EXHIBIT 4.7
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of
December 19, 2002 and entered into by and among Grant Prideco, Inc., a Delaware
corporation ("HOLDINGS"), each of THE UNDERSIGNED DIRECT AND INDIRECT
SUBSIDIARIES of Holdings (each of such undersigned Subsidiaries being a
"SUBSIDIARY GRANTOR" and collectively "SUBSIDIARY GRANTORS") and each ADDITIONAL
GRANTOR that may become a party hereto after the date hereof in accordance with
Section 22 hereof (each of Holdings, each Subsidiary Grantor, and each
Additional Grantor being a "GRANTOR" and collectively the "GRANTORS") and
Deutsche Bank Trust Company Americas ("AGENT"), as agent for and representative
of (in such capacity herein called "SECURED PARTY") the financial institutions
("LENDERS") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
A. Pursuant to the Credit Agreement dated as of the date
hereof (said Credit Agreement, as it may hereafter be further amended, restated,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT"), by and among the Grantors, the financial institutions listed
therein as Lenders, and Deutsche Bank Trust Company Americas, as Agent, Lenders
have made certain commitments, subject to the terms and conditions set forth in
the Credit Agreement, to extend certain credit facilities to the Grantors.
Capitalized terms used herein and not otherwise defined herein have the meanings
ascribed thereto in the Credit Agreement.
B. Grantors may from time to time enter, or may from time to
time have entered, into one or more Permitted Hedge Agreements (collectively,
the "LENDER HEDGE AGREEMENTS") with one or more Persons that are Lenders or
Affiliates of Lenders at the time such Lender Hedge Agreements are entered into
(in such capacity, collectively, "HEDGE LENDERS") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of such Grantors
under the Lender Hedge Agreements, including without limitation the obligation
of such Grantors to make payments thereunder in the event of early termination
thereof, together with all obligations of such Grantors under the Credit
Agreement and the other Loan Documents, be secured hereunder.
C. Each Subsidiary Grantor has executed and delivered that
certain Subsidiary Guaranty dated the date hereof (said Subsidiary Guaranty, as
it may hereafter be amended, restated, supplemented or otherwise modified from
time to time, being the "SUBSIDIARY GUARANTY") in favor of Secured Party for the
benefit of Lenders and any Hedge Lenders, pursuant to which each such Subsidiary
Grantor has guarantied the prompt payment and performance when due of all
obligations of such Grantor under the Credit Agreement and all obligations of
such Grantor under the Lender Hedge Agreements, including without limitation the
obligation of such Grantor to make payments thereunder in the event of early
termination thereof.
D. It is a condition precedent to the initial extensions of
credit by Lenders under the Credit Agreement that Grantors listed on the
signature pages hereof shall have granted the security interests and undertaken
the obligations contemplated by this Agreement.
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NOW, THEREFORE, in consideration of the premises and in order
to induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Hedge Lenders to enter into the Lender Hedge Agreements,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, each Grantor hereby agrees with Secured Party as
follows:
SECTION 1. GRANT OF SECURITY.
Each Grantor hereby assigns to Secured Party, and hereby
grants to Secured Party a security interest in, all of such Grantor's right,
title and interest in and to the following, in each case whether now or
hereafter existing, whether tangible or intangible, or in which such Grantor now
has or hereafter acquires an interest and wherever the same may be located (the
"COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof and
all accessions thereto (any and all such equipment, parts and accessions being
the "EQUIPMENT");
(b) all inventory in all of its forms, including but not
limited to (i) all goods held by such Grantor for sale or lease or to be
furnished under contracts of service or so leased or furnished, (ii) all raw
materials, work in process, finished goods, and materials used or consumed in
the manufacture, packing, shipping, advertising, selling, leasing, furnishing or
production of such inventory or otherwise used or consumed in such Grantor's
business, (iii) all goods in which such Grantor has an interest in mass or a
joint or other interest or right of any kind, and (iv) all goods which are
returned to or repossessed by such Grantor and all accessions thereto and
products thereof (collectively the "INVENTORY") and all negotiable and
non-negotiable documents of title (including without limitation warehouse
receipts, dock receipts and bills of lading) issued by any Person covering any
Inventory (any such negotiable document of title being a "NEGOTIABLE DOCUMENT OF
TITLE");
(c) all accounts, contract rights, chattel paper, documents,
instruments, letters of credit; letter-of-credit rights and other rights and
obligations of any kind owned by or owing to such Grantor and all rights in, to
and under all security agreements, leases and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
documents, instruments, letter-of-credit rights or other rights and obligations
(any and all such accounts, contract rights, chattel paper, documents,
instruments, letter-of-credit rights and other rights and obligations being the
"ACCOUNTS", and any and all such security agreements, leases and other contracts
being the "RELATED CONTRACTS");
(d) all deposit accounts, including the restricted deposit
account established and maintained by Secured Party pursuant to Section 12 (the
"COLLATERAL ACCOUNT"), together with (i) all amounts on deposit from time to
time in such deposit accounts and (ii) all interest, cash, instruments,
securities and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
foregoing ("DEPOSIT ACCOUNTS");
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(e) the "SECURITIES COLLATERAL", which term means:
(i) all shares of stock, partnership interests,
interests in joint ventures, limited liability company interests and
all other equity interests in a Person, including all securities
convertible into, and rights, warrants, options and other rights to
purchase or otherwise acquire, any of the foregoing now or hereafter
owned by such Grantor, including those owned on the date hereof and
described on Schedule 1(e)(i), and the certificates or other
instruments representing any of the foregoing and any interest of such
Grantor in the entries on the books of any securities intermediary
pertaining thereto (the "PLEDGED SHARES"), and all dividends,
distributions, returns of capital, cash, warrants, option, rights,
instruments, rights to vote or manage the business of such Person
pursuant to organizational documents governing the rights and
obligations of the stockholders, partners, members or other owners
thereof and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such Pledged Shares; provided, that if the issuer of any
of such Pledged Shares is a controlled foreign corporation (used
hereinafter as such term is defined in Section 957(a) or a successor
provision of the Internal Revenue Code), the Pledged Shares shall not
include any shares of stock of such issuer in excess of the number of
shares of such issuer possessing up to but not exceeding 65% of the
voting power of all classes of capital stock entitled to vote of such
issuer, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such Pledged Shares;
(ii) all indebtedness from time to time owed to such
Grantor by any obligor that is, or becomes, a direct or indirect
Subsidiary of such Grantor, or by any obligor of which Grantor is a
direct or indirect Subsidiary, including the indebtedness described on
Schedule 1(e)(ii) and issued by the obligors named therein, and the
instruments evidencing such indebtedness (the "PLEDGED DEBT"), and all
interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Debt; and
(iii) all other investment property of such Grantor;
(f) the "INTELLECTUAL PROPERTY COLLATERAL", which term means:
(i) all rights, title and interest (including rights
acquired pursuant to a license or otherwise, but only to the extent not
prohibited by any enforceable provision of any agreements governing
such license or other use) in and to all trademarks, service marks,
designs, logos, indicia, tradenames, trade dress, corporate names,
company names, business names, fictitious business names, trade styles
and/or other source and/or business identifiers and applications
pertaining thereto, owned by such Grantor, or hereafter adopted and
used, in its business (including, without limitation, the trademarks
specifically identified in Schedule 1(f)(i), as the same may be amended
pursuant hereto from time to time) (collectively, the "TRADEMARKS"),
all registrations that have been or may hereafter be issued or applied
for thereon in the United States and any state thereof and in foreign
countries (including, without limitation, the registrations and
applications
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specifically identified in Schedule 1(f)(i), as the same may be amended
pursuant hereto from time to time; but excluding any application at the
United States Patent and Trademark Office to the extent an assignment
for security purposes would void the same pursuant to applicable law or
any enforceable contract provision) (the "TRADEMARK REGISTRATIONS"),
all common law and other rights in and to the Trademarks in the United
States and any state thereof and in foreign countries (the "TRADEMARK
RIGHTS"), and all goodwill of such Grantor's business symbolized by the
Trademarks and associated therewith (the "ASSOCIATED GOODWILL"):
(ii) all rights, title and interest (including rights
acquired pursuant to a license or otherwise, but only to the extent not
prohibited by any enforceable provision of any agreements governing
such license or other use) in and to all patents and patent
applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or
in the future may be, owned or held by such Grantor and all patents and
patent applications and rights, title and interests in patents and
patent applications under any domestic or foreign law that are
presently, or in the future may be, owned by such Grantor in whole or
in part (including, without limitation, the patents and patent
applications listed in Schedule 1(f)(ii), as the same may be amended
pursuant hereto from time to time), all rights corresponding thereto
(including, without limitation, the right, exercisable only upon the
occurrence and during the continuation of an Event of Default, to xxx
for past, present and future infringements in the name of such Grantor
or in the name of Secured Party or Lenders), and all re-issues,
divisions, continuations, renewals, extensions and
continuations-in-part thereof (all of the foregoing being collectively
referred to as the "PATENTS"); it being understood that the rights and
interests included in the Intellectual Property Collateral hereby shall
include, without limitation, all rights and interests pursuant to
licensing or other contracts in favor of such Grantor pertaining to
patent applications and patents presently or in the future owned or
used by third parties but, (x) in the case of third parties which are
not Affiliates of such Grantor, only to the extent permitted by such
licensing or other contracts and, if not so permitted, only with the
consent of such third parties, and (y) excluding any application at the
United States Patent and Trademark Office to the extent an assignment
for security purposes would void the same pursuant to applicable law or
any enforceable contract provision; and
(iii) all rights, title and interest (including
rights acquired pursuant to a license or otherwise, but only to the
extent not prohibited by any enforceable provision of any agreements
governing such license or other use) under copyright in various
published and unpublished works of authorship including, without
limitation, computer programs, computer data bases, other computer
software, layouts, trade dress, drawings, designs, writings, and
formulas owned by such Grantor (including, without limitation, the
works listed on Schedule 1(f)(iii), as the same may be amended pursuant
hereto from time to time) (collectively, the "COPYRIGHTS"), all
copyright registrations issued to such Grantor and applications for
copyright registration that have been or may hereafter be issued or
applied for thereon by such Grantor in the United States and any state
thereof and in foreign countries (including, without limitation, the
registrations listed on Schedule 1(f)(iii), as the same may be amended
pursuant hereto from time to time) (collectively, the "COPYRIGHT
REGISTRATIONS"), all common law and other rights in and to the
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Copyrights in the United States and any state thereof and in foreign
countries including all copyright licenses (but with respect to such
copyright licenses, only to the extent permitted by such licensing
arrangements) (the "COPYRIGHT RIGHTS"), including, without limitation,
each of the Copyrights, rights, titles and interests in and to the
Copyrights, all derivative works and other works protectable by
copyright, which are presently, or in the future may be, owned, created
(as a work for hire for the benefit of such Grantor), authored (as a
work for hire for the benefit of such Grantor), or acquired by such
Grantor, in whole or in part, and all Copyright Rights with respect
thereto and all Copyright Registrations therefor, heretofore or
hereafter granted or applied for, and all renewals and extensions
thereof, throughout the world, including all proceeds thereof (such as,
by way of example and not by limitation, license royalties and proceeds
of infringement suits), the right to renew and extend such Copyright
Registrations and Copyright Rights and to register works protectable by
copyright and the right to xxx for past, present and future
infringements of the Copyrights and Copyright Rights;
(g) all information used or useful or arising from the
business including all goodwill, trade secrets, trade secret rights, know-how,
customer lists, processes of production, ideas, confidential business
information, techniques, processes, formulas, and all other proprietary
information;
(h) the agreements listed in Schedule 1(h), as each such
agreement may be amended, restated, supplemented or otherwise modified from time
to time (said agreements, as so amended, restated, supplemented or otherwise
modified, being referred to herein individually as an "ASSIGNED AGREEMENT" and
collectively as the "ASSIGNED AGREEMENTS"), including, without limitation, (i)
all rights of such Grantor to receive moneys due or to become due under or
pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) all claims of such Grantor for damages arising out of
any breach of or default under the Assigned Agreements, and (iv) all rights of
such Grantor to terminate, amend, supplement, modify or exercise rights or
options under the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder; provided, however,
that the term "ASSIGNED AGREEMENT" shall not include any agreement listed in
Schedule 1(h) to the extent that the grant of a security interest in, or in
connection with, any such agreement would result in a breach of an enforceable
term of such agreement prohibiting such grant without the consent of the other
party thereto (if such consent has not been provided);
(i) to the extent not included in any other paragraph of this
Section 1, all general intangibles, including, without limitation, tax refunds,
payment intangibles, other rights to payment or performance, choses in action,
software and judgments taken on any rights or claims included in the
Collateral);
(j) all plant fixtures, business fixtures and other fixtures
and storage and office facilities, and all accessions thereto and products
thereof;
(k) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that at any
time evidence or contain information
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relating to any of the Collateral or are otherwise necessary or helpful in the
collection thereof or realization thereupon; and
(l) all proceeds, products, rents and profits of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary; but
(m) excluding the items specifically described on Schedule
1(m).
Each item of Collateral listed in this Section 1 that is
defined in Articles 8 or 9 of the Uniform Commercial Code, as it exists on the
date of this Agreement or as it may hereafter be amended, in the State of New
York (the "UCC") shall have the meaning set forth in the UCC, it being the
intention of the Grantors that the description of the Collateral set forth above
be construed to include the broadest possible range of assets, except for assets
expressly excluded as set forth above.
SECTION 2. SECURITY FOR OBLIGATIONS.
This Agreement secures, and the Collateral assigned by each
Grantor is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including without limitation the payment of
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code), of all Secured Obligations of such
Grantor. "Secured Obligations" means, with respect to each Grantor, all
obligations and liabilities of every nature of such Grantor now or hereafter
existing under or arising out of or in connection with the Credit Agreement and
the other Credit Documents, together with all extensions or renewals thereof,
whether for principal, interest (including without limitation interest that, but
for the filing of a petition in bankruptcy with respect to any Grantor, would
accrue on such obligations, whether or not a claim is allowed against such
Grantor for such interest in the related bankruptcy proceeding), reimbursement
of amounts drawn under Letters of Credit, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender as
a preference, fraudulent transfer or otherwise, and all obligations of every
nature of such Grantor now or hereafter existing under this Agreement.
SECTION 3. GRANTORS REMAIN LIABLE.
Anything contained herein to the contrary notwithstanding, (a)
each Grantor shall remain liable under any contracts and agreements included in
the Collateral, to the extent set forth therein, to perform all of its duties
and obligations thereunder to the same extent as if this
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Agreement had not been executed, (b) the exercise by Secured Party of any of its
rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any
contracts, licenses, and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Each Grantor represents and warrants as follows with respect
to itself (and not with respect to any other Grantor):
(a) OWNERSHIP OF COLLATERAL. Except as expressly permitted by
the Credit Agreement and for the security interest created by this Agreement,
such Grantor owns the Collateral owned by such Grantor free and clear of any
Lien. Except as expressly permitted by the Credit Agreement and such as may have
been filed in favor of Secured Party relating to this Agreement, no effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any filing or recording office.
(b) DELIVERY OF CERTAIN COLLATERAL. All certificates or
instruments (excluding checks and drafts) evidencing, comprising or representing
the Collateral (including, without limitation, the Securities Collateral) have
been delivered to Secured Party duly endorsed or accompanied by duly executed
instruments of transfer or assignment in blank. Notwithstanding anything to the
contrary in the preceding sentence, (i) the Grantors are not obligated to
deliver to Secured Party negotiable instruments of title unless an Event of
Default has occurred and is continuing and the applicable Agent requests
delivery of such items and (ii) the Grantors are not obligated to deliver to
Secured Party Letters of Credit unless requested by Secured Party. If requested
by Secured Party, each Grantor will cause all Letters of Credit to be delivered
to Secured Party. If Grantors are required to deliver Letters of Credit to
Secured Party, then any Grantor notify the Secured Party from time to time of
its desire to make a draw on a Letter of Credit and its request for return of
the Letter of Credit for such purposes. The Secured Party shall, promptly after
receipt of any such request, return the requested Letter of Credit to the
requesting Grantor. Such Grantor shall within five (5) business days after
receipt of such Letter of Credit either, present such Letter of Credit to the
issuing bank for draw thereon or return the Letter of Credit to Secured Party.
If the Letter of Credit is partially (rather than fully) drawn, the Grantor
shall return the Letter of Credit to the Secured Party within three (3) business
days after submitting the Letter of Credit for such partial draw (or if the
Letter of Credit is retained by the issuing bank, then within three (3) business
days after the Letter of Credit is returned to the Grantor by the issuing bank).
(c) SECURITIES COLLATERAL. (i) All of the Pledged Shares
described on Schedule 1(e)(i) have been duly authorized and validly issued and
are fully paid and non-assessable; (ii) all of the Pledged Debt described on
Schedule 1(e)(ii) has been duly authorized, authenticated or issued, and
delivered and is the legal, valid and binding obligation of the issuers thereof
and is not in default; (iii) except as set forth on Schedule 1(e)(i), the
Pledged Shares constitute all of the issued and outstanding shares of stock or
other equity interests of each issuer
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thereof (subject to the proviso to Section 1(e)(i) with respect to shares of a
foreign controlled corporation), and there are no outstanding warrants, options
or other rights to purchase, or other agreements outstanding with respect to, or
property that is now or hereafter convertible into, or that requires the
issuance or sale of, any Pledged Shares; (iv) the Pledged Debt constitutes all
of the issued and outstanding intercompany indebtedness evidenced by a
promissory note of the respective issuers thereof owing to such Grantor; (v)
Schedule 1(e)(i) sets forth all of the Pledged Shares owned by each Grantor on
the date hereof; and (vi) Schedule 1(e)(ii) sets forth all of the Pledged Debt
in existence on the date hereof.
(d) INTELLECTUAL PROPERTY COLLATERAL.
(i) a true and complete list of all Trademark
Registrations and Trademark applications owned by such Grantor, in
whole or in part, is set forth in Schedule 1(f)(i);
(ii) a true and complete list of all Patents owned by
such Grantor, in whole or in part, is set forth in Schedule 1(f)(ii);
(iii) a true and complete list of all Copyright
Registrations and applications for Copyright Registrations owned by
such Grantor, in whole or in part, is set forth in Schedule 1(f)(iii);
(iv) such Grantor is not aware of any pending or
threatened claim by any third party that any of the Intellectual
Property Collateral owned, held or used by such Grantor is invalid or
unenforceable; and
(v) no effective security interest or other Lien
covering all or any part of the Intellectual Property Collateral is on
file in the United States Patent and Trademark Office or the United
States Copyright Office.
(e) PERFECTION. The security interests in the Collateral
granted to Secured Party for the ratable benefit of the Lenders and Hedge
Lenders hereunder constitute valid security interests in the Collateral,
securing the payment of Secured Obligations as provided in Section 2 hereof.
Upon (i) the filing of UCC financing statements naming each Grantor as "debtor",
naming Secured Party as "secured party" and describing the Collateral in the
filing offices with respect to such Grantor set forth on Schedule 4(i), (ii) in
the case of the Securities Collateral consisting of certificated securities or
evidenced by instruments, delivery of the certificates representing such
certificated securities and delivery of such instruments to Secured Party, in
each case duly endorsed or accompanied by duly executed instruments of
assignment or transfer in blank, (iii) in the case of the Intellectual Property
Collateral, in addition to the filing of such UCC financing statements, the
filing of a Grant of Trademark Security Interest, substantially in the form of
Exhibit I, and a Grant of Patent Security Interest, substantially in the form of
Exhibit II, with the United States Patent and Trademark Office and the filing of
a Grant of Copyright Security Interest, substantially in the form of Exhibit
III, with the United States Copyright Office (each such Grant of Trademark
Security Interest, Grant of Patent Security Interest and Grant of Copyright
Security Interest being referred to herein as a "GRANT"), and (iv) in the case
of Equipment that is covered by a certificate of title, the filing with the
registrar of
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motor vehicles or other appropriate authority in the applicable jurisdiction of
an application requesting the notation of the security interest created
hereunder on such certificate of title, the security interests in the Collateral
granted to Secured Party for the ratable benefit of the Lenders and Hedge
Lenders will constitute perfected security interests therein prior to all other
Liens (except for Permitted Liens), and all filings and other actions necessary
or desirable to perfect and protect such security interest have been duly made
or taken.
SECTION 5. FURTHER ASSURANCES.
(a) GENERALLY. Each Grantor agrees that from time to time, at
the expense of Grantors, such Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Secured Party may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will: (i) at the request of Secured Party, xxxx
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Secured Party, each of its records pertaining to
its Collateral, with a legend, in form and substance reasonably satisfactory to
Secured Party, indicating that such Collateral is subject to the security
interest granted hereby, (ii) at the request of Secured Party, deliver and
pledge to Secured Party hereunder all promissory notes and other instruments
(including checks) and all original counterparts of chattel paper constituting
Collateral, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance reasonably satisfactory to
Secured Party, (iii) (A) execute and file such financing or continuation
statements, or amendments thereto, (B) execute and deliver, and cause to be
executed and delivered, agreements establishing that Secured Party has control
of specified items of Collateral for which possession is the required or
preferable means of perfecting a security interest (as determined by Agent) and
(C) deliver such other instruments or notices, in each case, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby, (iv) furnish
to Secured Party from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as Secured Party may reasonably request, all in reasonable detail,
(v) promptly after the acquisition by such Grantor of any item of Equipment that
is covered by a certificate of title under a statute of any jurisdiction under
the law of which indication of a security interest on such certificate is
required as a condition of perfection thereof, execute and file with the
registrar of motor vehicles or other appropriate authority in such jurisdiction
an application or other document requesting the notation or other indication of
the security interest created hereunder on such certificate of title, (vi)
within 30 days after the end of each calendar quarter, deliver to Secured Party
copies of all such applications or other documents filed during such calendar
quarter and copies of all such certificates of title issued during such calendar
quarter indicating the security interest created hereunder in the items of
Equipment covered thereby, (vii) at any reasonable time (and during normal
business hours so long as no Event of Default has occurred that is continuing),
upon request by Secured Party, exhibit the Collateral to and allow inspection of
the Collateral by Secured Party, or persons designated by Secured Party, (viii)
at Secured Party's request, appear in and defend any action or proceeding that
may adversely affect such Grantor's title to or Secured Party's security
interest in all or any part of the Collateral, and (ix) use commercially
reasonable efforts to obtain any necessary consents of third parties to the
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assignment and perfection of a security interest to Secured Party with respect
to any Collateral. Each Grantor hereby authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of any Grantor. Each
Grantor agrees that a carbon, photographic or other reproduction of this
Agreement or of a financing statement signed by such Grantor shall be sufficient
as a financing statement and may be filed as a financing statement in any and
all jurisdictions. Notwithstanding anything to the contrary in the foregoing, so
long as no Event of Default has occurred and is continuing, Grantors are not
obligated to make filings, and Secured Party will not make filings with respect
to Intellectual Property rights established in jurisdictions other than the U.S.
(except filings in Canada with respect to Intellectual Property owned by Grant
Prideco, Inc. and Grant Prideco, L.P. or filings with respect to Canadian
Borrowers pursuant to the Canadian Security Agreements).
(b) SECURITIES COLLATERAL. Without limiting the generality of
the foregoing Section 5(a), each Grantor agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder,
promptly (and in any event within five Business Days) deliver to Secured Party a
Pledge Supplement, duly executed by such Grantor, in substantially the form of
Exhibit IV (a "PLEDGE SUPPLEMENT"), in respect of the additional Pledged Shares
or Pledged Debt to be pledged pursuant to this Agreement. Upon each delivery of
a Pledge Supplement to Secured Party, the representations and warranties
contained in clauses (i)-(iv) of Section 4(g) hereof shall be deemed to have
been made by such Grantor as to the Securities Collateral described in such
Pledge Supplement as of the date thereof. Each Grantor hereby authorizes Secured
Party to attach each Pledge Supplement to this Agreement and agrees that all
Pledged Shares or Pledged Debt of such Grantor listed on any Pledge Supplement
shall for all purposes hereunder be considered Collateral of such Grantor;
provided, the failure of any Grantor to execute a Pledge Supplement with respect
to any additional Pledged Shares or Pledged Debt pledged pursuant to this
Agreement shall not impair the security interest of Secured Party therein or
otherwise adversely affect the rights and remedies of Secured Party hereunder
with respect thereto.
(c) INTELLECTUAL PROPERTY COLLATERAL. Without limiting the
generality of the foregoing Section 5(a), if any Grantor shall hereafter obtain
rights to any new Intellectual Property Collateral or become entitled to the
benefit of (i) any patent application or patent or any reissue, division,
continuation, renewal, extension or continuation-in-part of any Patent or any
improvement of any Patent or (ii) any Copyright Registration, application for
Copyright Registration or renewals or extension of any Copyright, then in any
such case, the provisions of this Agreement shall automatically apply thereto.
Each Grantor shall notify Secured Party in writing, on the quarterly basis
prescribed in Section 7.1(b) of the Credit Agreement, of any of the foregoing
rights acquired by such Grantor after the date hereof and of (i) any Trademark
Registrations issued or application for a Trademark Registration or application
for a Patent made, and (ii) any Copyright Registrations issued or applications
for Copyright Registration made, in any such case, after the date hereof.
Promptly within thirty (30) days after the filing of an application for any (1)
Trademark Registration; (2) Patent; and (3) Copyright Registration, each Grantor
shall execute and deliver to Secured Party and record in all places where a
Grant is recorded an IP Supplement, substantially in the form of Exhibit V (an
"IP SUPPLEMENT"), pursuant to which such Grantor shall grant to Secured Party a
security interest to the extent of its interest in such Intellectual Property
Collateral; provided, if, in the reasonable judgment of such
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Grantor, after due inquiry, granting such interest would result in the grant of
a Trademark Registration or Copyright Registration in the name of Secured Party,
such Grantor shall give written notice to Secured Party as soon as reasonably
practicable and the filing shall instead be undertaken as soon as practicable
but in no case later than immediately following the grant of the applicable
Trademark Registration or Copyright Registration, as the case may be. Upon
delivery to Secured Party of an IP Supplement, Schedules 1(f)(i), 1(f)(ii), and
1(f)(iii) hereto and Schedule A to each Grant, as applicable, shall be deemed
modified to include reference to any right, title or interest in any existing
Intellectual Property Collateral or any Intellectual Property Collateral
included on Schedule A to such IP Supplement. Each Grantor hereby authorizes
Secured Party to modify this Agreement without the signature or consent of such
Grantor by attaching Schedules 1(f)(i), 1(f)(ii), and 1(f)(iii), as applicable,
that have been modified to include such Intellectual Property Collateral or to
delete any reference to any right, title or interest in any Intellectual
Property Collateral in which such Grantor no longer has or claims any right,
title or interest; provided, the failure of such Grantor to execute an IP
Supplement with respect to any additional Intellectual Property Collateral
pledged pursuant to this Agreement shall not impair the security interest of
Secured Party therein or otherwise adversely affect the rights and remedies of
Secured Party hereunder with respect thereto.
SECTION 6. CERTAIN COVENANTS OF GRANTORS.
Each Grantor shall:
(a) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(b) if Secured Party gives value to enable such Grantor to
acquire rights in or the use of any Collateral, use such value for such
purposes; and
(c) except as expressly permitted by the Credit Agreement, pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
services, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith; provided that such
Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against such Grantor or
any of the Collateral as a result of the failure to make such payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND
INVENTORY.
Each Grantor shall:
(a) keep correct and accurate records of Inventory owned by
such Grantor, itemizing and describing the kind, type and quantity of such
Inventory, such Grantor's cost therefor and (where applicable) the current list
prices for such Inventory;
(b) if any Inventory is in possession or control of any of
such Grantor's agents or processors, upon the occurrence and continuation of an
Event of Default (as defined in Section
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16(a)), instruct such agent or processor to hold all such Inventory for the
account of Secured Party and subject to the instructions of Secured Party;
(c) maintain insurance with respect to the Equipment and
Inventory in accordance with the terms of the Credit Agreement; and
(d) upon (i) the occurrence and during the continuation of any
Event of Default or (ii) the actual or constructive loss of any Equipment or
Inventory, insurance payments in respect of such Equipment or Inventory shall be
paid to and applied by Secured Party to the extent required by, and as specified
in, the Credit Agreement.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND
RELATED CONTRACTS.
(a) Each Grantor shall, for not less than three (3) years from
the date on which each Account of such Grantor arose, maintain (i) complete
records of such Account, including records of all payments received, credits
granted and merchandise returned consistent with good business practice, and
(ii) all documentation relating thereto.
(b) Except as otherwise provided in this subsection (b), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor under the Accounts and Related Contracts. In
connection with such collections, each Grantor may take (and, upon the
occurrence and during the continuance of an Event of Default at Secured Party's
direction, shall take) such action as such Grantor or Secured Party may deem
necessary or advisable to enforce collection of amounts due or to become due
under the Accounts; provided, however, that Secured Party shall have the right
at any time, upon the occurrence and during the continuation of an Event of
Default or a Potential Event of Default and upon written notice to such Grantor
of its intention to do so, to notify the account debtors or obligors under any
Accounts of the assignment of such Accounts to Secured Party and to direct such
account debtors or obligors to make payment of all amounts due or to become due
to such Grantor thereunder directly to Secured Party, to notify each Person
maintaining a lockbox or similar arrangement to which account debtors or
obligors under any Accounts have been directed to make payment to remit all
amounts representing collections on checks and other payment items from time to
time sent to or deposited in such lockbox or other arrangement directly to
Secured Party and, upon such notification and at the expense of such Grantor, to
enforce collection of any such Accounts and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done. After receipt by such Grantor of the notice from
Secured Party referred to in the proviso to the preceding sentence and during
the continuation of an Event of Default, (i) all amounts and proceeds (including
checks and other instruments) received by such Grantor in respect of the
Accounts and the Related Contracts shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of such Grantor
and shall be forthwith paid over or delivered to Secured Party in the same form
as so received (with any necessary endorsement) to be held as cash Collateral
and applied as provided by Section 18, and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.
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SECTION 9. SPECIAL COVENANTS WITH RESPECT TO THE SECURITIES
COLLATERAL.
(a) DELIVERY. Each Grantor agrees that all certificates or
instruments representing or evidencing its Securities Collateral shall be
delivered to and held by or on behalf of Secured Party pursuant hereto and shall
be in suitable form for transfer by delivery or, as applicable, shall be
accompanied by such Grantor's endorsement, where necessary, or duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party in its Permitted Discretion.
(b) COVENANTS. Each Grantor shall (i) not, except as expressly
permitted by the Credit Agreement, permit any issuer of Pledged Shares that is a
Subsidiary to merge or consolidate unless all the outstanding capital stock or
other equity interests of the surviving or resulting Person owned by such
Grantor is, upon such merger or consolidation, pledged hereunder and no cash,
securities or other property is distributed in respect of the outstanding shares
of any other constituent corporation; provided, if the surviving or resulting
Person upon any such merger or consolidation involving an issuer of Pledged
Shares which is a controlled foreign corporation is a controlled foreign
corporation, then such Grantor shall only be required to pledge outstanding
capital stock of such surviving or resulting Person possessing up to but not
exceeding 65% of the voting power of all classes of capital stock of such issuer
entitled to vote; (ii) cause each issuer of Pledged Shares that is a Subsidiary
not to issue any stock, other equity interests or other securities in addition
to or in substitution for the Pledged Shares issued by such issuer, except in
connection with any transaction permitted under the Credit Agreement (or except
to such Grantor or any other Grantor); (iii) pledge hereunder, upon its
acquisition (directly or indirectly) thereof, in accordance with the Credit
Agreement, any and all additional shares of stock, other equity interests or
other securities of each issuer of Pledged Shares in accordance with the Credit
Agreement; (iv) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock or other equity interests of
any Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of such Grantor; provided, notwithstanding
anything contained in this clause (iv) or the above clause (iii) to the
contrary, such Grantor shall only be required to pledge the outstanding capital
stock of a controlled foreign corporation possessing up to but not exceeding 65%
of the voting power of all classes of capital stock of such controlled foreign
corporation entitled to vote; (v) pledge hereunder, upon their issuance, in
accordance with the Credit Agreement, any and all instruments or other evidences
of additional indebtedness from time to time owed to such Grantor by any obligor
on the Pledged Debt; (vi) pledge hereunder, upon their issuance, in accordance
with the Credit Agreement, any and all instruments or other evidences of
indebtedness from time to time owed to such Grantor by any Person that after the
date of this Agreement becomes, as a result of any occurrence, a direct or
indirect Subsidiary of such Grantor; (vii) promptly deliver to Secured Party all
written notices received by it with respect to the Securities Collateral; and
(viii), at the request of Secured Party, promptly execute and deliver to Secured
Party an agreement providing for the control, as that term is defined in the
UCC, by Secured Party of all securities entitlements and securities accounts of
such Grantor.
(c) VOTING AND DISTRIBUTIONS. So long as no Event of Default
shall have occurred and be continuing, (i) each Grantor shall be entitled to
exercise any and all management, voting and other consensual rights (and all
other rights, powers, privileges and remedies) pertaining to its Securities
Collateral or any part thereof for any purpose not
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inconsistent with the terms of this Agreement or the Credit Agreement; provided,
no Grantor shall exercise or refrain from exercising any such right if Secured
Party shall have notified such Grantor that, in Secured Party's reasonable
judgment, such action would have a material adverse effect on the value of the
Securities Collateral or any part thereof; (ii) each Grantor shall be entitled
to receive and retain, and to utilize any and all dividends, other distributions
and interest paid in respect of the Securities Collateral to the extent
permitted by the Credit Agreement; and (iii) Secured Party shall promptly
execute and deliver (or cause to be executed and delivered) to such Grantor all
such proxies, dividend payment orders and other instruments as such Grantor may
from time to time reasonably request for the purpose of enabling such Grantor to
exercise the voting and other rights which it is entitled to exercise pursuant
to clause (i) above and to receive the dividends, distributions, principal or
interest payments which it is authorized to receive and retain pursuant to
clause (ii) above.
Upon the occurrence and during the continuation of an Event of
Default, (x) upon written notice from Secured Party to any Grantor, all rights
of such Grantor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant hereto shall cease, and all
such rights shall thereupon become vested in Secured Party who shall thereupon
have the sole right to exercise such voting and other consensual rights; (y) all
rights of such Grantor to receive the dividends, other distributions and
interest payments which it would otherwise be authorized to receive and retain
pursuant hereto shall cease, and all such rights shall thereupon become vested
in Secured Party who shall thereupon have the sole right to receive and hold as
Securities Collateral such dividends, other distributions and interest payments;
and (z) all dividends, principal, interest payments and other distributions
which are received by such Grantor contrary to the provisions of clause (ii) of
the immediately preceding paragraph or clause (y) above shall be received in
trust for the benefit of Secured Party, shall be segregated from other funds of
such Grantor and shall forthwith be paid over to Secured Party as Securities
Collateral in the same form as so received (with any necessary endorsements).
In order to permit Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant hereto and
to receive all dividends and other distributions which it may be entitled to
receive hereunder, (I) each Grantor shall promptly execute and deliver (or cause
to be executed and delivered) to Secured Party all such proxies, dividend
payment orders and other instruments as Secured Party may from time to time
reasonably request for the purpose of enabling Secured Party to exercise its
voting and other consensual rights hereunder upon the occurrence and during the
continuation of an Event of Default, and (II) without limiting the effect of
clause (I) above, each Grantor hereby grants to Secured Party an irrevocable
proxy to vote its Pledged Shares and to exercise all other rights, powers,
privileges and remedies to which a holder of such Pledged Shares would be
entitled (including giving or withholding written consents of shareholders or
other holders of equity interests, calling special meetings of shareholders or
other holders of equity interests and voting at such meetings), which proxy
shall be effective, automatically and without the necessity of any action
(including any transfer of any Pledged Shares on the record books of the issuer
thereof) by any other Person (including the issuer of the Pledged Shares or any
officer or agent thereof), upon the occurrence and during the continuation of an
Event of Default and which proxy shall only terminate upon the earlier of (i)
payment in full of the Secured Obligations, or (ii) the discontinuance of such
Event of Default, or the delivery by U.S. Agent of a waiver thereof in
accordance with Section 11.10 of the Credit Agreement.
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SECTION 10. SPECIAL COVENANTS WITH RESPECT TO THE INTELLECTUAL
PROPERTY COLLATERAL.
(a) Each Grantor shall:
(i) diligently keep reasonable records respecting the
Intellectual Property Collateral and at all times keep at least one
complete set of its records concerning such Collateral at its chief
executive office or principal place of business;
(ii) take any and all reasonable steps to protect the
secrecy of all trade secrets relating to the products and services sold
or delivered under or in connection with the Intellectual Property
Collateral, including, without limitation, where appropriate entering
into confidentiality agreements with employees and labeling and
restricting access to secret information and documents;
(iii) use proper statutory notice in connection with
its use of any of the Intellectual Property Collateral;
(iv) use a commercially appropriate standard of
quality (which may be consistent with such Grantor's past practices) in
the manufacture, sale and delivery of products and services sold or
delivered under or in connection with the Trademarks; and
(v) furnish to Secured Party from time to time at
Secured Party's reasonable request statements and schedules further
identifying and describing any Intellectual Property Collateral and
such other reports in connection with such Collateral, all in
reasonable detail.
(b) Except as otherwise provided in this Section 10, each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor in respect of the Intellectual Property Collateral or
any portion thereof. In connection with such collections, each Grantor may take
(and, after the occurrence and during the continuance of any Event of Default at
Secured Party's reasonable direction, shall take) such action as such Grantor or
Secured Party may deem reasonably necessary or advisable to enforce collection
of such amounts; provided, Secured Party shall have the right at any time, upon
the occurrence and during the continuation of an Event of Default and upon
written notice to such Grantor of its intention to do so, to notify the obligors
with respect to any such amounts of the existence of the security interest
created hereby and to direct such obligors to make payment of all such amounts
directly to Secured Party, and, upon such notification and at the expense of
such Grantor, to enforce collection of any such amounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by any Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence
and during the continuation of any Event of Default, (i) all amounts and
proceeds (including checks and other instruments) received by each Grantor in
respect of amounts due to such Grantor in respect of its Intellectual Property
Collateral or any portion thereof shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of such Grantor
and shall be forthwith paid over or delivered to Secured Party in the same form
as so received (with any necessary endorsement) to be held as cash Collateral
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and applied as provided by Section 18, and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any such amount or release wholly
or partly any obligor with respect thereto or allow any credit or discount
thereon.
(c) Each Grantor shall have the duty diligently to prosecute,
file and/or make, unless and until such Grantor, in its commercially reasonable
judgment, decides otherwise, (i) any application relating to any of the
Intellectual Property Collateral owned, held or used by such Grantor and
identified on Schedules 1(f)(i), 1(f)(ii) or 1(f)(iii), as applicable, that is
pending as of the date of this Agreement, (ii) any Copyright Registration on any
existing or future unregistered but copyrightable works (except for works of
nominal commercial value or with respect to which such Grantor has determined in
the exercise of its commercially reasonable judgment that it shall not seek
registration), (iii) application on any future patentable but unpatented
innovation or invention comprising Intellectual Property Collateral, and (iv)
any Trademark opposition and cancellation proceedings, renew Trademark
Registrations and Copyright Registrations and do any and all acts which are
necessary or desirable to preserve and maintain all rights in its Intellectual
Property Collateral. Any expenses incurred in connection therewith shall be
borne solely by Grantors. Subject to the foregoing, each Grantor shall give
Secured Party prior written notice of any abandonment of any Intellectual
Property Collateral or any pending patent application or any Patent.
(d) Except as provided herein, each Grantor shall have the
right to commence and prosecute in its own name, as real party in interest, for
its own benefit and at its own expense, such suits, proceedings or other actions
for infringement, unfair competition, dilution, misappropriation or other
damage, or reexamination or reissue proceedings as are necessary to protect the
Intellectual Property Collateral. Secured Party shall provide, at such Grantor's
expense, all reasonable and necessary cooperation in connection with any such
suit, proceeding or action including, without limitation, joining as a necessary
party. Each Grantor shall promptly, following its becoming aware thereof, notify
Secured Party of the institution of, or of any adverse determination in, any
proceeding (whether in the United States Patent and Trademark Office, the United
States Copyright Office or any federal, state, local or foreign court) or
regarding such Grantor's ownership, right to use, or interest in any
Intellectual Property Collateral material to the conduct of such Grantor's
business. Each Grantor shall provide to Secured Party any information with
respect thereto reasonably requested by Secured Party.
(e) In addition to, and not by way of limitation of, the
granting of a security interest in the Collateral pursuant hereto, each Grantor,
effective upon the occurrence and during the continuation of an Event of
Default, hereby assigns, transfers and conveys to Secured Party the nonexclusive
right and license to use all trademarks, tradenames, copyrights, patents or
technical processes (including, without limitation, the Intellectual Property
Collateral) owned or used by such Grantor that relate to the Collateral and any
other collateral granted by such Grantor as security for the Secured
Obligations, together with any goodwill associated therewith, all to the extent
necessary to enable Secured Party to realize on the Collateral in accordance
with this Agreement and to enable any transferee or assignee of the Collateral
to enjoy the benefits of the Collateral. This right shall inure to the benefit
of all successors, assigns and transferees of Secured Party and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license shall be granted free of charge, without requirement that
any monetary
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payment whatsoever be made to such Grantor. In addition, each Grantor hereby
grants to Secured Party and its employees, representatives and agents the right
to visit such Grantor's and any of its Affiliate's or subcontractor's plants,
facilities and other places of business that are utilized in connection with the
manufacture, production, inspection, storage or sale of products and services
sold or delivered under any of the Intellectual Property Collateral (or which
were so utilized during the prior six month period), and to inspect the quality
control and all other records relating thereto upon reasonable advance written
notice to such Grantor and during normal business hours at reasonable dates and
times and as often as may be reasonably requested. Any Grantor may license its
Intellectual Property Collateral to any Person as it may deem necessary to the
successful conduct of its business. Nothing contained herein shall prohibit or
limit the licensing of Intellectual Property to any Person as a Grantor may deem
necessary to the successful conduct of its business. If and to the extent that
any Grantor licenses the Intellectual Property Collateral, Secured Party shall
promptly enter into a non-disturbance agreement or other similar arrangement, at
such Grantor's request and expense, with such Grantor and any licensee of any
Intellectual Property Collateral permitted hereunder in form and substance
reasonably satisfactory to Secured Party pursuant to which (i) Secured Party
shall agree not to disturb or interfere with such licensee's rights under its
license agreement with such Grantor so long as such licensee is not in default
thereunder, and (ii) such licensee shall acknowledge and agree that the
Intellectual Property Collateral licensed to it is subject to the security
interest created in favor of Secured Party and the other terms of this Agreement
subject to clause (i).
(f) Notwithstanding anything in the foregoing, Grantors will
not be subject to clauses (a)(i) through (a)(iv), (b), and (c) of this Section
10 with respect to Intellectual Property Collateral that is obsolete.
SECTION 11. INTENTIONALLY OMITTED
SECTION 12. COLLATERAL ACCOUNT.
Secured Party is hereby authorized to establish and maintain
at its office at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as a blocked
account in the name of each Borrower and under the sole dominion and control of
Secured Party, a restricted deposit account designated as "Grant Prideco
Collateral Account". All amounts at any time held in the Collateral Account
shall be beneficially owned by such Grantor but shall be held in the name of
Secured Party hereunder, for the benefit of Lenders, as collateral security for
the Secured Obligations upon the terms and conditions set forth herein. Grantors
shall have no right to withdraw, transfer or, except as expressly set forth
herein, otherwise receive any funds deposited into the Collateral Account.
Anything contained herein to the contrary notwithstanding, the Collateral
Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or Governmental Authority, as may now or hereafter be
in effect. All deposits of funds in the Collateral Account shall be made by wire
transfer (or, if applicable, by intra-bank transfer from another account of a
Grantor) of immediately available funds, in each case addressed in accordance
with instructions of Secured Party. Each Grantor shall, promptly after
initiating a transfer of funds to the Collateral Account, give notice to Secured
Party by telefacsimile of the date, amount and method of delivery of such
deposit. Cash held by Secured Party in the Collateral Account shall not be
invested by Secured Party but instead shall be maintained as a cash deposit in
the Collateral
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Account pending application thereof as elsewhere provided in this Agreement. To
the extent permitted under Regulation Q of the Board of Governors of the Federal
Reserve System, any cash held in the Collateral Account shall bear interest at
the standard rate paid by Secured Party to its customers for deposits of like
amounts and terms. Subject to Secured Party's rights hereunder, any interest
earned on deposits of cash in the Collateral Account shall be deposited directly
in, and held in the Collateral Account.
SECTION 13. SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
Each Grantor hereby irrevocably appoints Secured Party as such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, Secured Party or otherwise, from time
to time in Secured Party's discretion.
(a) upon the occurrence and during the continuance of an Event
of Default, to obtain and adjust insurance required to be maintained by such
Grantor or paid to Secured Party pursuant to Section 7;
(b) upon the occurrence and during the continuance of an Event
of Default, to ask for, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event
of Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) upon the occurrence and during the continuance of an Event
of Default, to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of Secured Party with respect
to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of such Grantor to Secured Party, due and payable immediately without demand;
(f) upon the occurrence and during the continuance of an Event
of Default, to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuance of an Event
of Default, generally to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and Grantors' expense, at any time or from time to
time, all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
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SECTION 14. SECURED PARTY MAY PERFORM.
If any Grantor fails to perform any agreement contained
herein, Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by Grantors under Section 19(b).
SECTION 15. STANDARD OF CARE.
The powers conferred on Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property.
SECTION 16. REMEDIES.
(a) GENERALLY. If any Event of Default shall have occurred and
be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the UCC (whether or not the UCC applies to the affected Collateral), and also
may (i) require each Grantor to, and each Grantor hereby agrees that it will at
its expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it available to Secured
Party at a place to be designated by Secured Party that is reasonably convenient
to both parties, (ii) enter onto the property where any Collateral is located
and take possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (iv) take possession of any
Grantor's premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of such Grantor's equipment for the
purpose of completing any work in process, taking any actions described in the
preceding clause (iii) and collecting any Secured Obligation, (v) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, (vi) exercise dominion and control over and refuse to
permit further withdrawals from any Deposit Account maintained with Secured
Party or any Lender and provide instructions directing the disposition of funds
in Deposit Accounts not maintained with Secured Party or any Lender and (vii)
provide entitlement orders with respect to security entitlements and other
investment property constituting a part of the Collateral and, without notice to
any Grantor, transfer to or register in the name of Secured Party or any of its
nominees any or all of the Securities Collateral. Secured Party or any Lender
may be the purchaser of any or all of the Collateral at any such sale and
Secured Party, as agent for and representative of Lenders (but not any Lender in
its individual capacity unless Majority Lenders shall otherwise agree in
writing), shall be entitled, for the purpose of bidding and making settlement or
payment
-19-
of the purchase price for all or any portion of the Collateral sold at any such
public sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Collateral payable by Secured Party at
such sale. Each 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 applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Each Grantor agrees that, to the extent notice of sale shall be required by law,
at least ten days' notice to such Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Each Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantors shall be jointly
and severally liable for the deficiency and the fees of any attorneys employed
by Secured Party to collect such deficiency. Each Grantor further agrees that a
breach of any of the covenants contained in this Section will cause irreparable
injury to Secured Party, that Secured Party has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section shall be specifically enforceable against such
Grantor, and each Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no default has occurred giving rise to the Secured Obligations
becoming due and payable prior to their stated maturities.
(b) SECURITIES COLLATERAL.
(i) Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act of 1933, as
amended (the "SECURITIES ACT") and applicable state or foreign
securities laws, Secured Party may be compelled, with respect to any
sale of all or any part of the Securities Collateral not registered or
qualified under the Securities Act and/or such state or foreign
securities laws, to limit purchasers to those who will agree, among
other things, to acquire such Securities Collateral for their own
account, for investment and not with a view to the distribution or
resale thereof. Each Grantor acknowledges that any such private sales
may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions (including a public
offering made pursuant to a registration statement under the Securities
Act) and, notwithstanding such circumstances and the registration
rights granted to Secured Party by such Grantor pursuant hereto and
notwithstanding the provisions of Section 9610 of the UCC, which each
Grantor hereby waives, each Grantor agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner,
and that Secured Party shall have no obligation to engage in public
sales and no obligation to delay the sale of any Securities Collateral
for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state or foreign securities laws,
even if such issuer
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would, or should, agree to so register it. If Secured Party determines
to exercise its right to sell any or all of the Securities Collateral,
upon written request, each Grantor shall and shall cause each issuer of
any Pledged Shares to be sold hereunder from time to time to furnish to
Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included
in the Securities Collateral which may be sold by Secured Party in
exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as
the same are from time to time in effect.
(ii) If Secured Party shall determine to exercise its
right to sell all or any of the Securities Collateral pursuant to this
Section, each Grantor agrees that, upon request of Secured Party (which
request may be made by Secured Party in its sole discretion), such
Grantor will, at its own expense (A) execute and deliver, and cause
each issuer of the Securities Collateral contemplated to be sold and
the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the reasonable opinion of
Secured Party, advisable to register such Securities Collateral under
the provisions of the Securities Act and to cause the registration
statement relating thereto to become effective and to remain effective
for such period as prospectuses are required by law to be furnished,
and to make all amendments and supplements thereto and to the related
prospectus which, in the opinion of Secured Party, are necessary or
advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto; (B) use its best efforts to qualify the
Securities Collateral under all applicable state securities or "Blue
Sky" laws and to obtain all necessary governmental approvals for the
sale of the Securities Collateral, as requested by Secured Party; (C)
cause each such issuer to make available to its security holders, as
soon as practicable, an earnings statement which will satisfy the
provisions of Section 11(a) of the Securities Act; (D) do or cause to
be done all such other acts and things as may be necessary to make such
sale of the Securities Collateral or any part thereof valid and binding
and in compliance with applicable law; and (E) bear all costs and
expenses, including reasonable attorneys' fees, of carrying out its
obligations under this Section.
(iii) Without limiting the generality of Sections
10.6 and 11.8 of the Credit Agreement, in the event of any public sale
described herein, each Grantor agrees to indemnify and hold harmless
Secured Party, and each Lender and each Hedge Lender and each of their
respective directors, officers, employees and agents from and against
any loss, fee, cost, expense, damage, liability or claim, joint or
several, to which any such Persons may become subject or for which any
of them may be liable, under the Securities Act or otherwise, insofar
as such losses, fees, costs, expenses, damages, liabilities or claims
(or any litigation commenced or threatened in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus,
registration statement, prospectus or other such document published or
filed in connection with such public sale, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse Secured Party and such other Persons for any legal or
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other expenses reasonably incurred by Secured Party and such other
Persons in connection with any litigation, of any nature whatsoever,
commenced or threatened in respect thereof (including any and all fees,
costs and expenses whatsoever reasonably incurred by Secured Party and
such other Persons and counsel for Secured Party and such other Persons
in investigating, preparing for, defending against or providing
evidence, producing documents or taking any other action in respect of,
any such commenced or threatened litigation or any claims asserted).
This indemnity shall be in addition to any liability which any Grantor
may otherwise have and shall extend upon the same terms and conditions
to each Person, if any, that controls Secured Party or such Persons
within the meaning of the Securities Act.
(c) COLLATERAL ACCOUNT. If an Event of Default has occurred
and is continuing and, in accordance with Article 9 of the Credit Agreement, the
Grantors are required to pay to Secured Party an amount (the "AGGREGATE
AVAILABLE AMOUNT") equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding under the Credit Agreement, the US
Funds Administrator shall deliver funds in such an amount for deposit in the
Collateral Account. If for any reason the aggregate amount delivered by the
Funds Administrators for deposit in the Collateral Account as aforesaid is less
than the Aggregate Available Amount, the aggregate amount so delivered by the
Funds Administrators shall be apportioned among all outstanding Letters of
Credit for purposes of this Section in accordance with the ratio of the maximum
amount available for drawing under each such Letter of Credit (as to such Letter
of Credit, the "MAXIMUM AVAILABLE AMOUNT") to the Aggregate Available Amount.
Upon any drawing under any outstanding Letter of Credit in respect of which the
Funds Administrators have deposited in the Collateral Account any amounts
described above, Secured Party shall apply such amounts to reimburse the Issuing
Lender for the amount of such drawing. In the event of cancellation or
expiration of any Letter of Credit in respect of which the Funds Administrators
have deposited in the Collateral Account any amounts described above, or in the
event of any reduction in the Maximum Available Amount under such Letter of
Credit, Secured Party shall apply the amount then on deposit in the Collateral
Account in respect of such Letter of Credit (less, in the case of such a
reduction, the Maximum Available Amount under such Letter of Credit immediately
after such reduction) first, to the payment of any amounts payable to Secured
Party pursuant to Section 18 hereof, second, to the extent of any excess, to the
cash collateralization pursuant to the terms of this Agreement of any
outstanding Letters of Credit in respect of which the Funds Administrators have
failed to pay all or a portion of the amounts described above (such cash
collateralization to be apportioned among all such Letters of Credit in the
manner described above), third, to the extent of any further excess, to the
payment of any other outstanding Secured Obligations in such order as Secured
Party shall elect, and fourth, to the extent of any further excess, to the
payment to whomsoever shall be lawfully entitled to receive such funds.
SECTION 17. ADDITIONAL REMEDIES FOR INTELLECTUAL PROPERTY
COLLATERAL.
(a) Anything contained herein to the contrary notwithstanding,
upon the occurrence and during the continuation of an Event of Default, (i)
Secured Party shall have the right (but not the obligation) to bring suit, in
the name of any Grantor, Secured Party or otherwise, to enforce any Intellectual
Property Collateral, in which event each Grantor shall, at the request of
Secured Party, do any and all lawful acts and execute any and all documents
-22-
required by Secured Party in aid of such enforcement and each Grantor shall
promptly, upon demand, reimburse and indemnify Secured Party as provided in
Sections 10.6 and 11.8 of the Credit Agreement and Section 19 hereof, as
applicable, in connection with the exercise of its rights under this Section,
and, to the extent that Secured Party shall elect not to bring suit to enforce
any Intellectual Property Collateral as provided in this Section, each Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of its Intellectual Property
Collateral by others and for that purpose agrees to use its commercially
reasonable judgment in maintaining any action, suit or proceeding against any
Person so infringing reasonably necessary to prevent such infringement; (ii)
upon written demand from Secured Party, each Grantor shall execute and deliver
to Secured Party an assignment or assignments of its Intellectual Property
Collateral and such other documents as are necessary or appropriate to carry out
the intent and purposes of this Agreement; (iii) each Grantor agrees that such
an assignment and/or recording shall be applied to reduce its Secured
Obligations outstanding only to the extent that Secured Party (or any Lender)
receives cash proceeds in respect of the sale of, or other realization upon, its
Intellectual Property Collateral; and (iv) within five Business Days after
written notice from Secured Party, each Grantor shall make available to Secured
Party, to the extent within such Grantor's power and authority, such personnel
in such Grantor's employ on the date of such Event of Default as Secured Party
may reasonably designate, by name, title or job responsibility, to permit such
Grantor to continue, directly or indirectly, to produce, advertise and sell the
products and services sold or delivered by such Grantor under or in connection
with the Trademarks, Trademark Registrations and Trademark Rights, such persons
to be available to perform their prior functions on Secured Party's behalf and
to be compensated by Secured Party at such Grantor's expense on a per diem,
pro-rata basis consistent with the salary and benefit structure applicable to
each as of the date of such Event of Default.
(b) If (i) an Event of Default shall have occurred and, by
reason of cure, waiver, modification, amendment or otherwise, no longer be
continuing, (ii) no other Event of Default shall have occurred and be
continuing, (iii) an assignment to Secured Party of any rights, title and
interests in and to the Intellectual Property Collateral shall have been
previously made, and (iv) the Secured Obligations shall not have become
immediately due and payable, upon the written request of any Grantor, Secured
Party shall promptly execute and deliver to such Grantor such assignments as may
be necessary to reassign to such Grantor any such rights, title and interests as
may have been assigned to Secured Party as aforesaid, subject to any disposition
thereof that may have been made by Secured Party; provided, after giving effect
to such reassignment, Secured Party's security interest granted pursuant hereto,
as well as all other rights and remedies of Secured Party granted hereunder,
shall continue to be in full force and effect; and provided further, the rights,
title and interests so reassigned shall be free and clear of all Liens other
than Liens (if any) encumbering such rights, title and interest at the time of
their assignment to Secured Party and Permitted Liens.
SECTION 18. APPLICATION OF PROCEEDS.
Except as expressly provided elsewhere in this Agreement, all
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral shall be applied as
provided in the Credit Agreement.
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SECTION 19. INDEMNITY AND EXPENSES.
(a) Grantors jointly and severally agree to indemnify Secured
Party and each Lender from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including without limitation
enforcement of this Agreement), except to the extent such claims, losses or
liabilities result solely from Secured Party's or such Lender's gross negligence
or willful misconduct as finally determined by a court of competent
jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured
Party upon demand the amount of any and all reasonable costs and expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, that Secured Party may incur in connection with (i) the administration
of this Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of Secured Party
hereunder, or (iv) the failure by any Grantor to perform or observe any of the
provisions hereof.
(c) The obligations of Grantors in this Section 19 shall (i)
survive the termination of this Agreement and the discharge of Grantors' other
obligations under this Agreement, the Credit Agreement and the other Credit
Documents and (ii), as to any Grantor that is a party to a Subsidiary Guaranty,
be subject to the provisions of Section 1(b) thereof.
SECTION 20. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS;
TERMINATION AND RELEASE.
(a) This Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force and effect until the
payment in full of the Secured Obligations, the cancellation or termination of
the Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (ii) be binding upon Grantors and their respective successors and
assigns, and (iii) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), but
subject to the provisions of Section 11.6 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise.
(b) Upon the payment in full of all Secured Obligations, the
cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
applicable Grantors. Upon any such termination Secured Party will, at Grantors'
expense, (a) return to Grantors such of the Collateral in Secured Party's
possession as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (ii) execute and deliver to Grantors such
documents as Grantors shall reasonably request to evidence such termination. In
addition, upon the proposed sale or other disposition of any Collateral by a
Grantor in accordance with the Credit Agreement for which such Grantor desires
to obtain a security interest release from Secured Party, a security interest
release may be obtained pursuant to the provisions of Section 10.10 of the
Credit Agreement.
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SECTION 21. SECURED PARTY AS AGENT.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 16 in accordance with the instructions of Requisite Lenders.
(b) Secured Parties shall at all times be the same Persons
that are Agents under the Credit Agreement. Written notice of resignation by an
Agent or removal of an Agent pursuant to Section 10.9 of the Credit Agreement
shall also constitute notice of resignation or removal as Secured Party under
this Agreement; and appointment of a successor Agent pursuant to Section 10.9 of
the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as an Agent
under Section 10.9 of the Credit Agreement by a successor Agent, that successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under this
Agreement, and the retiring or removed Secured Party under this Agreement shall
promptly (i) transfer to such successor Secured Party all sums, securities and
other items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Secured Party under this Agreement, and (ii) execute and
deliver to such successor Secured Party such amendments to financing statements,
and take such other actions, as may be necessary or appropriate in connection
with the assignment to such successor Secured Party of the security interests
created hereunder, whereupon such retiring or removed Secured Party shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Agent's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
SECTION 22. ADDITIONAL GRANTORS.
The initial Subsidiary Grantors hereunder shall be such of the
Subsidiaries of Holdings as are signatories hereto on the date hereof. From time
to time subsequent to the date hereof, additional Subsidiaries of Holdings may
become parties hereto as additional Grantors (each an "ADDITIONAL GRANTOR"), by
executing a counterpart substantially in the form of Exhibit VI annexed hereto
(each, a "COUNTERPART"). Upon delivery of any such Counterpart to Secured Party,
notice of which is hereby waived by Grantors, each such Additional Grantor shall
be a Grantor and shall be as fully a party hereto as if such Additional Grantor
were an original signatory hereto. Each Grantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of
Administrative Agent not to cause any Subsidiary of Holdings to become an
Additional Grantor hereunder. This Agreement shall be fully effective as to any
Grantor that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor hereunder.
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SECTION 23. AMENDMENTS; ETC.
No amendment, modification, termination or waiver of any
provision of this Agreement, and no consent to any departure by any Grantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Secured Party and, in the case of any such amendment or
modification, by Grantors; provided this Agreement may be modified by the
execution of a Counterpart by an Additional Grantor in accordance with Section
22 and Grantors hereby waive any requirement of notice of or consent to any such
amendment. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 24. NOTICES.
Any notice or other communications required or permitted
hereunder shall be given as provided in the Credit Agreement.
SECTION 25. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE.
No failure or delay on the part of Secured Party in the
exercise of any power, right or privilege hereunder shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude any other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 26. SEVERABILITY.
In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 27. HEADINGS.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 28. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT
THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
-26-
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Articles 8
and 9 of the Uniform Commercial Code in the State of New York are used herein as
therein defined. The rules of construction set forth in Section 1.3 of the
Credit Agreement shall be applicable to this Agreement mutatis mutandis.
SECTION 29. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN XXX XXXXX,
XXXXXX XXX XXXX XX XXX XXXX. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH
GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I)
ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF
SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS
ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 24; (IV) AGREES THAT SERVICE AS
PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER SUCH GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT
SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER
JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 29 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 30. WAIVER OF JURY TRIAL.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Each Grantor and Secured Party acknowledge that this
waiver is a material inducement for Grantors and Secured Party to enter into a
business relationship, that Grantors and Secured Party have already relied on
this waiver in entering into this Agreement and that each will continue to rely
on this waiver in their related future dealings. Each Grantor and Secured Party
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN
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WAIVER SPECIFICALLY REFERRING TO THIS SECTION 30 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 31. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
SECTION 32. CONFLICTS WITH FOREIGN LAW PLEDGES.
To the extent that the terms of any agreement or instrument
executed by any Grantor or Secured Party for the purpose of creating or
perfecting a security interest (a "FOREIGN LAW PLEDGE") under the law of a
jurisdiction not within the United States of America (a "FOREIGN PLEDGE
JURISDICTION") conflicts with the terms of this Security Agreement, the terms of
this Security Agreement shall prevail. Any undertaking, waiver or covenant of or
by Secured Party under the terms of any Foreign Pledge shall not be enforceable
against Secured Party except in a proceeding to enforce such Foreign Law Pledge
brought in a court of competent jurisdiction in the applicable Foreign Pledge
Jurisdiction.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Grantors and Secured Party have caused
this Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
GRANTORS:
GRANT PRIDECO, INC.
By:
----------------------------------------------
Title:
-----------------------------------------
GRANT PRIDECO, LP,
By:
----------------------------------------------
Title:
-----------------------------------------
XL SYSTEMS, L.P.,
By:
----------------------------------------------
Title:
-----------------------------------------
TEXAS ARAI, INC.,
By:
----------------------------------------------
Title:
-----------------------------------------
TUBE-ALLOY CORPORATION,
By:
----------------------------------------------
Title:
-----------------------------------------
STAR OPERATING COMPANY,
By:
----------------------------------------------
Title:
-----------------------------------------
XXXX-HYCALOG OPERATING, L.P.,
By:
----------------------------------------------
Title:
-----------------------------------------
[EACH OTHER GRANTOR]
VI-1
SECURED PARTIES:
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Secured Party
By:
----------------------------------------------
Title:
-----------------------------------------
CANADIAN AGENT:
DEUTSCHE BANK AG, CANADA BRANCH,
as Secured Party
By:
----------------------------------------------
Title:
-----------------------------------------
VI-2
