the Collateral, pursuant to this Agreement, or any other document or
instrument, to secure the Obligations shall be (i) subordinate and junior to
priority to the Liens granted to the Senior Agent and the Senior Lenders
pursuant to the Senior Loan Agreement and the other Senior Security Documents
(the "Senior Lender Liens") and (ii) subject to each of the terms and
conditions of the Intercreditor Agreement. Any provisions contained herein
that purport to give the Trustee the right to exercise its judgment, the right
to be satisfied or other similar rights or decision making abilities shall
only be operative after such time as all indebtedness under the Senior Loan
Agreement has been fully and indefeasibly paid in cash and satisfied and all
lending commitments under the Senior Loan Agreement have been terminated. In
addition, the Issuer and the Trustee acknowledge and agree that, to the extent
that any provision hereunder imposes an obligation upon the Issuer that the
Issuer is unable to satisfy due to the satisfaction of its obligations under
the Senior Loan Agreement and the Senior Security Documents, such provision
shall not become operative until all indebtedness under the Senior Loan
Agreement has been fully and indefeasibly paid in cash and satisfied and all
lending commitments under the Senior Loan Agreement have been terminated.
SECTION 2. COLLATERAL ADMINISTRATION
2.1. General.
2.1.1. Location of Collateral. All Collateral, other than Inventory
in transit and motor vehicles, will at all times be kept by the Issuer or
one of the Guarantors at one or more of the business locations set forth
in Exhibit 2.1.1 hereto, as updated by the Issuer providing prior written
notice to Trustee of any new location.
2.1.2. Insurance of Collateral. Issuer shall, and shall cause each
Guarantor to, maintain and pay for insurance upon all Collateral wherever
located and with respect to the business of the Issuer and each
Guarantor, covering casualty, hazard, public liability, workers'
compensation and such other risks in such amounts and with such insurance
companies as are reasonably satisfactory to Trustee. The Issuer shall,
and shall cause each Guarantor to, deliver certified copies of such
policies to Trustee as promptly as practicable, with satisfactory
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lender's loss payable endorsements, naming Trustee as a loss payee,
assignee or additional insured, as appropriate, as its interest may
appear, and showing only such other loss payees, assignees and additional
insureds as are satisfactory to Trustee. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less
than 10 days' prior written notice to Trustee in the event of
cancellation of the policy for nonpayment of premium and not less than 30
days' prior written notice to Trustee in the event of cancellation of the
policy for any other reason whatsoever and a clause specifying that the
interest of Trustee shall not be impaired or invalidated by any act or
neglect of the Issuer, any Guarantor or the owner of the Property or by
the occupation of the premises for purposes more hazardous than are
permitted by said policy. The Issuer agrees, and shall cause each
Guarantor to agree, to deliver to Trustee, promptly as rendered, true
copies of all reports made in any reporting forms to insurance companies.
Unless Issuer or Guarantors provide Trustee with evidence of the
insurance coverage required by this Agreement, Trustee may purchase
insurance at the Issuer's expense to protect Trustee's interests in the
Properties of the Issuer and Guarantors. This insurance may, but need
not, protect the interests of the Issuer and each of the Guarantors. The
coverage that Trustee purchases may not pay any claim that the Issuer or
any Guarantor makes or any claim that is made against the Issuer or any
such Guarantor in connection with said Property. The Issuer or Guarantors
may later cancel any insurance purchased by Trustee, but only after
providing Trustee with evidence that the Issuer or Guarantors have
obtained insurance as required by this Agreement. If Trustee purchases
insurance, the Issuer and Guarantors will be jointly and severally
responsible for the costs of that insurance, including interest and any
other charges Trustee may impose in connection with the placement of
insurance, until the effective date of the cancellation or expiration of
the insurance. The costs of the insurance may be added to the
Obligations. The costs of the insurance may be more than the cost of
insurance that the Issuer and each of the Guarantors may be able to
obtain on their own.
2.1.3. Protection of Collateral. Neither Trustee nor any Holder
shall be liable or responsible in any way for the safekeeping of any of
the Collateral or for any loss or damage thereto (except for reasonable
care in the custody thereof while any Collateral is in Trustee's or any
Holder's actual possession) or for any diminution in the value thereof,
or for any act or default of any warehouseman, carrier, forwarding
agency, or other person whomsoever, but the same shall be at the sole
risk of Issuer and the Guarantors.
2.2. Taxes.
After such time as all indebtedness under the Senior Loan Agreement has
been fully and indefeasibly paid in cash and satisfied and all lending
commitments under the Senior Loan Agreement have been terminated, if any item
of Collateral becomes subject to charge for any tax payable to any
governmental taxing authority, Trustee is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing authority for the account of
the Issuer and to charge the Issuer therefor, except for taxes that (i) are
being actively contested in good faith and by appropriate proceedings and with
respect to which the Issuer maintains reasonable reserves on its books
therefor and (ii) would not reasonably be expected to result in any Lien other
than a Permitted Lien. In no event shall Trustee or any Holder be liable for
any taxes to any governmental taxing authority that may be due by the Issuer.
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2.3. Certain Matters Relating to Accounts.
Trustee shall have the right to make test verifications of the Accounts
of Issuer and Guarantors in any manner and through any medium that it
reasonably considers advisable, provided, that no such test verification
activities shall involve actions or communications with Account Debtor parties
unless and until an Event of Default has occurred and is continuing. Issuer
shall, and shall cause each Guarantor to, furnish all such assistance and
information as Trustee may require in connection with such test verifications.
At any time and from time to time, upon Trustee's request and at the expense
of Issuer, Issuer shall cause independent public accountants or others
satisfactory to Trustee to furnish to Trustee reports showing
reconciliation's, aging and test verifications of, and trial balances for, the
Accounts of Issuer and Guarantors.
SECTION 3. REPRESENTATIONS AND WARRANTIES, COVENANTS
3.1. General Representations, Warranties and Covenants.
The Issuer warrants, represents and covenants to Trustee that:
3.1.1. Qualification. Issuer and each of the Guarantors is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization. The
Issuer and each Guarantor is duly qualified and is authorized to do
business and is in good standing as a foreign limited liability company,
limited partnership or corporation, as applicable, in each state or
jurisdiction listed on Exhibit 3.1.1 hereto and in all other states and
jurisdictions in which the failure of the Issuer or any Guarantor to be
so qualified could reasonably be expected to have a Material Adverse
Effect.
3.1.2. Power and Authority. Issuer and each Guarantor is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the Other Agreements to which it is a party. The
execution, delivery and performance of this Agreement and each of the
Other Agreements have been duly authorized by all necessary corporate or
other relevant action and do not and will not (i) require any consent or
approval of the shareholders of the Issuer or any of the shareholders,
partners or members, as the case may be, of any Guarantor; (ii)
contravene the Issuer's or any Guarantor's certificate of incorporation;
(iii) violate, or cause the Issuer or any Guarantor to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability
to the Issuer or any Guarantor the violation of which could reasonably be
expected to have a Material Adverse Effect; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which the Issuer or any
Guarantor is a party or by which it or its Properties may be bound or
affected, including without limitation, the Parent Indenture, the breach
of or default under which could reasonably be expected to have a Material
Adverse Effect; or (v) result in, or require, the creation or imposition
of any Lien (other than Permitted Liens) upon or with respect to any of
the Properties now owned or hereafter acquired by the Issuer or any
Guarantor.
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3.1.3. Legally Enforceable Agreements. This Agreement and each of
the Other Agreements to which the Issuer and each Guarantor is a party,
is a legal, valid and binding obligation of the Issuer and each Guarantor
party thereto, enforceable against the Issuer and each Guarantor in
accordance with its respective terms.
3.1.4. Title to Properties; Priority of Liens. Issuer and each
Guarantor has indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its
real Property, and title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted
Liens. The Issuer and each Guarantor has paid or discharged each lawful
claim which, if unpaid, is reasonably likely to become a Lien against any
of the Issuer's or such Guarantor's Properties that is not a Permitted
Lien. The Liens granted to Trustee under Section 1 hereof are superior in
priority to all Liens other than the Senior Lender Liens, subject only to
Permitted Liens.
3.1.5. Organization; Capital Structure. Exhibit 3.1.5 hereto states,
as of the date hereof, (i) the correct name of Issuer and each of the
Guarantors, its jurisdiction of incorporation or organization and the
percentage of its Voting Stock owned by Issuer or other Guarantors, (ii)
the name of Issuer's and each Guarantor's corporate or joint venture
relationships and the nature of the relationship, (iii) the number,
nature and holder of all outstanding Securities of each of Issuer and
Guarantors and the holder of Securities of each Subsidiary of Issuer and
Guarantors and (iv) the number of authorized, issued and treasury
Securities of Issuer and Guarantors. Each of Issuer and Guarantors has
good title to all of the Securities it purports to own of each of such
entities, free and clear in each case of any Lien other than Permitted
Liens. All such Securities have been duly issued and are fully paid and
non-assessable. As of the date hereof, there are no outstanding options
to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell any Securities or obligations
convertible into, or any powers of attorney relating to any Securities of
Issuer or any Guarantors. Except as set forth on Exhibit 3.1.5, as of the
date hereof, there are no outstanding agreements or instruments
binding upon any of Issuer's or any of its Guarantors'
partners, members or shareholders, as the case may be, relating to the
ownership of its Securities.
3.1.6. Names; Organization. Neither Issuer nor any Guarantor has
been known as or has used any legal, fictitious or trade names except
those listed on Exhibit 3.1.6 hereto. Except as set forth on Exhibit
3.1.6, neither Issuer nor any Guarantor has been the surviving entity of
a merger or consolidation or has acquired all or substantially all of the
assets of any Person. Issuer and each Guarantor's state(s) of
incorporation or organization, Type of Organization and Organizational
I.D. Number is set forth on Exhibit 3.1.6. The exact legal name of Issuer
and each Guarantor is set forth on Exhibit 3.1.6.
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3.1.7. Business Locations; Agent for Process. Issuer's and each
Guarantor's chief executive office, location of books and records and
other places of business are as listed on Exhibit 2.1.1 hereto, as
updated from time to time by Issuer in accordance with the provisions of
subsection 2.1.1; provided, that Exhibit 2.1.1 hereto need not include,
and Trustee need not receive, notice of, up to (i) $5,000 of Inventory
located at any one location and (ii) $50,000 of Inventory at all
locations in the aggregate. During the preceding one-year period, neither
Issuer nor any Guarantor has had an office, place of business or agent
for service of process, other than as listed on Exhibit 2.1.1. All
tangible Collateral is and will at all times be kept by Issuer or a
Guarantor in accordance with subsection 2.1.1. Except as shown on Exhibit
2.1.1, as of the date hereof, no Inventory is stored with a bailee,
distributor, warehouseman or similar party, nor is any Inventory
consigned to any Person.
3.1.8. Accounts. Trustee may rely, in determining which Accounts
constitute Accounts that represent Collateral, on all statements and
representations made by the Issuer and the Guarantors with respect to any
Account or Accounts. With respect to each of the Accounts of Issuer and
the Guarantors, unless otherwise disclosed to Trustee in writing:
(i) It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by the Issuer and the Guarantors,
in the ordinary course of its business and in accordance with the
terms and conditions of all purchase orders, contracts or other
documents relating thereto and forming a part of the contract
between the Issuer and the Guarantors and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Trustee;
(iv) To the best of the Issuer's knowledge, there are no facts,
events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable
thereunder from the face amount of the invoice and statements
delivered or made available to Trustee with respect thereto;
(v) To the best of the Issuer's knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (2)
such Account Debtor is Solvent; and
(vi) To the best of the Issuer's knowledge, there are no
proceedings or actions which are threatened or pending against the
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectibility of such Account.
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3.1.9. Equipment. The Equipment of Issuer and each Guarantor is in
good operating condition and repair, and all necessary replacements of
and repairs thereto shall be made so that the operating efficiency
thereof shall be maintained and preserved, reasonable wear and tear
excepted. The Issuer will not permit any of its Equipment or any
Guarantor's Equipment to become affixed to any real Property leased to
the Issuer or a Guarantor so that an interest arises therein under the
real estate laws of the applicable jurisdiction unless the landlord of
such real Property has executed a landlord waiver or leasehold mortgage
in favor of and in form reasonably acceptable to Trustee, and the Issuer
will not permit any of its Equipment to become an accession to any
personal Property other than Collateral Equipment that is subject to
second priority (except for Permitted Liens) Liens in favor of Trustee.
3.1.10. Patents, Trademarks, Copyrights and Licenses. Issuer and
each Guarantor owns, possesses or licenses or has the right to use all
the patents, trademarks, service marks, trade names, copyrights, licenses
and other Intellectual Property necessary for the present and planned
future conduct of its business without any known conflict with the rights
of others, except for such conflicts as could not reasonably be expected
to have a Material Adverse Effect. All such patents, trademarks, service
marks, tradenames, copyrights, licenses, and other similar rights are
listed on Exhibit 3.1.10 hereto. No claim has been asserted to Issuer or
any Guarantor which is currently pending that their use of their
Intellectual Property or the conduct of their business does or may
infringe upon the Intellectual Property rights of any third party. To the
knowledge of Issuer and except as set forth on Exhibit 3.l.10 hereto, as
of the date hereof, no Person is engaging in any activity that infringes
in any material respect upon the Issuer's or any Guarantor's material
Intellectual Property. Except as set forth on Exhibit 3.1.10, Issuer's
and each Guarantor's material trademarks, service marks, and copyrights
are registered with the U.S. Patent and Trademark Office or in the U.S.
Copyright Office, as applicable. In addition, except as set forth on
Exhibit 3.1.10, Issuer's and each Guarantor's material license agreements
and similar arrangements relating to its Inventory (1) permits, and does
not restrict, the assignment by Issuer or any Guarantor to Trustee, or
any other Person designated by Trustee, of all of Issuer's or such
Guarantor's, as applicable, rights, title and interest pertaining to such
license agreement or such similar arrangement and (2) would permit the
continued use by Issuer or such Guarantor, or Trustee or its assignee, of
such license agreement or such similar arrangement and the right to sell
Inventory subject to such license agreement for a period of no less than
6 months after a default or breach of such agreement or arrangement, in
each case to the extent that the failure to permit the same could not
reasonably be expected to have a Material Adverse Affect. The
consummation and performance of the transactions and actions contemplated
by this Agreement and the Other Documents, including without limitation,
the exercise by Trustee of any of its rights or remedies under Section 4,
will not result in the termination or impairment of any of Issuer's or
any Guarantor's ownership or rights relating to its Intellectual
Property, except for such Intellectual Property rights the loss or
impairment of which could not reasonably be expected to have a Material
Adverse Effect. Except as listed on Exhibit 3.1.10 and except as could
not reasonably be expected to have a Material Adverse Effect, (i) neither
Issuer nor any Guarantor is in breach of, or default under, any term of
any license or sublicense with respect to any of its Intellectual
Property and (ii) to the knowledge of Issuer, no other party to such
license or sublicense is in breach thereof or default thereunder, and
such license is valid and enforceable.
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3.2. Reimbursement of Expenses
If, at any time or times regardless of whether or not an Event of Default
then exists, (i) Trustee incurs legal or accounting expenses or any other
costs or out-of-pocket expenses in connection with (1) the negotiation and
preparation of this Agreement or any of the Other Agreements, any amendment of
or modification of this Agreement or any of the Other Agreements, or (2) the
administration of this Agreement or any of the Other Agreements and the
transactions contemplated hereby and thereby; or (ii) Trustee incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with (1) any litigation, contest, suit, proceeding or action (whether
instituted by Trustee, any Holder, the Issuer or any other Person) relating to
the Collateral, this Agreement or any of the Other Agreements or the Issuer's
or any Guarantor's affairs; (2) any attempt to enforce any rights of Trustee
or any Holder against the Issuer or any other Person which may be obligated to
Trustee or any Holder by virtue of this Agreement or any of the Other
Agreements, including, without limitation, the Account Debtors; or (3) any
attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all
such legal and accounting expenses, other costs and out of pocket expenses of
Trustee as shall be charged to the Issuer; provided, that (a) if an Event of
Default does not then exist, the Issuer shall only be responsible for such
expenses, costs and out-of-pocket expenses to the extent that the same are
reasonable and (b) the Issuer shall be responsible for such expenses, costs
and out-of-pocket expenses to the extent incurred because of the gross
negligence or willful misconduct of Trustee. All amounts chargeable to the
Issuer under this Section 3.2 shall be Obligations secured by all of the
Collateral, shall be payable to Trustee on the earlier of 15 days after demand
therefor or, in the case of expenses billed to Trustee by a third party, the
due date thereof, and shall bear interest from the date due hereunder until
paid in full at the rate of 12% per annum.
3.3. Collateral Protection Expenses; Appraisals.
All out-of-pocket expenses incurred in protecting, storing, warehousing,
insuring, handling, maintaining and shipping the Collateral, and any and all
excise, property, sales, and use taxes imposed by any state, federal, or local
authority on any of the Collateral or in respect of the sale thereof shall be
paid by the Issuer. If the Issuer fails to promptly pay any portion thereof
when due, Trustee may, at its option, but shall not be required to, pay the
same and charge the Issuer therefor. Additionally, from time to time after all
indebtedness under the Senior Loan Agreement has been fully and indefeasibly
paid and satisfied and all lending commitments under the Senior Loan Agreement
have been terminated, Trustee may, at the Issuer's expense, obtain appraisals
from appraisers (who may be personnel of Trustee), stating the then current
fair market value of all or any portion of the real estate or personal
property of the Issuer or any Guarantor, including without limitation the
Inventory of the Issuer or any Guarantor.
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3.4. No Deductions.
Any and all payments or reimbursements made hereunder shall be made free
and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto;
excluding, however, the following: taxes imposed on the income of Trustee or
any Holder or franchise taxes by the jurisdiction under the laws of which
Trustee or any Holder is organized or doing business or any political
subdivision thereof and taxes imposed on its income by the jurisdiction of
Trustee's or such Holder's applicable lending office or any political
subdivision thereof or franchise taxes (all such taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto
excluding such taxes imposed on net income, herein "Tax Liabilities").
3.5. Affirmative Covenants.
For so long as any Obligations are outstanding, Issuer covenants that it
shall:
3.5.1. Visits and Inspections; Holder Meeting. Permit and cause each
Guarantor to permit Trustee and/or representatives of Trustee, and during
the continuation of any Default or Event of Default any Holder, from time
to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of Issuer and each
Guarantor, inspect, audit and at the Issuer's expense, make extracts or
copies from its books and records, and discuss with its officers, its
employees and its independent accountants, the Issuer's and each
Guarantor's business, assets, liabilities, financial condition, business
prospects and results of operations; provided that so long as no Default
or Event of Default exists, Trustee and each Holder shall provide Issuer
and each Guarantor with at least two days' prior notice of any
inspection, audit or discussion between such Person and Issuer's and each
Guarantor's independent accountants. Without limiting the foregoing,
Issuer shall, and shall cause each Guarantor to, participate and shall
cause their key management personnel to participate in a meeting with
Trustee and Holders periodically, which meeting(s) shall be held at such
times and such places as may be reasonably requested by Trustee.
3.5.2. Landlord, Processor and Storage Agreements. Provide Trustee
with copies of all agreements between Issuer or any Guarantor and any
landlord, processor, distributor, warehouseman or consignee which owns
any premises at which any Collateral may, from time to time, be kept.
3.5.3. Maintenance of Perfected Security Interest. The Issuer shall,
and shall cause each Guarantor to, maintain the security interest created
by this Agreement or any Guarantor Security Agreement as the case may be,
as a second priority security interest (or a first priority security
interest after the Senior Lender Liens have been terminated) subject only
to Permitted Liens, and shall defend such security interest against the
claims and demands of all Persons whomsoever.
3.5.4. Restricted Subsidiaries. Issuer shall cause each domestic
Restricted Subsidiary hereafter in existence, that did not execute the
Indentures as a Guarantor, to execute and deliver supplemental indentures
to the Indentures, a Guarantor Security Agreement and, if applicable, a
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Copyright, Patent, Trademarks and License Mortgage pursuant to which such
domestic Restricted Subsidiary guaranties the payment and performance of
the Obligations and grants to Trustee a second priority (or first
priority if the Senior Lender Liens have terminated) Lien, subject only
to Permitted Liens, on all of its Properties of the types described in
Section 1 hereto. Additionally, the appropriate Person shall execute and
deliver to Trustee a Pledge Agreement pursuant to which the Trustee is
granted a valid, second priority (or first priority if the Senior Lender
Liens have terminated) Lien, subject only to Permitted Liens, with
respect to all of the issued and outstanding Securities of each such
Restricted Subsidiary.
3.6. Negative Covenants.
For so long as there are any Obligations outstanding, Issuer
covenants that it shall not:
3.6.1. Matters Relating to Parent Indenture.
(i) Become, or permit any Guarantor to become, a
"Non-Restricted Subsidiary" under and as defined in the Parent
Indenture; or
(ii) Provide, or permit any Guarantor to provide, a guarantee
in respect of the Parent Senior Notes pursuant to subsection 4.15 of
the Parent Indenture.
3.6.2. Structural Changes. Change its, or permit any Guarantor to
change its, state of incorporation or organization, Type of Organization
or Organizational I.D. Number; nor change its or permit any Guarantor to
change its legal name, in each case without providing 30 days' prior
written notice thereof to Trustee.
3.7. Intangible Collateral. Issuer represents and warrants, and covenants
and agrees, that its, and each Guarantor's, General Intangibles and
Intellectual Property constituting Terminable Intangibles are not, and will
not at any time be, material to the business or operations of the Issuer and
the Guarantors taken as a whole.
SECTION 4. RIGHTS AND REMEDIES ON DEFAULT
4.1. Remedies.
Upon the occurrence and during the continuance of an Event of Default,
Trustee shall have and may exercise from time to time the following other
rights and remedies (subject in each case to the terms of the Intercreditor
Agreement and Section 1.5 hereof):
4.1.1. All of the rights and remedies of a secured party under the
UCC or under other applicable law, and all other legal and equitable
rights to which Trustee may be entitled, all of which rights and remedies
shall be cumulative and shall be in addition to any other rights or
remedies contained in this Agreement or any of the Other Agreements, and
none of which shall be exclusive.
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4.1.2. The right to take immediate possession of the Collateral, and
to (i) require the Issuer and each of the Guarantors to assemble the
Collateral, at the Issuer's expense, and make it available to Trustee at
a place designated by Trustee which is reasonably convenient to both
parties, and (ii) enter any premises where any of the Collateral shall be
located and to keep and store the Collateral on said premises until sold
(and if said premises be the Property of the Issuer or the Guarantors,
the Issuer agrees not to charge, or permit any Guarantor to charge,
Trustee for storage thereof).
4.1.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice
as may be required by law, in lots or in bulk, for cash or on credit, all
as Trustee, in its sole discretion, may deem advisable. Trustee may, at
Trustee's option, disclaim any and all warranties regarding the
Collateral in connection with any such sale. The Issuer agrees that 10
days' written notice to it or any of the Guarantors of any public or
private sale or other disposition of Collateral shall be reasonable
notice thereof, and such sale shall be at such locations as Trustee may
designate in said notice. Trustee shall have the right to conduct such
sales on the Issuer's or any Guarantor's premises, without charge
therefor, and such sales may be adjourned from time to time in accordance
with applicable law. Trustee shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Trustee, on behalf of the Holders,
may purchase all or any part of the Collateral at public or, if permitted
by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations. The
proceeds realized from the sale of any Collateral may be applied, after
allowing 2 Business Days for collection (provided, that amounts received
in immediately available funds shall be credited upon receipt thereof),
first to the costs, expenses and attorneys' fees incurred by Trustee in
collecting the Obligations, in enforcing the rights of Trustee and
Holders under the Other Agreements and in collecting, retaking,
completing, protecting, removing, storing, advertising for sale, selling
and delivering any Collateral, second to the interest due upon any of the
Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, the Issuer and each Guarantor shall remain
jointly and severally liable to Trustee therefor.
4.1.4. Trustee is hereby granted a license or other right to use,
without charge, the Issuer's and each Guarantor's labels, patents,
copyrights, licenses, rights of use of any name, trade secrets,
tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in completing,
advertising for sale and selling any Collateral and the Issuer's and each
Guarantor's rights under all licenses and all franchise agreements shall
inure to Trustee's benefit.
4.1.5. At Trustee's request, Issuer shall deliver, and shall cause
each Guarantor to deliver, to Trustee all original and other documents
evidencing, and relating to, the agreements and transactions which gave
rise to the Accounts, including, without limitation, all original orders,
invoices and shipping receipts. Trustee in its own name or in the name of
others may communicate with Account Debtors under the Accounts to verify
with them to Trustee's satisfaction the existence, amount and terms of
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any Accounts. Upon the request of Trustee at any time, Issuer shall
notify Account Debtors on the Accounts that the Accounts have been
assigned to Trustee and that payments in respect thereof shall be made
directly to Trustee. Anything herein to the contrary notwithstanding,
Issuer shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed
by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither the Trustee nor any Holder shall have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by
Trustee or any Holder of any payment relating thereto, nor shall Trustee
or any Holder be obligated in any manner to perform any of the
obligations of Issuer under or pursuant to any Account (or any agreement
giving rise thereto), to make any payment, to make any inquiry as to the
nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times. Any payments of
Accounts, when collected by Issuer ("Proceeds of Accounts"), consisting
of cash, cash equivalents, checks and other near-cash items, shall be
held by Issuer in trust for Trustee, segregated from other funds of
Issuer, and shall, forthwith upon receipt by such Issuer (and, in any
event within two Business Days) be turned over to Trustee in the exact
form received by Issuer, (duly endorsed by such Issuer to Trustee, if
required), and deposited in any account that is subject to an Account
Control Agreement maintained under sole dominion and control of Trustee.
Each such deposit of Proceeds of Accounts shall be accompanied by a
report identifying in reasonable detail the nature and source of payments
included in the deposit. All Proceeds of Accounts while held by the
Trustee (or by such Issuer in trust for Trustee) shall continue to be
held as collateral security for all the Obligations and shall not
constitute payment thereof until so applied as provided in Section 4.1.3.
4.2. Set Off and Sharing of Payments.
Subject to the terms of the Intercreditor Agreement and Section 1.5
hereof, in addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, during the continuance of
any Event of Default, Trustee is hereby authorized by the Issuer at any time
or from time to time, with reasonably prompt subsequent notice to the Issuer
(any prior or contemporaneous notice to the Issuer being hereby expressly
waived) to set off and to appropriate and to apply any and all (i) balances
held by Trustee at any of its offices for the account of the Issuer
(regardless of whether such balances are then due to the Issuer), and (ii)
other property at any time held or owing by Trustee to or for the credit or
for the account of the Issuer, against and on account of any of the
Obligations.
4.3. Remedies Cumulative; No Waiver.
All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of the Issuer and/or the Guarantors
contained in this Agreement and the Other Agreements, or in any document
referred to herein or contained in any agreement supplementary hereto or in
any schedule given to the Trustee or any Holder or contained in any other
agreement between Trustee and the Issuer and/or the Guarantors heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and not
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in derogation or substitution of any of the terms, covenants, conditions, or
agreements of the Issuer herein contained. The failure or delay of Trustee to
require strict performance by the Issuer of any provision of this Agreement or
any Other Agreement or to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all
Obligations owing or to become owing from the Issuer to Trustee and each
Holder have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of the Issuer and/or the Guarantors
contained in this Agreement or any of the Other Agreements and no Default or
Event of Default by the Issuer under this Agreement or any Other Agreements
shall be deemed to have been suspended or waived by Majority Holders, unless
such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of
Trustee and directed to the Issuer.
SECTION 5. THE TRUSTEE
5.1. Authorization and Action.
By purchase or acceptance of any Note, each Holder appoints and
authorizes Trustee to take such action on its behalf and to exercise such
powers under this Agreement and the Security Documents as are delegated to
Trustee by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. Each Holder hereby acknowledges that Trustee
shall not have by reason of this Agreement assumed a fiduciary relationship in
respect of any Holder. Upon the effective appointment of a successor Trustee
under the Indentures, such successor Trustee shall succeed to the rights,
powers, and duties of Trustee under this Agreement and all Other Agreements,
and the term "Trustee" shall mean such successor effective upon its
appointment. In performing its functions and duties under this Agreement and
the Security Documents, Trustee shall act solely as agent of Holders and shall
not assume, or be deemed to have assumed, any obligation toward, or
relationship of agency or trust with or for, any Holder. As to any matters not
expressly provided for by this Agreement, the Security Documents, Trustee may,
but shall not be required to, exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Holders, whenever such instruction shall be requested by Trustee or
required hereunder, or a greater or lesser number of Holders if so required
hereunder, and such instructions shall be binding upon all Holders; provided,
that Trustee shall be fully justified in failing or refusing to take any
action which exposes Trustee to any liability or which is contrary to this
Agreement and the Security Documents, the Other Agreements or applicable law,
unless Trustee is indemnified to its satisfaction by the Holders against any
and all liability and expense which it may incur by reason of taking or
continuing to take any such action. If Trustee seeks the consent or approval
of the Majority Holders (or a greater or lesser number of Holders as required
in this Agreement or any Security Document), with respect to any action
hereunder or thereunder, Trustee shall send notice thereof to each Holder and
shall notify each Holder at any time that the Majority Holders (or such
greater or lesser number of Holders) have instructed Trustee to act or refrain
from acting pursuant hereto.
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5.2. Trustee's Reliance, Etc.
Neither Trustee, any Affiliate of Trustee, nor any of their respective
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this
Agreement or the Other Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, Trustee: (i) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (ii) makes no warranties or
representations to any Holder and shall not be responsible to any Holder for
any recitals, statements, warranties or representations made in or in
connection with this Agreement or any Other Agreements; (iii) shall not have
any duty beyond Trustee's customary practices in respect of acting as Trustee
in similar transactions, to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or
the Other Agreements on the part of the Issuer, to inspect the property
(including the books and records) of the Issuer, to monitor the financial
condition of the Issuer or to ascertain the existence or possible existence or
continuation of any Default or Event of Default; (iv) shall not be responsible
to any Holder for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the Other Agreements or
any other instrument or document furnished pursuant hereto or thereto; (v)
shall incur no liability under or in respect of this Agreement or the Other
Agreements by acting upon any notice, consent, certificate, message or other
instrument or writing (which may be by telephone, facsimile, telegram, cable
or telex) believed in good faith by it to be genuine and signed or sent by the
proper party or parties; and (vi) may assume that no Event of Default has
occurred and is continuing, unless Trustee has actual knowledge of the Event
of Default, has received notice from the Issuer or any Guarantor or the
Issuer's or any Guarantor's independent certified public accountants stating
the nature of the Event of Default, or has received notice from a Holder
stating the nature of the Event of Default and that such Holder considers the
Event of Default to have occurred and to be continuing.
5.3. Amendment.
No amendment, modification or supplement or waiver of any provision of
this Agreement nor consent to any departure by Trustee therefrom, shall in any
event be effective unless the same shall be in writing and signed by Trustee
and the Issuer, and approved or consented to by the Majority Holders and then
such amendment, modification or supplement or such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no amendment, modification, supplement, waiver or
consent shall be effective, unless in writing and signed by each Holder, do
any of the following: (1) amend any provision of this Agreement that requires
the consent of all Holders or consent to or waive any breach thereof, (2)
amend the definition of the term "Majority Holders", (3) amend this Section
5.3 or (4) release any substantial portion of the Collateral. If a fee is to
be paid by Issuer in connection with any waiver or amendment hereunder, the
agreement evidencing such amendment or waiver may provide that only Holders
executing such agreement by a specified date may share in such fee (and in
such case, such fee shall be divided among the applicable Holders on a pro
rata basis without including the interests of any Holders who have not timely
executed such agreement).
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SECTION 6. MISCELLANEOUS
6.1. Power of Attorney.
Subject to the terms of the Intercreditor Agreement and Section 1.5
hereof, the Issuer hereby irrevocably designates, makes, constitutes and
appoints Trustee (and all Persons designated by Trustee) as the Issuer's true
and lawful attorney (and agent-in-fact), solely with respect to the matters
set forth in this Section 6.1, and Trustee, or Trustee's agent, may, without
notice to the Issuer and in the Issuer's or Trustee's name, but at the cost
and expense of the Issuer:
6.1.1. At such time or times upon or after the occurrence and during
the continuance of an Event of Default, and subject to the terms of the
Intercreditor Agreement and Section 1.5 hereof, as Trustee in its sole
discretion, may determine, endorse Issuer's name on any checks, notes,
acceptances, drafts, money orders or other evidence of payment or
proceeds of collateral that come into possession or control of Trustee.
6.1.2. At such time or times upon or after the occurrence and during
the continuance of an Event of Default, and subject to the terms of the
Intercreditor Agreement and Section 1.5 hereof, as Trustee or its agent
in its sole discretion may determine: (i) demand payment of the Accounts
from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of the Issuer's
rights and remedies with respect to the collection of the Accounts; (ii)
settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the
Accounts or other Collateral; (iii) sell or assign any of the Accounts
and other Collateral upon such terms, for such amounts and at such time
or times as Trustee deems advisable, and at Trustee's option, with all
warranties regarding the Collateral disclaimed; (iv) take control, in any
manner, of any item of payment or proceeds relating to any Collateral;
(v) prepare, file and sign the Issuer's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any
notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (vi) receive, open and dispose of
all mail addressed to the Issuer whether or not relating to its Accounts
that comes into Trustee's possession and notify the postal authorities to
change the address for mail delivery to Issuer to such address as Trustee
may designate; (vii) endorse the name of the Issuer upon any of the items
of payment or proceeds relating to any Collateral and deposit the same to
the account of Trustee on account of the Obligations; (viii) endorse the
name of the Issuer upon any chattel paper, document, instrument, invoice,
freight xxxx, xxxx of lading or similar document or agreement relating to
the Accounts, Inventory and any other Collateral; (ix) use the Issuer's
stationery and sign the name of the Issuer to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and Computer
Hardware and Software relating to the Accounts, Inventory, Equipment and
any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Trustee's
determination, to fulfill the Issuer's obligations under this Agreement.
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The power of attorney granted hereby shall constitute a power coupled
with an interest and shall be irrevocable.
6.2. Indemnity.
The Issuer hereby agrees to indemnify Trustee (and each of its
Affiliates) and hold Trustee (and each of its Affiliates) harmless from and
against any liability, loss, damage, suit, action or proceeding ever suffered
or incurred by any such Person (including reasonable attorneys fees and legal
expenses) as the result of the Issuer's failure to observe, perform or
discharge the Issuer's duties hereunder. In addition, the Issuer shall defend
Trustee (and its Affiliates) against and save it harmless from all claims of
any Person with respect to the Collateral (except those resulting from the
gross negligence or intentional misconduct of any such Person). Without
limiting the generality of the foregoing, these indemnities shall extend to
any claims asserted against Trustee or any Holder (and each of their
Affiliates) by any Person under any Environmental Laws by reason of the
Issuer's or any other Person's failure to comply with laws applicable to solid
or hazardous waste materials or other toxic substances. Notwithstanding any
contrary provision in this Agreement, the obligation of the Issuer under this
Section 6.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
6.3. Severability.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
6.4. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Issuer and the Trustee.
6.5. Cumulative Effect; Conflict of Terms.
The provisions of the Other Agreements are hereby made cumulative with
the provisions of this Agreement. Except as otherwise provided in any of the
Other Agreements by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in direct conflict
with, or inconsistent with, any provision in any of the Other Agreements, the
provision contained in this Agreement shall govern and control.
6.6. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
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6.7. Notice.
Except as otherwise provided herein, all notices, requests and demands to
or upon a party hereto, to be effective, shall be in writing, return receipt
requested, by personal delivery against receipt, by overnight courier or by
facsimile and, unless otherwise expressly provided herein, shall be deemed to
have been validly served, given, delivered or received immediately when
delivered against receipt, one Business Day after deposit with an overnight
courier or, in the case of facsimile notice, when sent, addressed as set forth
in the Indenture.
6.8. Consent.
Whenever Trustee's, Majority Holders' or all Holders' consent is required
to be obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
except as otherwise specifically provided herein, Trustee, Majority Holders or
all Holders, as applicable, shall be authorized to give or withhold such
consent in their sole and absolute discretion and to condition its consent
upon the giving of additional Collateral security for the Obligations, the
payment of money or any other matter.
6.9. Time of Essence.
Time is of the essence of this Agreement, the Other Agreements and the
Security Documents.
6.10. Entire Agreement.
This Agreement and the Other Agreements, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings
and inducements, whether express or implied, oral or written.
6.11. Interpretation.
No provision of this Agreement or any of the Other Agreements shall be
construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such provision.
6.12. Confidentiality.
Trustee shall hold all nonpublic information obtained pursuant to the
requirements of this Agreement in accordance with Trustee's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a Noteholder or prospective Noteholder in
connection with the contemplated participation or assignment or as required or
requested by any governmental authority or representative thereof or pursuant
to legal process.
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6.13. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS
OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF TRUSTEE'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF
TRUSTEE'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
NEW YORK. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS
OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE
ISSUER, OR TRUSTEE. THE ISSUER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO THE ISSUER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF THE ISSUER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF TRUSTEE OR ANY HOLDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY TRUSTEE
OR ANY HOLDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF
ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM
OR JURISDICTION.
6.14. WAIVERS BY THE ISSUER.
THE ISSUER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH TRUSTEE HEREBY
ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO ANY OF THE SECURITY DOCUMENTS, THE OBLIGATIONS OR
THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF
PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS,
CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY
TIME HELD BY TRUSTEE, TRUSTEE'S AGENT OR ANY HOLDER ON WHICH THE ISSUER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER TRUSTEE OR
TRUSTEE'S AGENT OR ANY HOLDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO
TRUSTEE'S OR TRUSTEE'S AGENT TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
TRUSTEE TO EXERCISE ANY OF TRUSTEE'S REMEDIES; (iv) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (v) NOTICE OF ACCEPTANCE HEREOF
AND (vi) EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM OR RECOVER ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE ISSUER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO TRUSTEE ENTERING INTO THIS
AGREEMENT AND THAT TRUSTEE IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH THE ISSUER. THE ISSUER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
6.15. Term of Agreement.
This Agreement shall be in full force and effect for a term commencing
on the date hereof and continuing until all Obligations have been paid in full
and the Indentures shall be fully discharged. Upon payment in full of the
Obligations and the discharge of the Indenture, the Liens provided for hereunder
shall terminate and all rights to the Collateral shall revert to the Issuer. The
Trustee agrees that, upon such termination of the Liens hereunder, the Trustee
shall, at the Issuer's expense, execute and deliver to the Issuer such documents
as the Issuer shall reasonably request to evidence the termination of such
Liens.
6.16. Reinstatement. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by Trustee
in respect of the Obligations is rescinded or must otherwise be restored or
returned by Trustee upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of Issuer or upon the appointment of any intervenor or
conservator of, or trustee or similar official for, Issuer or any substantial
part of its assets; or otherwise, all as though such payments had not been
made.
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IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year specified at the beginning of this Agreement.
KINETEK INDUSTRIES, INC.
By /s/ Xxxxxx X. Xxxxxx, Xx.
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Its Vice President
--------------------------------------
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Its Vice President
----------------------------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Security Agreement dated as of April 12,
2002, by and among U.S. BANK NATIONAL ASSOCIATION, as Trustee and KINETEK
INDUSTRIES, INC., (a) the terms Account, Certificated Security, Chattel Paper,
Commercial Tort Claims, Deposit Account, Document, Electronic Chattel Paler,
Equipment, Financial Asset, Fixture, General Intangibles, Goods, Instruments,
Inventory, Investment Property, Letter-of-Credit Rights, Payment Intangibles,
Proceeds, Security, Security Entitlement, Software, Supporting Obligations,
Tangible Chattel Paper and Uncertificated Security have the respective meanings
assigned thereto under the UCC; (b) all terms reflecting Collateral having the
meanings assigned thereto under the UCC shall be deemed to mean such Property,
whether now owned or hereafter created or acquired by the Issuer or in which the
Issuer now has or hereafter acquires any interest; (c) capitalized terms which
are not otherwise defined have the respective meanings assigned thereto in said
Security Agreement; and (d) the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account Control Agreement - an account control agreement reasonably
satisfactory to the Trustee. For the avoidance of doubt, such account
control agreement shall provide the Trustee with "control" of a deposit
account within the meaning of the applicable Uniform Commercial Code,
subject to the terms of the Intercreditor Agreement."
Account Debtor - any Person who is or may become obligated under or
on account of any Account, Contract Right, Chattel Paper or General
Intangible.
ADC - Advanced D.C. Motors, Inc., a New York corporation and an
indirect wholly-owned Subsidiary of Kinetek.
ADC Holdings - Advanced D.C. Holdings, Inc., a Delaware corporation
and a direct wholly-owned Subsidiary of Kinetek.
Affiliate - a Person (other than a Subsidiary): (i) which directly
or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 10% or more of any class of the Voting Stock
of a Person; or (iii) 10% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held by a Person or a Subsidiary of a
Person. Without limiting the foregoing in any way, any director or
executive officer of a Person shall deemed to be an "Affiliate" of such
Person for purposes of this Agreement.
Agreement - the Security Agreement referred to in the first sentence
of this Appendix A, all Exhibits and Schedules thereto and this Appendix
A, as each of the same may be amended from time to time.
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Assignment - the Collateral Assignment of Intercompany Note and
Intercompany Loan and Security Documents from Issuer to Trustee, dated
the date hereof, as the same may be amended from time to time.
Business Day - any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or the State
of Minnesota or is a day on which banking institutions located in either
of such states are closed.
Collateral - all of the Property and interests in Property described
in Section 1 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any
of the Obligations.
Computer Hardware and Software - all of the Issuer's rights
(including rights as licensee and lessee) with respect to (i) computer
and other electronic data processing hardware, including all integrated
computer systems, central processing units, memory units, display
terminals, printers, computer elements, card readers, tape drives, hard
and soft disk drives, cables, electrical supply hardware, generators,
power equalizers, accessories, peripheral devices and other related
computer hardware; (ii) all software and all software programs designed
for use on the computers and electronic data processing hardware
described in clause (i) above, including all operating system software,
utilities and application programs in any form (source code and object
code in magnetic tape, disk or hard copy format or any other listings
whatsoever); (iii) any firmware associated with any of the foregoing; and
(iv) any documentation for hardware, Software and firmware described in
clauses (i), (ii) and (iii) above, including flow charts, logic diagrams,
manuals, specifications, training materials, charts and pseudo codes.
Contract Right - any right of the Issuer and each Guarantor to
payment under a contract for the sale or lease of goods or the rendering
of services, which right is at the time not yet earned by performance.
Copyright, Patent, Trademarks and License Mortgages - collectively,
each of the four Copyright, Patent, Trademarks and License Mortgages,
dated as of the date hereof, between Trustee and Issuer, Imperial,
Xxxxxx-Xxxxx and MCE, respectively, and all other copyright, patent,
trademark and license mortgages and comparable documents now or at any
time hereafter securing the whole or any part of the Obligations..
Default - as defined in the Indentures.
EDC - Electrical Design and Control Company, a Delaware corporation
and a direct wholly-owned Subsidiary of Kinetek.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, orders and consent decrees relating to health,
safety and environmental matters.
Event of Default - as defined in the Indentures.
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FIR - FIR Electromeccanica, a corporation organized under the laws
of Italy and a direct wholly-owned Subsidiary of FIR Holdings.
FIR Holdings - FIR Group Holdings, Inc., a Delaware corporation and
a direct wholly-owned Subsidiary of Kinetek. -
Foreign Subsidiary - any now or hereafter existing Subsidiary of the
Issuer or a Restricted Subsidiary that was not formed under the laws of
any state of the United States of America.
Gear - Gear Research, Inc., a Delaware corporation and an indirect
wholly-owned Subsidiary of Kinetek and direct wholly-owned Subsidiary of
Imperial.
Guarantor Security Agreements - collectively, each of the ten
Guarantor Security Agreements, dated as of the date hereof, between each
of the Guarantors respectively and Trustee, and any such Guarantor
Security Agreements entered into in the future by Trustee and any
additional Guarantors, securing the Obligations, as the same may be
amended from time to time.
Guarantors - Each of the Persons identified in the second recital
paragraph of this Agreement, and any other Person at any time, that
guarantees payment or performance of the whole or any part of the
Obligations pursuant to the Guaranty.
Guaranty - The guaranty of payment and performance by each of the
Guarantors pursuant to the Indenture.
Holders - as defined in the Indentures.
Imperial - The Imperial Electric Company, a Delaware corporation and
a direct wholly-owned Subsidiary of Kinetek.
Indentures - as defined in the first recital paragraph of the
Security Agreement.
Intellectual Property - means: all past, present and future: trade
secrets, know-how and other proprietary information; trademarks, internet
domain names, service marks, trade dress, trade names, business names,
designs, logos, slogans (and all translations, adaptations, derivations
and combinations of the foregoing) indicia and other source and/or
business identifiers, and the goodwill of the business relating thereto
and all registrations or applications for registrations which have
heretofore been or may hereafter be issued thereon throughout the world;
copyrights (including copyrights for computer programs) and copyright
registrations or applications for registrations which have heretofore
been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights, unpatented inventions (whether or not
patentable); patent applications and patents; industrial design
applications and registered industrial designs; license agreements
related to any of the foregoing and income therefrom; books, records,
writings, computer tapes or disks, flow diagrams, specification sheets,
computer software, source codes, object codes, executable code, data,
databases and other physical manifestations, embodiments or
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incorporations of any of the foregoing; the right to xxx for all past,
present and future infringements of any of the foregoing; all other
intellectual property; and all common law and other rights throughout the
world in and to all of the foregoing.
Intercreditor Agreement - the Intercreditor Agreement between
Trustee and the Senior Agent, dated the date hereof.
Issuer - Kinetek Industries, Inc., a Delaware corporation.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien"
shall also include rights of seller under conditional sales contracts or
title retention agreements, reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting Property. For the
purpose of the Agreement, the Issuer shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property
has been retained by or vested in some other Person for security
purposes.
Majority Holders - as of any date, Holders holding more than 50% of
the aggregate principal amount of outstanding Notes.
Material Adverse Effect - (i) a material adverse effect on the
business, condition (financial or otherwise), operation, performance or
properties of Issuer and the Guarantors taken as a whole, (ii) a material
adverse effect on the rights and remedies of Trustee or Holders under the
Other Agreements, or (iii) the material impairment of the ability of
Issuer or any Guarantor to perform its obligations hereunder or under any
Other Agreements.
MCE - Motor Control Engineering, Inc., a California corporation and
an indirect wholly-owned Subsidiary of Kinetek.
MCE Holdings - Motion Holdings, Inc., a Delaware corporation and a
direct wholly-owned Subsidiary of Kinetek.
Xxxxxx-Xxxxx - Xxxxxx-Xxxxx Industries, Inc., an Illinois
corporation and a direct wholly-owned Subsidiary of Kinetek.
Mortgages - (i) the Real Property Mortgage executed by Gear on or
about the date hereof in favor of Trustee, for the benefit of Holders, by
which Gear has granted to Trustee, as security for the Obligations, a
Lien upon the real Property of Gear located at 0000 Xxxxxxx Xxxxxx XX,
Xxxxx Xxxxxx, Xxxxxxxx 00000, (ii) the Real Property Mortgage executed by
ADC on or about the date hereof in favor of Trustee, for the benefit of
Holders, by which ADC has granted to Trustee, as security for the
Obligations, a Lien upon the real Property of ADC located at 0000 Xxxx
Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000, (iii) the Open-End Real Property
Mortgage executed by Imperial on or about the date hereof in favor of
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Trustee, for the benefit of Holders, by which Imperial has granted to
Trustee, as security for the Obligations, a Lien upon the real Property
of Imperial located at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000 and
(iv) all other mortgages, deeds of trust and comparable documents now or
at any time hereafter securing the whole or any part of the Obligations.
Motors and Gears - Motors and Gears Holdings, Inc., a Delaware
corporation and a majority-owned Subsidiary of Jordan.
Motors and Gears Note - the $37,671,186.87 13 1/2% Senior Discount
Note due 2007 issued by M&G in favor of Jordan.
Notes - the Issuer's 5% Senior Secured Notes due May 1, 2007 and 10%
Senior Secured Notes due 2007, issued pursuant to the Indentures.
Obligations - all amounts of principal, interest and premium, if
any, owing on the Notes and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and
other charges thereon, owing, arising, due or payable from the Issuer to
Trustee, for its own benefit, or for the benefit of any Holder, of any
kind or nature, present or future, arising under this Agreement, the
Indenture or any of the other Other Agreements, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired.
Organizational I.D. Number - with respect to any Person, the
organizational identification number assigned to such Person by the
applicable governmental unit or agency of the jurisdiction of
organization of such Person.
Other Agreements - any and all agreements, instruments and documents
including the Indentures and the Security Documents, heretofore, now or
hereafter executed by the Issuer or any Guarantor, delivered to Trustee
or any Holder in respect of the transactions contemplated by the
Indentures and the Security Documents.
Parent - Kinetek, Inc., a Delaware corporation, formerly known as
Motors and Gears, Inc.
Parent Indenture - the Indenture dated as of December 17, 1997
between Parent and State Street Bank and Trust Company, as Trustee.
Parent Senior Notes - the 10 3/4% Series D Senior Notes Due 2006 in
the aggregate outstanding principal amount of $270,000,000 issued by
Parent pursuant to the Parent Indenture.
Permitted Liens - as defined in the Indentures.
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Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Pledge Agreements - collectively, (i) the Pledge Agreement executed
by Kinetek on or about the date hereof in favor of Trustee, for the
benefit of Holders, by which Kinetek has granted to Trustee, as security
for the Obligations, a Lien on the 100% of the Securities of each of ADC
Holdings, EDC, Imperial, MCE Holdings, Xxxxxx-Xxxxx and FIR Holdings,
(ii) the Pledge Agreement executed by ADC Holdings on or about the
Closing Date in favor of Trustee, for the benefit of Holders, by which
ADC Holdings has granted to Trustee, as security for the Obligations, a
Lien on the 100% of the Securities of ADC, (iii) the Pledge Agreement
executed by MCE Holdings on or about the Closing Date in favor of
Trustee, for the benefit of Holders, by which MCE Holdings has granted to
Trustee, as security for the Obligations, a Lien on the 100% of the
Securities of MCE (iv) the Pledge Agreement executed by Imperial on or
about the Closing Date in favor of Trustee, for the benefit of Holders,
by which Imperial has granted to Trustee, as security for the
Obligations, a Lien on the 100% of the Securities of Gear, (v) the Pledge
Agreement executed by Parent on or about the Closing Date in favor of
Trustee, for the benefit of Holders, by which Parent has granted to
Trustee, as security for the Obligations, a Lien on the 100% of the
Securities of Kinetek, (vi) the Pledge Agreement executed by FIR Holdings
on or about the Closing Date in favor of Trustee, for the benefit of
Holders, by which FIR Holdings has granted to Trustee, as security for
the Obligations, a Lien on the 65% of the Securities of FIR, and (vii)
all other pledge agreements and comparable documents now or at any time
hereafter securing the whole or any part of the Obligations.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Restricted Subsidiary - as defined in the Indentures.
Security - all shares of stock, partnership interests, membership
interests, membership units or other ownership interests in any other
Person and all warrants, options or other rights to acquire the same.
Security Documents - this Agreement, the Assignment, the Copyright,
Patent, Trademark and License Mortgages, the Guarantor Security
Agreements, the Mortgages, the Pledge Agreements, and all other
instruments and agreements now or at any time hereafter securing the
whole or any part of the Obligations.
Senior Agent - Fleet Capital Corporation, in its capacity as Agent
under the Senior Loan Agreement or any successor Agent thereto in
accordance with the Senior Loan Agreement.
Senior Lenders - the financial lenders identified as Lenders under
the Senior Loan Agreement.
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Senior Lender Liens - as defined in Section 1.5 of the Agreement.
Senior Loan Agreement - the Loan and Security Agreement dated as of
December 18, 2001 among Kinetek, certain Subsidiaries of Kinetek, the
financial institutions party thereto as lenders and the Senior Agent and
any other loan or credit agreement that evidences indebtedness that would
constitute "Senior Debt" under and as defined in the Intercreditor
Agreement.
Solvent - as to any Person, that such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of
such Person's Indebtedness (including contingent debts), (ii) is able to
pay all of its Indebtedness as such Indebtedness matures and (iii) has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
Senior Security Documents - the Security Documents as defined in the
Senior Loan Agreement.
Subsidiary - any Person of which another Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
Terminable Intangible - as defined in Section 1.1 of the Agreement.
Trustee - U.S. Bank National Association, as Trustee under the
Indentures, and any successor Trustee thereto in accordance with the
Indentures.
Type of Organization - with respect to any Person, the kind or type
of entity by which such Person is organized, such as a corporation or
limited liability company.
UCC - the Uniform Commercial Code as in effect in the State of New
York on the date of this Agreement, as it may be amended or otherwise
modified.
Voting Stock - Securities of any class or classes of a corporation,
limited partnership or limited liability company or any other entity the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote with respect to the election of corporate directors (or
Persons performing similar functions).
Other Terms. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the UCC or by
the Indenture to the extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof' and
"hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section titles,
table of contents and list of exhibits appear as a matter of convenience
only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. All
references to any of the Other Agreements shall include any and all
amendments, modifications, supplements thereto and any restatements
thereof, thereto and any and all extensions or renewals thereof.
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