Exhibit 99.2
SECURITY AGREEMENT
By
POLYMER GROUP, INC.,
and
THE DOMESTIC SUBSIDIARIES PARTY HERETO,
as Grantors,
and
CITICORP NORTH AMERICA, INC.,
as First Lien Collateral Agent and
as Second Lien Collateral Agent
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Dated as of April 27, 2004
TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS
SECTION 1.01. Uniform Commercial Code Defined Terms.......................................2
SECTION 1.02. Credit Agreement Defined Terms..............................................2
SECTION 1.03. Definition of Certain Terms Used Herein.....................................2
SECTION 1.04. Rules of Construction.......................................................8
ARTICLE II
SECURITY INTERESTS
SECTION 2.01. Security Interests..........................................................8
SECTION 2.02. No Assumption of Liability..................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Title and Authority.........................................................9
SECTION 3.02. Filings.....................................................................9
SECTION 3.03. Validity of Security Interests..............................................9
SECTION 3.04. Limitations on and Absence of Other Liens..................................10
SECTION 3.05. Other Actions..............................................................10
SECTION 3.06. Condition and Maintenance of Equipment.....................................13
SECTION 3.07. No Conflicts, Consents, etc................................................13
ARTICLE IV
COVENANTS
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of Business.........14
SECTION 4.02. Protection of Security.....................................................14
SECTION 4.03. Further Assurances.........................................................14
SECTION 4.04. Inspection and Verification................................................14
SECTION 4.05. Taxes; Encumbrances........................................................14
SECTION 4.06. Assignment of Security Interest............................................14
SECTION 4.07. Continuing Obligations of the Grantors.....................................15
SECTION 4.08. Use and Disposition of Collateral..........................................15
SECTION 4.09. Limitation on Modification of Accounts.....................................15
SECTION 4.10. Insurance..................................................................15
SECTION 4.11. Certain Covenants and Provisions Regarding Patent, Trademark and
Copyright Collateral.......................................................15
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ARTICLE V
REMEDIES
SECTION 5.01. Remedies upon Default......................................................17
SECTION 5.02. Application of Proceeds....................................................18
SECTION 5.03. Grant of License to Use Intellectual Property..............................18
ARTICLE VI
COLLATERAL ACCOUNT
SECTION 6.01. Establishment of Collateral Account........................................19
SECTION 6.02. Proceeds of Destruction, Taking and Excluded Asset Sale....................19
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices....................................................................20
SECTION 7.02. Survival of Agreement......................................................20
SECTION 7.03. Binding Effect.............................................................20
SECTION 7.04. Successors and Assigns.....................................................20
SECTION 7.05. GOVERNING LAW..............................................................20
SECTION 7.06. Waivers; Amendment; Several Agreement......................................20
SECTION 7.07. WAIVER OF JURY TRIAL.......................................................21
SECTION 7.08. Severability...............................................................21
SECTION 7.09. Counterparts...............................................................21
SECTION 7.10. Headings...................................................................22
SECTION 7.11. Jurisdiction; Consent to Service of Process................................22
SECTION 7.12. Termination................................................................22
SECTION 7.13. Additional Grantors........................................................23
SECTION 7.14. Financing Statements.......................................................23
SECTION 7.15. No Deemed Dividend.........................................................23
SECTION 7.16. Collateral Agent Appointed Attorney-in-Fact................................23
SECTION 7.17. Concerning Collateral Agent................................................24
SCHEDULES
Schedule I Domestic Subsidiaries
ANNEXES
Annex I Form of Joinder Agreement
Annex II Form of Perfection Certificate
Annex III Form of Bailee Letter
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SECURITY AGREEMENT
SECURITY AGREEMENT (as amended, amended and restated, supplemented or
otherwise modified from time to time, this "AGREEMENT") dated as of April 27,
2004 among POLYMER GROUP, INC., a Delaware corporation (the "BORROWER"), each
Domestic Subsidiary of the Borrower listed on SCHEDULE I hereto (collectively,
together with each Domestic Subsidiary that becomes a party hereto pursuant to
SECTION 7.15 of this Agreement, the "SUBSIDIARY GUARANTORS" and, together with
the Borrower, the "GRANTORS"), CITICORP NORTH AMERICA, INC., (in such capacity,
the "FIRST LIEN COLLATERAL AGENT") on behalf of the First Lien Secured Parties
(as defined in the Credit Agreement) and as collateral agent (in such capacity,
the "SECOND LIEN COLLATERAL AGENT") on behalf of the Second Lien Secured Parties
(as defined in the Credit Agreement) pursuant to the Credit Agreement (as
hereinafter defined), as pledgee, assignee and secured party.
R E C I T A L S
A. The Borrower, the Collateral Agents, Citicorp North America, Inc., as
administrative agent (in such capacity and together with any successors in such
capacity, the "ADMINISTRATIVE AGENT") for the Lenders (as defined herein), as
documentation agent (in such capacity, the "DOCUMENTATION AGENT"), and as
syndication agent (in such capacity, the "SYNDICATION AGENT"); and Citigroup
Global Markets Inc. ("CGMI"), as sole lead arranger and sole bookrunner (in such
capacity, the "LEAD ARRANGER"), and the lending institutions from time to time
party thereto (the "LENDERS") have, in connection with the execution and
delivery of this Agreement, entered into that certain credit agreement, dated as
of the date hereof (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), providing for the making of
Loans to the Borrower and the issuance of and participations in Letters of
Credit for the account of the Borrower, pursuant to, and upon the terms and
subject to the conditions specified in, the Credit Agreement.
B. Each Subsidiary Guarantor has, pursuant to the Guarantee Agreement,
dated as of the date hereof, among other things, unconditionally guaranteed the
obligations of the Borrower under the Credit Agreement.
C. The Borrower and each Subsidiary Guarantor will receive substantial
benefits from the execution, delivery and performance of the obligations under
the Credit Agreement and is, therefore, willing to enter into this Agreement.
D. It is contemplated that, to the extent permitted by the Credit
Agreement, one or more of the Grantors may enter into one or more Hedging
Agreements with one or more Persons that were Lenders or Affiliates of a Lender
at the time such Hedging Agreements were entered into (collectively, the
"HEDGING EXCHANGERS") fixing interest rates relating to the Loans.
E. Contemporaneously with the execution and delivery of this Agreement,
the Borrower, and certain Subsidiary Guarantors have executed and delivered to
the Collateral Agents a Pledge Agreement (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "PLEDGE AGREEMENT").
F. This Agreement is given by each Grantor in favor of the Collateral
Agents for the benefit of the respective Secured Parties (as hereinafter
defined) to secure the payment and performance of all of the Obligations (as
hereinafter defined).
NOW THEREFORE, in consideration of the foregoing and other benefits
accruing each Grantor, the receipt and sufficiency of which are hereby
acknowledged, each Grantor hereby makes the following
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representations and warranties to each Collateral Agent for the benefit of the
respective Secured Parties (and each of their respective successors and
assigns), as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. UNIFORM COMMERCIAL CODE DEFINED TERMS. Unless otherwise
defined herein, terms used herein that are defined in the UCC shall have the
meanings assigned to them in the UCC, including the following which are
capitalized herein:
"ACCOUNTS"; "BANK"; "CERTIFICATES OF TITLE"; "CHATTEL PAPER";
"COMMERCIAL TORT CLAIM"; "COMMODITY ACCOUNT"; "COMMODITY CONTRACT";
"COMMODITY INTERMEDIARY"; "DEPOSIT ACCOUNTS"; "DOCUMENTS"; "ELECTRONIC
CHATTEL PAPER"; "ENTITLEMENT ORDER"; "EQUIPMENT"; "FIXTURES"; "GOODS";
"INSTRUMENTS" (as defined in Article 9 rather than Article 3); "INVENTORY";
"INVESTMENT PROPERTY"; "LETTER-OF-CREDIT RIGHTS"; "LETTERS OF CREDIT";
"SECURITIES ACCOUNT"; "SECURITIES INTERMEDIARY"; "SECURITY ENTITLEMENT";
"SUPPORTING OBLIGATIONS"; and "TANGIBLE CHATTEL PAPER".
SECTION 1.02. CREDIT AGREEMENT DEFINED TERMS. Capitalized terms used but
not otherwise defined herein that are defined in the Credit Agreement shall have
the meanings given to them in the Credit Agreement.
SECTION 1.03. DEFINITION OF CERTAIN TERMS USED HEREIN. As used herein, the
following terms shall have the following meanings:
"ACCOUNT DEBTOR" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"ACCOUNTS RECEIVABLE" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"BAILEE LETTER" shall mean an agreement in form substantially similar to
Annex III hereto.
"BOOKS AND RECORDS" shall mean all instruments, files, records, ledger
sheets and documents evidencing, covering or relating to any of the Collateral.
"BORROWER" shall have the meaning assigned to such term in the preamble of
this Agreement.
"CHARGES" shall mean any and all property and other taxes, assessments and
special assessments, levies, fees and all governmental charges imposed upon or
assessed against, and all claims (including, without limitation, landlords',
carriers', mechanics', maritime, workmen's, repairmen's, laborers',
materialmen's, suppliers' and warehousemen's Liens and other claims arising by
operation of law) against, all or any portion of the Collateral.
"COLLATERAL" shall mean with respect to each of the Grantors all of the
following, in each case, whether now owned or hereafter acquired:
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(a) Accounts Receivable;
(b) Books and Records;
(c) cash and Deposit Accounts;
(d) Chattel Paper;
(e) Collateral Account and Collateral Account Funds;
(f) Commercial Tort Claims described on Schedule 15 to the Perfection
Certificate;
(g) Documents;
(h) Equipment;
(i) Fixtures;
(j) General Intangibles;
(k) Goods;
(l) Instruments;
(m) Inventory;
(n) Investment Property;
(o) Letter-of-Credit Rights;
(p) Letters of Credit;
(q) Supporting Obligations;
(r) Intellectual Property;
(s) to the extent not covered by clauses (a) through (r) of this
definition, all other personal property, whether tangible or
intangible; and
(s) Proceeds of any and all of the foregoing;
PROVIDED that, for purposes of this Agreement, "Collateral" shall not include
any Excluded Property.
"COLLATERAL ACCOUNT" shall mean that collateral account established
pursuant to Section 6.01 of this Agreement.
"COLLATERAL ACCOUNT FUNDS" shall mean, collectively, the following from
time to time on deposit in the Collateral Account: all funds, investments
(including, without limitation, all Permitted Investments) and all certificates
and instruments from time to time representing or evidencing such investments;
all notes, certificates of deposit, checks and other instruments from time to
time hereafter delivered to or otherwise possessed by the Collateral Agent for
or on behalf of any Grantor in substitution for, or in addition to, any or all
of the Collateral; and all interest, dividends, cash, instruments and other
property from
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time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the items constituting Collateral.
"COLLATERAL AGENTS" shall have the meaning assigned to such term in the
preamble of this Agreement; provided that (except where this Agreement refers to
"Collateral Agents", "each Collateral Agent", "either Collateral Agent", the
"applicable Collateral Agent" or the First Lien Collateral Agent or the Second
Lien Collateral Agent, individually) prior to the Discharge of First Lien
Obligations, each reference herein to "Collateral Agent" shall be deemed to be a
reference to the First Lien Collateral Agent, and after the Discharge of First
Lien Obligations, each such reference shall be deemed to be a reference to the
Second Lien Collateral Agent. Any reference to the "Collateral Agents" when only
one of the First Lien Obligations or the Second Lien Obligations remain
outstanding shall mean the applicable Collateral Agent of the Priority Class
under which the obligations remain outstanding.
"COLLATERAL SHARING AGREEMENT" shall mean the Collateral Sharing Agreement,
dated as of the date hereof, among the Collateral Agents, the Borrower and the
other Grantors for the benefit of the respective Secured Parties.
"CONTROL" shall mean (i) in the case of each Deposit Account, "control," as
such term is defined in Section 9-104 of the UCC, (ii) in the case of any
Security Entitlement, "control," as such term is defined in Section 8-106(d) of
the UCC, and (iii) in the case of any Commodity Contract, "control," as such
term is defined in Section 9-106(b) of the UCC.
"CONTROL AGREEMENT" shall mean an agreement in form and substance
reasonably acceptable to the Collateral Agent for the purpose of effecting
Control with respect to any Deposit Account, Securities Account or Commodity
Account.
"COPYRIGHT LICENSE" shall mean each written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"COPYRIGHTS" shall mean, collectively, with respect to each Grantor, all
copyrights (whether statutory or common law, whether established or registered
in the United States by a Grantor or established or registered in any other
country or any political subdivision thereof by a Grantor if the beneficial
interest is owned by such Grantor, whether registered or unregistered and
whether published or unpublished) and all copyright registrations and
applications made by such Grantor, in each case, whether now owned or hereafter
created or acquired by or assigned to such Grantor, including, without
limitation, the copyrights, registrations and applications listed in SCHEDULE
14(b) of the Perfection Certificate, together with any and all (i) rights and
privileges arising under applicable law with respect to such Grantor's use of
such copyrights, (ii) reissues, renewals, continuations and extensions thereof,
(iii) income, fees, royalties, damages, claims and payments now or hereafter due
and/or payable with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) rights
corresponding thereto throughout the world and (v) rights to xxx for past,
present or future infringements thereof.
"CREDIT AGREEMENT" shall have the meaning assigned to such term in the
Recitals of this Agreement.
"DISCHARGE OF FIRST LIEN OBLIGATIONS" shall mean the occurrence of all of
the following: (i) termination of all commitments to extend credit that would
constitute First Lien Obligations, (ii) payment in full in cash or Cash
Equivalents of all First Lien Obligations (other than contingent indemnifica-
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tion obligations not then claimed or due) and (iii) termination, cancellation or
cash collateralization of all outstanding Letters of Credit constituting First
Lien Obligations.
"EXCLUDED ACCOUNT" shall mean (i) any xxxxx cash Deposit Account, opened by
any Grantor; PROVIDED that average daily balance during any ten day period of
any such excluded xxxxx cash Deposit Account, when aggregated with the average
daily balance during any ten day period of all other excluded xxxxx cash Deposit
Accounts shall not exceed $100,000 and (ii) any Deposit Account used solely for
payroll.
"EXCLUDED PROPERTY" shall mean:
(a) any permit, lease or license, or the assets (owned by a Person
other than a Loan Party) subject thereto or covered thereby, held by any
Grantor that validly prohibits the creation by such Grantor of a security
interest therein or thereon (other than to the extent that any such
prohibition would be rendered ineffective pursuant to Sections 9-406,
9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions)
of any relevant jurisdiction or any other applicable law (including the
Bankruptcy Code) or principles of equity);
(b) any permit, lease or license, or the assets (owned by a Person
other than a Loan Party) subject thereto or covered thereby, held by any
Grantor to the extent that any Requirement of Law applicable thereto
prohibits the creation of a security interest therein or thereon (other
than to the extent that any such prohibition would be rendered ineffective
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any
successor provision or provisions) of any relevant jurisdiction or any
other applicable law (including the Bankruptcy Code) or principles of
equity);
(c) Goods owned by any Grantor on the date hereof or hereafter
acquired that are subject to a Lien securing a purchase money obligation or
Capital Lease Obligation permitted to be incurred pursuant to the
provisions of Section 6.01(vii) of the Credit Agreement if the contract or
other agreement in which such Lien is granted (or the documentation
providing for such purchase money obligation or Capital Lease Obligation)
validly prohibits the creation of any other Lien on such Goods;
(d) Any Intellectual Property Collateral, including without
limitation, intent-to-use trademark applications, for which the creation by
a Grantor of a security interest therein is prohibited (i) without the
consent of third party, (ii) by Requirement of Law, or (iii) would
otherwise result in the loss by any Loan Party of any material rights
therein (other than to the extent that any such prohibition would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of
the UCC (or any successor provision or provisions) of any relevant
jurisdiction or any other applicable law (including the Bankruptcy Code) or
principles of equity);
(e) Securities Collateral (as defined in the Pledge Agreement); and
(f) Any Equity Interests pledged pursuant to any Non-U.S. Pledge
Agreement;
PROVIDED THAT the term Excluded Property shall not include any Proceeds,
substitutions or replacements of any Excluded Property (unless such
Proceeds, substitutions or replacements would constitute Excluded
Property).
"GENERAL INTANGIBLES" shall mean, collectively, all "general intangibles,"
as such term is defined in the UCC, and in any event shall include, without
limitation, all choses in action and causes of action and all other intangible
personal property of any Grantor of every kind and nature now owned or hereafter
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acquired by any Grantor, including all rights and interests in partnerships,
limited partnerships, limited liability companies and other unincorporated
entities, corporate or other business records, indemnification claims, contract
rights (including rights under leases, whether entered into as lessor or lessee,
Hedging Agreements and other agreements), Intellectual Property, goodwill,
registrations, franchises and tax refund claims.
"GRANTORS" shall have the meaning assigned to such term in the preamble of
this Agreement.
"HEDGING EXCHANGERS" shall have the meaning assigned to such term in the
Recitals of this Agreement.
"INTELLECTUAL PROPERTY" shall mean all intellectual and similar property of
any Grantor of every kind and nature now owned in the United States by a
Grantor, or with respect to any country other than the United States,
established, registered or recorded by a Grantor and beneficially owned by such
Grantor, or hereafter acquired by any Grantor, including inventions, designs,
Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or
proprietary technical and business information, know-how, show-how or other data
or information, software and databases and all embodiments or fixations thereof
and related documentation, registrations and franchises, and all additions,
improvements and accessions to, and books and records describing or used in
connection with, any of the foregoing.
"LENDERS" shall have the meaning assigned to such term in the Recitals of
this Agreement.
"LICENSE" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including, without limitation, those listed on SCHEDULES 14(a) and 14(b) of the
Perfection Certificate (other than those license agreements in existence on the
date hereof and listed on SCHEDULES 14(a) and 14(b) of the Perfection
Certificate.
"OBLIGATIONS" shall mean, collectively, the First Lien Obligations and the
Second Lien Obligations.
"PATENT LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"PATENTS" shall mean all of the following now owned in the United States by
a Grantor, or with respect to any country other than the United States,
registered or recorded by a Grantor and beneficially owned by such Grantor, or
hereafter acquired by any Grantor: (a) all patents and all applications for
patent of the United States or any other country, including registrations,
recordings and pending applications in the United States Patent and Trademark
Office or any other country, including those listed on SCHEDULE 14(a) of the
Perfection Certificate, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"PERFECTION CERTIFICATE" shall mean a certificate substantially in the form
of Annex II hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by the Grantors.
"PLEDGE AGREEMENT" shall have the meaning assigned to such term in the
Recitals of this Agreement.
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"PLEDGED SECURITIES" shall have the meaning assigned to such term in the
Pledge Agreement and shall include Equity Interests pledged pursuant to Non-U.S.
Pledge Agreements.
"PROCEEDS" shall mean, collectively, all "proceeds," as such term is
defined in the UCC, and in any event shall include, without limitation, any
consideration received from the sale, exchange, license, lease or other
disposition of any asset or property that constitutes Collateral, any payment
received from any insurer or other Person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property that constitutes Collateral, and shall include
(a) all cash and negotiable instruments received by or held on behalf of the
Collateral Agent, (b) any claim of any Grantor against any third party for (and
the right to xxx and recover for and the rights to damages or profits due or
accrued arising out of or in connection with) (i) past, present or future
infringement of any Patent now or hereafter owned by any Grantor, or licensed
under a Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by any Grantor or licensed under a
Trademark License or injury to the goodwill associated with or symbolized by any
Trademark now or hereafter owned by any Grantor, (iii) past, present or future
breach of any License and (iv) past, present or future infringement of any
Copyright now or hereafter owned by any Grantor or licensed under a Copyright
License and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"SECURED PARTIES" shall mean the First Lien Secured Parties and the Second
Lien Secured Parties, collectively.
"SECURITY INTERESTS" shall have the meaning assigned to such term in
Section 2.01.
"SUBSIDIARY GUARANTORS" shall have the meaning assigned to such term in the
preamble of this Agreement.
"TRADEMARK LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or that any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"TRADEMARKS" shall mean all of the following now owned in the United States
by a Grantor, or with respect to any country other than the United States,
registered or recorded by a Grantor and beneficially owned by such Grantor, or
hereafter acquired by any Grantor: (a) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all registration and recording applications filed in
connection therewith, including registrations and registration applications in
the United States Patent and Trademark Office, any State of the United States or
any similar offices in any other country or any political subdivision thereof,
and all extensions or renewals thereof, including those listed on SCHEDULE 14(a)
of the Perfection Certificate, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
"UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in the State of
New York; provided, however, that if by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of either Collateral Agent's and the Secured Parties' security interest
in any item or portion of the Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of
New York, the term
"UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions relating to
such provisions.
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SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; or
(5) provisions apply to successive events and transactions.
ARTICLE II
SECURITY INTERESTS
SECTION 2.01. SECURITY INTERESTS. (a) It being expressly understood and
agreed that the security interests granted herein for the benefit of the
Collateral Agents on behalf of the applicable Secured Parties shall be subject
to the intercreditor and subordination terms of the Credit Agreement and the
Collateral Sharing Agreement, the following liens on the Collateral are hereby
granted:
(i) As collateral security for the payment and performance in full of
all the First Lien Obligations, each Grantor hereby pledges and grants to
the First Lien Collateral Agent for the benefit of the First Lien Secured
Parties, a lien on and security interest in and to all of the right, title
and interest of such Grantor in, to and under the Collateral.
(ii) As collateral security for the payment and performance in full of
all the Second Lien Obligations, each Grantor hereby pledges and grants to
the Second Lien Collateral Agent for the benefit of the Second Lien Secured
Parties, a lien on and security interest in and to all of the right, title
and interest of such Grantor in, to and under the Collateral; PROVIDED that
the Liens granted pursuant to this clause shall be subject and subordinate
to the Liens granted to secure the First Lien Obligations pursuant to the
immediately preceding clause and further subject to the intercreditor and
subordination provisions of the Credit Agreement and the Collateral Sharing
Agreement.
The Liens granted hereunder to secure the First Lien Obligations and the
Second Lien Obligations are collectively referred to herein as the "Security
Interests".
SECTION 2.02. NO ASSUMPTION OF LIABILITY. The Security Interests are
granted as security only and shall not subject either Collateral Agent or any
other Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to each Collateral
Agent and the Secured Parties that:
SECTION 3.01. TITLE AND AUTHORITY. Each Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant to
each Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other Person other
than any consent or approval which has been obtained.
SECTION 3.02. FILINGS. (a) All information set forth herein and in the
Perfection Certificate, including the Schedules annexed hereto and thereto, has
been duly prepared, completed and executed and the information set forth herein
and therein is correct and complete in all material respects. Except with regard
to foreign Intellectual Property, the Collateral described on the Schedules
annexed to the Perfection Certificate constitutes all of the property of such
type of Collateral owned or held by the Grantors. Fully completed UCC financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to each Collateral Agent for filing in each governmental,
municipal or other office specified in SCHEDULE 7 to the Perfection Certificate,
which, except with regard to foreign Intellectual Property, are all the filings,
recordings and registrations that are necessary to publish notice of and protect
the validity of and to establish a legal, valid and perfected security interest
in favor of such Collateral Agent (for the benefit of the respective Secured
Parties, in respect of all Collateral in which a security interest may be
perfected by filing, recording or registration under Article 9 of the UCC in the
United States (or any political subdivision thereof) and its territories and
possessions, and, no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration under Article 9 of the UCC is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements.
(b) Each Grantor represents and warrants that fully executed
security
agreements in the form hereof (or short form
security agreements) containing a
description of all Collateral consisting of Intellectual Property with respect
to United States Patents, United States registered Trademarks (and Trademarks
for which United States registration applications are pending) have been
delivered to each Collateral Agent for registration with the United States
Patent and Trademark Office pursuant to 35 U.S.C. Section 261 or 17 U.S.C.
Section 205 and the regulations thereunder, as applicable, and otherwise as may
be required pursuant to the laws of any other necessary jurisdiction to protect
the validity of and to establish a legal, valid and perfected security interest
in favor of each Collateral Agent for the benefit of the respective Secured
Parties in respect of all Collateral consisting of Patents and Trademarks in
which a security interest may be perfected by filing, recording or registration
in the United States (or any political subdivision thereof) and its territories
and possessions, and, except with regard to foreign Intellectual Property, no
further or subsequent filing, refiling, recording, prerecording, registration or
preregistration is necessary (other than such actions as are necessary to
perfect the Security Interest with respect to any Collateral consisting of
Patents, Trademarks and Copyrights (or registration or application for
registration thereof) acquired or developed after the date hereof).
SECTION 3.03. VALIDITY OF SECURITY INTERESTS. The Security Interests
constitutes (a) legal and valid security interests under
New York law in all the
Collateral securing the payment and performance of the Obligations, (b) subject
to the filings described in Section 3.02 above, perfected security interests in
all Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in the
United States (or any political subdivision thereof) and its xxxxxxx-
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xxxx and possessions pursuant to the UCC in such jurisdictions, (c) security
interests that shall be perfected in all Collateral in which a security interest
may be perfected upon the receipt and registering and recording of this
Agreement or a short form
security agreement with the United States Patent and
Trademark Office, and (d) perfected security interests in all Collateral in
which a security interest may be perfected by possession or control by the
Collateral Agents, in each case, to the extent required pursuant to the
provisions hereof. The Security Interests are and shall be prior to any other
Lien on any of the Collateral, other than Permitted Liens.
SECTION 3.04. LIMITATIONS ON AND ABSENCE OF OTHER LIENS. The Collateral is
owned by the Grantors or the Grantors have rights therein, free and clear of any
Lien, except for Permitted Liens. The Grantors have not filed or consented to
the filing of (a) any financing statement or analogous document under the UCC or
any other applicable laws covering any Collateral, (b) any assignment in which
any Grantor assigns any Collateral or any
security agreement or similar
instrument covering any Collateral with the United States Patent and Trademark
Office and the United States Copyright Office or (c) any assignment in which any
Grantor assigns any Collateral or any
security agreement or similar instrument
covering any Collateral with any foreign governmental, municipal or other
office, which financing statement or analogous document, assignment,
security
agreement or similar instrument is still in effect, except, in each case, for
Permitted Liens.
SECTION 3.05. OTHER ACTIONS. In order to further ensure the attachment,
perfection and priority of, and the ability of the Collateral Agents to enforce,
the Collateral Agents' security interests in the Collateral, each Grantor
agrees, in each case at such Grantor's own expense, to take the following
actions with respect to the following Collateral:
(a) INSTRUMENTS AND TANGIBLE CHATTEL PAPER. As of the date hereof,
each Instrument and each item of Tangible Chattel Paper specified in
SCHEDULE 13 to the Perfection Certificate valued in excess of $500,000 has
been properly endorsed, assigned and delivered to the Collateral Agent,
and, if necessary, accompanied by instruments of transfer or assignment
duly executed in blank. If any amount individually or in the aggregate in
excess of $500,000 payable under or in connection with any of the
Collateral shall be evidenced by any Instrument or Tangible Chattel Paper,
the Grantor acquiring such Instrument or Tangible Chattel Paper shall, on a
quarterly basis, notify each Collateral Agent thereof and promptly endorse,
assign and deliver the same to the Collateral Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as the
Collateral Agent may from time to time reasonably request; PROVIDED,
HOWEVER, that so long as no Event of Default shall have occurred and be
continuing, the Collateral Agent shall return such Instrument or Tangible
Chattel Paper to such Grantor from time to time, to the extent necessary
for collection in the ordinary course of such Grantor's business.
(b) DEPOSIT ACCOUNTS. Each Grantor hereby represents and warrants
that (i) it has neither opened nor maintains any Deposit Accounts other
than the accounts listed in SCHEDULE 16 of the Perfection Certificate and
(ii) each Collateral Agent has a perfected security interest in each
Deposit Account, other than any Excluded Accounts, by Control. No Grantor
shall hereafter establish and maintain any Deposit Account, other than an
Excluded Account, unless (1) the applicable Grantor shall have given each
Collateral Agent 15 days' prior written notice (or such shorter period as
the Collateral Agent shall agree to) of its intention to establish such new
Deposit Account with a Bank, and (2) such Bank and such Grantor shall have
duly executed and delivered to each Collateral Agent a Control Agreement
with respect to such Deposit Account. Each Collateral Agent agrees with
each Grantor that such Collateral Agent shall not give any instructions
directing the disposition of funds from time to time credited to any
Deposit Account or withhold any withdrawal rights from such Grantor with
respect to funds from time to time credited to any Deposit Account unless
an Event of Default of the type specified in Section 7.01(a) of the Credit
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Agreement has occurred and is continuing or upon the occurrence of the
Loans or other Obligations becoming declared immediately due and payable
and/or the Commitments being declared terminated. No Grantor shall grant
Control of any Deposit Account to any Person other than the Collateral
Agents.
Notwithstanding the provisions of the immediately preceding paragraph,
each Grantor will not be required to enter into Control Agreements, subject
to the conditions set forth in this paragraph, with respect to the
following Deposit Accounts: (i) any Deposit Accounts used to fund xxxxx
cash expenditures to the extent such accounts do not hold greater than
$30,000 at any time; (ii) any Deposit Accounts used solely to fund payroll
disbursements to employees; (iii) the Deposit Account held at Wachovia
(Acct no: 2000003339970) to the extent such account does not hold over
$30,000 at any one time; (iv) the Deposit Account held at Wachovia (Acct
no: 6728001483) to the extent such account does not hold over $30,000 for
any consecutive five Business Days; (v) the Deposit Account held at BB&T
and identified on Schedule 16 to the Perfection Certificate for a period of
thirty days following the date hereof; (vi) the Deposit Accounts held at
Royal Bank of Canada and identified on the Perfection Certificate on the
date hereof, to the extent that any of these accounts do not hold over
$200,000 (or the U.S. dollar equivalent thereof at the then prevailing
rates of foreign exchange) for any consecutive five Business Days; (vii)
the Deposit Accounts held at XX Xxxxxx Chase Bank - Hong Kong Branch and
identified on the Perfection Certificate on the date hereof, to the extent
that these accounts do not hold over $1,500,000 (or the U.S. dollar
equivalent thereof at the then prevailing rates of foreign exchange), in
the aggregate, at any time; (viii) the Deposit Account held at The Fuji
Bank, Ltd. and identified on the Perfection Certificate on the date hereof,
to the extent that this account does not hold over $30,000 (or the U.S.
dollar equivalent thereof at the then prevailing rates of foreign exchange)
at any time; and (ix) the Deposit Account held at Bank of Nova Scotia and
identified on the Perfection Certificate on the date hereof, to the extent
that all funds held in this account are deposited weekly pursuant to an
agreement which is reasonably satisfactory to the Collateral Agents into a
Deposit Account subject to a Control Agreement in favor of the Collateral
Agents. The Grantors shall use their Deposit Accounts in accordance with
past practices and shall not manipulate the balances in any of their
Deposit Accounts solely to ensure that the balances in the Deposit Account
meets the limits set forth in the foregoing clauses (i), (iii), (iv), (vi),
(vii) and (viii).
(c) INVESTMENT PROPERTY. (i) (1) Each Grantor hereby represents and
warrants that it (1) has neither opened nor maintains any Securities
Accounts or Commodity Accounts other than those listed in SCHEDULE 16 of
the Perfection Certificate and each Collateral Agent has a perfected first
priority security interest in such Securities Accounts and Commodity
Accounts by Control and (2) it does not hold, own or have any interest in
any certificated securities or uncertificated securities other than those
constituting Securities Collateral under the Pledge Agreement and those
maintained in Securities Accounts or Commodity Accounts listed in SCHEDULE
16 of the Perfection Certificate. If any Grantor shall at any time hold or
acquire any certificated securities constituting Investment Property valued
in excess of $500,000 that are not Pledged Securities under the Pledge
Agreement, such Grantor shall immediately endorse, assign and deliver the
same to the Collateral Agent, accompanied by such instruments of transfer
or assignment duly executed in blank, all in form and substance reasonably
satisfactory to the Collateral Agent; PROVIDED, that in no event shall such
Grantor be required to pledge more than 65% of the voting stock of any
non-U.S. Subsidiary. If any securities now or hereafter acquired by any
Grantor constituting Investment Property that are not Pledged Securities
are uncertificated, such Grantor shall promptly notify each Collateral
Agent thereof and use its commercially reasonable efforts to, within five
(5) Business Days and in any event no later than 30 days (except where
legally prohibited therefrom), pursuant to an agreement in form and
substance reasonably satisfactory to the Collateral Agent, either (at such
Grantor's option) (a) cause the issuer to agree to comply with instructions
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from the Collateral Agent as to such securities, without further consent of
any Grantor, or (b) arrange for the Collateral Agent to become the
registered owner of the securities. No Grantor shall hereafter establish
and maintain any Securities Account or Commodity Account with any
Securities Intermediary or Commodity Intermediary unless (1) the applicable
Grantor shall have given each Collateral Agent 15 days' prior written
notice of its intention to establish such new Securities Account or
Commodity Account with such Securities Intermediary or Commodity
Intermediary and (2) such Securities Intermediary or Commodity
Intermediary, as the case may be, and such Grantor shall have duly executed
and delivered to the Collateral Agents a Control Agreement with respect to
such Securities Account or Commodity Account, as the case may be. Each
Grantor shall accept any cash and Investment Property (not subject to the
Pledge Agreement or Non-U.S. Pledge Agreements) in trust for the benefit of
the Collateral Agents and within five (5) Business Days of actual receipt
thereof, deposit such Investment Property and any new securities,
instruments, documents or other Investment Property by reason of ownership
of such Investment Property received by it into a Securities Account or
Commodity Account subject to a Control Agreement in favor of the Collateral
Agents. Each Collateral Agent agrees with each Grantor that the Collateral
Agents shall not give any Entitlement Orders or instructions or directions
to any issuer of uncertificated securities, Securities Intermediary or
Commodity Intermediary, and shall not withhold its consent to the exercise
of any withdrawal or dealing rights by such Grantor, unless an Event of
Default has occurred and is continuing. No Grantor shall grant control over
any Investment Property to any Person other than the Collateral Agents.
Notwithstanding the foregoing, the "Collateral Investment Account" as
identified on Schedule 16 the Perfection Certificate need not be subject to
a Control Agreement for a period not to exceed thirty days from the date
hereof.
(ii) Each Grantor shall promptly pay all Charges and fees with respect
to the Investment Property pledged by it under this Agreement, other than
any Charges and fees constituting Liens permitted by Section 6.02(iii) of
the Credit Agreement. In the event any Grantor shall fail to make such
payment contemplated in the immediately preceding sentence, either
Collateral Agent may do so for the account of such Grantor and the Grantors
shall promptly reimburse and indemnify such Collateral Agent from all
reasonable costs and expenses incurred by such Collateral Agent under this
Section 3.05(c).
(d) ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If any amount
individually or in the aggregate in excess of $500,000 payable under or in
connection with any of the Collateral shall be evidenced by any Electronic
Chattel Paper or any "transferable record," as that term is defined in
Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act
as in effect in any relevant jurisdiction, the Grantor acquiring such
Electronic Chattel Paper or transferable record shall, on a quarterly
basis, notify each Collateral Agent thereof and shall, promptly, take such
action as the Collateral Agent may reasonably request to vest in the
Collateral Agent control under UCC Section 9-105 of such Electronic Chattel
Paper or control under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction,
of such transferable record. The Collateral Agent agrees with such Grantor
that the Collateral Agent will arrange, pursuant to procedures reasonably
satisfactory to the Collateral Agent and so long as such procedures will
not result in the Collateral Agent's loss of control, for the Grantor to
make alterations to the Electronic Chattel Paper or transferable record
permitted under UCC Section 9-105 or, as the case may be, Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act of
Section 16 of the Uniform Electronic Transactions Act for a party in
control to allow without loss of control, unless an Event of Default has
occurred and is continuing or would occur after
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taking into account any action by such Grantor with respect to such
Electronic Chattel Paper or transferable record.
(e) LETTER-OF-CREDIT RIGHTS. If any Grantor is at any time a
beneficiary under a Letter of Credit now or hereafter issued in favor of
such Grantor in an amount individually in excess of $100,000 or in the
aggregate in excess of $500,000, such Grantor shall notify each Collateral
Agent on a quarterly basis thereof and such Grantor shall promptly,
pursuant to an agreement in form and substance reasonably satisfactory to
the Collateral Agent, either (at the option of such Grantor) (i) arrange
for the issuer and any confirmer of such Letter of Credit to consent to an
assignment to the Collateral Agents of the proceeds of any drawing under
the Letter of Credit or (ii) arrange for the Collateral Agent to become the
transferee beneficiary of such Letter of Credit, with the Collateral Agent
agreeing, in each case, that the proceeds of any drawing under the Letter
of Credit are to be applied as provided in the Collateral Sharing
Agreement.
(f) COMMERCIAL TORT CLAIMS. As of the date hereof each Grantor hereby
represents and warrants that it holds no Commercial Tort Claims other than
those listed in SCHEDULE 15 to the Perfection Certificate (as supplemented
from time to time). If any Grantor shall at any time hold or acquire a
Commercial Tort Claim having a value individually or in the aggregate in
excess of $500,000, such Grantor shall promptly notify each Collateral
Agent in writing signed by such Grantor of the brief details thereof and
grant to each Collateral Agent in such writing a security interest therein
and in the Proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to the
Collateral Agent.
(g) MOTOR VEHICLES. Upon the reasonable request of the Collateral
Agent, each Grantor shall deliver to the Collateral Agent originals of the
certificates of title or ownership for the motor vehicles (and any other
Equipment covered by Certificates of Title or ownership) owned by it with
the Collateral Agents listed as lienholders therein. Such requirement shall
apply to the Grantors if any such motor vehicle (or any such other
Equipment) is valued over $50,000, provided that the value of all such
motor vehicles (and such Equipment) as to which any Grantor has not
delivered a Certificate of Title or ownership is over $500,000.
(h) LANDLORD'S ACCESS AGREEMENTS/BAILEE LETTERS. Each Grantor shall
use its commercially reasonable efforts to obtain a Bailee Letter or a
Landlord Access Agreement, as applicable, from all such bailees and
landlords, as applicable, who from time to time have possession of
Collateral in excess of $100,000.
SECTION 3.06. CONDITION AND MAINTENANCE OF EQUIPMENT. The Equipment of
such Grantor is in good repair, working order and condition, reasonable wear and
tear excepted. Except as determined by such Grantor's commercially reasonable
business judgment, each Grantor shall cause the Equipment to be maintained and
preserved in good repair, working order and condition, reasonable wear and tear
excepted, and shall as quickly as commercially reasonably practicable make or
cause to be made all repairs, replacements and other improvements which are
necessary or appropriate in the conduct of such Grantor's business.
SECTION 3.07. NO CONFLICTS, CONSENTS, ETC. In the event that the
Collateral Agent desires to exercise any remedies, voting or consensual rights
or attorney-in-fact powers set forth in this Agreement and determines it
necessary to obtain any approvals or consents of any Governmental Authority or
any other Person therefor, then, upon the reasonable request of the Collateral
Agent, such Grantor agrees to use its commercially reasonable efforts to assist
and aid the Collateral Agent to obtain as soon as practicable any necessary
approvals or consents for the exercise of any such remedies, rights and powers.
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ARTICLE IV
COVENANTS
SECTION 4.01. CHANGE OF NAME; LOCATION OF COLLATERAL; RECORDS; PLACE OF
BUSINESS. (a) Each Grantor shall comply with the provisions of Section 5.07 of
the Credit Agreement.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and, at such time or times as either
Collateral Agent may reasonably request, promptly to prepare and deliver to such
Collateral Agent a duly certified schedule or schedules in form and detail
reasonably satisfactory to such Collateral Agent showing the identity, amount
and location of any and all Collateral.
SECTION 4.02. PROTECTION OF SECURITY. Except as determined by such
Grantor's commercially reasonable business judgment, each Grantor shall, at its
own cost and expense, take any and all actions necessary and reasonable to
defend title to the Collateral against all Persons and to defend the Security
Interests of the Collateral Agents in the Collateral and the priority thereof
against any Lien other than Permitted Liens.
SECTION 4.03. FURTHER ASSURANCES. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as either Collateral Agent
may from time to time reasonably request to preserve, protect and perfect the
Security Interests and the rights and remedies created hereby, including the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interests and the
filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith.
SECTION 4.04. INSPECTION AND VERIFICATION. Each Collateral Agent and such
Persons as either Collateral Agent may reasonably designate shall have the
right, at the Grantors' own cost and expense, to at all reasonable times and
intervals and upon reasonable prior notice inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located in each case during
business hours. The Collateral Agents shall have the absolute right to share any
information it gains from such inspection or verification with any Secured Party
(subject to Section 9.16 of the Credit Agreement).
SECTION 4.05. TAXES; ENCUMBRANCES. At its option, either Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
except to the extent the same constitute Permitted Liens, and may pay for the
maintenance and preservation of the Collateral to the extent any Grantor fails
to do so as required by this Agreement (in each case with reasonable prior
notice to such Grantor), and each Grantor jointly and severally agrees to
reimburse each Collateral Agent on written demand for any payment made or any
expense incurred by such Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.05 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on either Collateral Agent or any Secured Party to cure or perform,
any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Loan Documents.
SECTION 4.06. ASSIGNMENT OF SECURITY INTEREST. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
Person to secure payment and performance of an Account valued in excess of
$500,000, such Grantor shall promptly assign such security interest to the
Collateral Agents. Such assignment need not be filed of public record unless
necessary to continue
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the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other Person granting the security
interest.
SECTION 4.07. CONTINUING OBLIGATIONS OF THE GRANTORS. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless each Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.08. USE AND DISPOSITION OF COLLATERAL. None of the Grantors
shall make or permit to be made an assignment for security, pledge or
hypothecation of the Collateral or shall grant any other Lien in respect of the
Collateral other than Liens securing the Obligations and Permitted Liens.
SECTION 4.09. LIMITATION ON MODIFICATION OF ACCOUNTS. None of the Grantors
will, without the Collateral Agent's prior written consent, grant any extension
of the time of payment of any of the Accounts Receivable, compromise, compound
or settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.10. INSURANCE. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with Section 5.04 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints each
Collateral Agent (and all officers, employees or agents designated by either
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its reasonable discretion, obtain and maintain such policies of insurance and
pay such premium and take any other actions with respect thereto as the
Collateral Agent deems reasonably advisable. All sums disbursed by either
Collateral Agent in connection with this Section 4.10, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, shall
be payable, upon written demand, by the Grantors to such Collateral Agent and
shall be additional Obligations secured hereby in the same priority as the
original Obligations. So long as no Event of Default has occurred and is
continuing, all actions to be taken with respect to the making, settling and
adjusting of claims under insurance policies may be taken by the Grantors
without any requirement of participation or consent from either Collateral Agent
and all proceeds received from any insurance with respect to any claim may be
paid directly to the applicable Grantor to be applied in accordance with the
provisions of Section 6.02 hereof.
SECTION 4.11. CERTAIN COVENANTS AND PROVISIONS REGARDING PATENT, TRADEMARK
AND COPYRIGHT COLLATERAL. (a) Except as determined by such Grantor's reasonable
business judgment, each Grantor agrees that it will not, nor will it permit any
of its licensees to, do any act, or omit to do any act, whereby any Patent which
is material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to xxxx any products
covered by a Patent with
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the relevant patent number as necessary and sufficient to establish and preserve
its maximum rights under applicable patent laws.
(b) Except as determined by such Grantor's reasonable business judgment,
each Grantor (either itself or through its licensees or its sublicenses) will,
for each Trademark material to the conduct of such Grantor's business, use its
commercially reasonable efforts to (i) maintain such Trademark in full force
free from any claim of abandonment or invalidity for nonuse, (ii) maintain the
quality of products and services offered under such Trademark, (iii) display
such Trademark with notice of Federal or foreign registration to the extent
necessary and sufficient to establish and preserve its rights under applicable
law and (iv) not knowingly use or knowingly permit the use of such Trademark in
violation of any third party rights.
(c) Except as determined by such Grantor's reasonable business judgment,
each Grantor (either itself or through licensees) will, for each work covered by
a material registered Copyright, publish, reproduce, display, adopt and
distribute such work with such appropriate copyright notice as necessary and
sufficient to establish and preserve its rights under applicable copyright laws.
(d) Each Grantor shall notify each Collateral Agent as soon as practicable
if it knows that any Patent, Trademark or Copyright material to the conduct of
its business may become abandoned, lost or dedicated to the public, or of any
materially adverse determination or development including the institution of, or
any such determination or development in, any proceeding in the United States
Patent and Trademark Office or United States Copyright Office (or any court or
similar office of any country) regarding such Grantor's ownership of any Patent,
Trademark or Copyright, or its right to register the same, or to keep and
maintain the same.
(e) In the event that any Grantor, either itself or through any agent,
employee, licensee or designee, files an application for any Patent, Trademark
or Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office or United States Copyright Office, or
any office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, such Grantor shall promptly
notify each Collateral Agent thereof and execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agents' security interests in such
Patent, Trademark or Copyright or application therefor, and each Grantor hereby
appoints each Collateral Agent as its attorney-in-fact to execute and file such
writings with prior written notice to such Grantor solely for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
its reasonable business judgment in any proceeding before the United States
Patent and Trademark Office or United States Copyright Office, or any office or
agency in any political subdivision of the United States or in any other country
or any political subdivision thereof, to maintain and pursue each material
application relating to the Patents, Trademarks and/or Copyrights (and to obtain
the relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks or Copyrights that is material to the conduct of
any Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with commercially reasonable business judgment, to
initiate opposition, interference and cancellation proceedings against third
parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a material Patent, Trademark or Copyright has been or
is about to be infringed, misappropriated or diluted by a third party, such
Grantor promptly shall notify each Collateral Agent and shall, if consistent
with commercially reasonable business judgment, promptly xxx for infringement,
misappropriation or dilution and
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to recover any and all damages for such infringement, misappropriation or
dilution, and take such other actions as are reasonably appropriate under the
circumstances to protect such Collateral.
(h) To each Grantor's knowledge, on and as of the date hereof, such
Grantor is not infringing upon any Patent, Trademark or Copyright of any other
Person other than such infringement that, individually or in the aggregate,
would not (or would not reasonably be expected to) result in a material adverse
effect on the value or utility of the Collateral consisting of Intellectual
Property or any portion thereof material to the use and operation of the
Collateral and no proceedings have been instituted or are pending against such
Grantor or, to such Grantor's knowledge, threatened, and no claim against such
Grantor has been received by such Grantor, alleging any such violation.
(i) Upon and during the continuance of an Event of Default, each Grantor
shall upon the written request of the Collateral Agent use its commercially
reasonable efforts to obtain all requisite consents or approvals by the licensor
of each Copyright License, Patent License or Trademark License to effect the
assignment of all of such Grantor's right, title and interest thereunder to the
Collateral Agents or their designees.
Notwithstanding anything herein to the contrary, any Grantor may, for
commercially reasonable cause, abandon or allow to become lost or dedicated to
the public any Patent, Trademark or Copyright.
ARTICLE V
REMEDIES
SECTION 5.01. REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees upon written request to
deliver each item of Collateral to the Collateral Agent, and it is agreed that
the Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or nonexclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of applicable law or any then existing licensing arrangements
to the extent that waivers cannot be obtained), and (b) with or without legal
process and with or without prior notice or demand for performance, to take
possession of the Collateral and without liability for trespass to enter any
premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under the UCC or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem reasonably appropriate. The Collateral Agent shall
be authorized at any such sale (if it deems it advisable to do so) to restrict
the prospective bidders or purchasers to Persons who will represent and agree
that they are purchasing the Collateral for their own account for investment and
not with a view to the distribution or sale thereof, and upon consummation of
any such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
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The Collateral Agent shall give a Grantor ten (10) Business Days' prior
written notice (which each Grantor agrees is reasonable notice within the
meaning of Section 9-611 of the UCC) of the Collateral Agent's intention to make
any sale or other disposition of such Grantor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
Obligation then due and payable to such Secured Party from any Grantor as a
credit against the purchase price, and such Secured Party may, upon compliance
with the terms of sale, hold, retain and dispose of such property without
further accountability to any Grantor therefor. For purposes hereof, a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof; the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and no Grantor shall be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement all Events
of Default shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section shall be deemed to conform to the commercially
reasonable standards as provided in Section 9-611 of the UCC.
SECTION 5.02. APPLICATION OF PROCEEDS. The proceeds of any sale of
Collateral pursuant to Section 5, as well as any Collateral consisting of cash,
shall be applied by the Collateral Agent as provided in the Collateral Sharing
Agreement.
SECTION 5.03. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to each Collateral
Agent an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sublicense any
of the Collateral, except to the extent that such license may not be granted as
a result of a pre-existing exclusive license arrangement, consisting of
Intellectual Property now owned or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
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thereof. The use of such license by the Collateral Agent shall be exercised, at
the option of the Collateral Agent, upon the occurrence and during the
continuation of an Event of Default.
ARTICLE VI
COLLATERAL ACCOUNT
SECTION 6.01. ESTABLISHMENT OF COLLATERAL ACCOUNT. (a) The Collateral
Agent is hereby authorized to establish and maintain, in the name of the
Collateral Agent and pursuant to a Control Agreement, a restricted deposit
account designated "Polymer Group, Inc. Collateral Account." Each Grantor shall
deposit into the Collateral Account from time to time all amounts required to be
deposited in the Collateral Account by the Credit Agreement and any amounts
specifically required to be deposited therein by any other Loan Documents.
(b) The balance from time to time in the Collateral Account shall
constitute part of the Collateral and shall not constitute payment of the
Obligations until applied as hereinafter provided. So long as no Event of
Default has occurred and is continuing or will result therefrom and to the
extent Grantor is not required to repay debt under any Loan Documents, the
Collateral Agent shall within two Business Days of receiving a request of the
applicable Grantor for release of cash proceeds constituting (A) Net Proceeds
from any Destruction or Taking from the Collateral Account remit such cash
proceeds on deposit in the Collateral Account to or upon the order of such
Grantor, so long as such Grantor has satisfied the conditions relating thereto
set forth in Section 6.02 hereof and, (B) Net Proceeds from any Asset Sale from
the Collateral Account, remit such cash proceeds on deposit in the Collateral
Account, so long as such Guarantor has satisfied the conditions relating thereto
set forth in Section 6.02 hereof. At any time following the occurrence and
during the continuance of an Event of Default, the Collateral Agent may (and, if
instructed by the Requisite Obligees as specified in the Collateral Sharing
Agreement, shall) in its (or their) reasonable discretion apply or cause to be
applied (subject to collection) the balance from time to time outstanding to the
credit of the Collateral Account to the payment of the Obligations in the manner
specified in the Collateral Sharing Agreement; provided, however,
notwithstanding the foregoing, moneys deposited in the Collateral Account
pursuant to Section 2.06(j) of the Credit Agreement shall be held and applied as
set forth therein.
(c) Amounts on deposit in the Collateral Account shall be invested from
time to time in Permitted Investments as the applicable Grantor (or, after the
occurrence and during the continuance of an Event of Default, the Collateral
Agent) shall determine, which Permitted Investments shall be held in the name
and be under the control of the Collateral Agent (or any subagent); PROVIDED,
that at any time after the occurrence and during the continuance of an Event of
Default, the Collateral Agent may (and, if instructed by the Requisite Obligees
as specified in the Collateral Sharing Agreement, shall) in its (or their)
reasonable discretion at any time and from time to time elect to liquidate any
such Permitted Investments and to apply or cause to be applied the proceeds
thereof to the payment of the Obligations in the manner specified in the
Collateral Sharing Agreement.
SECTION 6.02. PROCEEDS OF DESTRUCTION, TAKING AND EXCLUDED ASSET SALE.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, and to the extent the applicable Grantor is permitted by Section
2.05(c)(iii) or (iv) of the Credit Agreement to apply any Net Proceeds as
contemplated therein, in the event there shall be any Net Proceeds in respect of
any Taking or any Destruction or from any Asset Sale, the applicable Grantor
shall have the right, at such Grantor's option, to apply such Net Proceeds
within the time periods provided in Section 2.05(c)(iii) or (iv) of the Credit
Agreement for purposes permitted thereby and the Collateral Agent shall release
such Net Proceeds to such Grantor in accordance with the provisions of Section
6.01(b) hereof.
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(b) Notwithstanding Section 6.02(a), the Collateral Agent shall not
release any amounts in the Collateral Account constituting Net Proceeds of a
Taking or Destruction or from an Asset Sale, until the applicable Grantor has
furnished to the Collateral Agent an Officers' Certificate, at least five (5)
days' prior to the proposed date of release, setting forth: (1) a brief
description of the application to be made (including the dollar amount thereof),
(2) to the extent the application is a reinvestment in properties or assets,
such reinvestment properties or assets will be Collateral to the extent required
by the Credit Agreement and all
security agreements and mortgages and other
items required to subject such reinvestment properties or assets to the Lien of
this Agreement in favor of the Collateral Agents, for their benefit and for the
benefit of the other Secured Parties, shall be accomplished at the times
required hereby and by Section 5.11 of the Credit Agreement and (3) the
reinvestment otherwise complies with the terms of the Credit Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. NOTICES. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and notices
hereunder to any Subsidiary Guarantor shall be given to it c/o the Borrower at
the Borrower's address as provided in Section 9.01 of the Credit Agreement, with
a copy to the Borrower.
SECTION 7.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by each Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the Lenders' issuance
of and participations in Letters of Credit, regardless of any investigation made
by the Secured Parties or on their behalf, and shall continue in full force and
effect until this Agreement shall terminate.
SECTION 7.03. BINDING EFFECT. This Agreement shall become effective as to
any Grantor when a counterpart hereof executed on behalf of such Grantor shall
have been delivered to each Collateral Agent and a counterpart hereof shall have
been executed on behalf of each Collateral Agent, and thereafter shall be
binding upon such Grantor and the Collateral Agents and their respective
successors and assigns, and shall inure to the benefit of such Grantor, the
Collateral Agents and the other Secured Parties and their respective permitted
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly permitted by each of the other Loan Documents.
SECTION 7.04. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or either Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 7.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
SECTION 7.06. WAIVERS; AMENDMENT; SEVERAL AGREEMENT. (a) No failure or
delay of either Collateral Agent in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall
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any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Collateral Agents hereunder and of the other Secured Parties
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provisions
of this Agreement or any other Loan Document or consent to any departure by any
Grantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Grantor in any case shall entitle such Grantor or any
other Grantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into among the Borrower, the Collateral Agents and the Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any
consents required in accordance with Section 9.08 of the Credit Agreement.
(c) This Agreement shall be construed as a separate agreement with respect
to each Grantor and may be amended, modified, supplemented, waived or released
with respect to any Grantor without the approval of any other Grantor and
without affecting the obligations of any other Grantor hereunder.
SECTION 7.07. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.07.
SECTION 7.08. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions. It is understood and agreed
among the parties that this Agreement shall create separate security interests
in the Collateral securing the Obligations as provided in Section 2.01, and that
any determination by any court with jurisdiction that the security interest
securing any Obligation or class of Obligations is invalid for any reason shall
not in and of itself invalidate the Security Interests securing any other
Obligations hereunder.
SECTION 7.09. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute a single contract and shall become effective as
provided in Section 7.03. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
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SECTION 7.10. HEADINGS. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.11. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each party
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any
New York State court or
Federal court of the United States of America sitting in
New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such
New York State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that either Collateral Agent or any other Secured Party may otherwise have
to bring any action or proceeding relating to this Agreement or the other Loan
Documents against any Grantor or its properties in the courts of any
jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any
New York State or Federal court referred to in paragraph (c) of
this Section. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.15 of the Credit
Agreement. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 7.12. TERMINATION. (a) This Agreement and the Security Interests
(i) shall automatically terminate when all the Obligations (other than
contingent indemnification obligations not then claimed or due) have been paid
in full, the Lenders have no further commitment to lend under the Credit
Agreement or to issue or participate in Letters of Credit and the LC Exposure
has been reduced to zero (at which time the Collateral Agents shall execute and
deliver to the Grantors, at the Grantors' expense, all UCC termination
statements and other documents which the Grantors shall reasonably request to
evidence such termination) and (ii) shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment in respect of any
Obligation is rescinded or must otherwise be restored by any Secured Party upon
any bankruptcy or reorganization of any Grantor or otherwise. Any execution and
delivery of termination statements or documents pursuant to this Section 7.12(a)
shall be without recourse to or warranty by the Collateral Agents. A Subsidiary
Guarantor shall automatically be released from its obligations hereunder and the
Security Interests in the Collateral of such Subsidiary Guarantor shall be
automatically released in the event that the Equity Interests of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of to a Person that
is not an Affiliate of Borrower such that such Person is no longer a Subsidiary
of Borrower in accordance with the terms of each Loan Document.
(b) Upon any sale or other transfer by any Grantor of any Collateral that
is permitted under the Credit Agreement or, upon the effectiveness of any
written consent to the release of the security interests granted hereby in any
Collateral pursuant to Section 9.08 of the Credit Agreement, security interests
in such Collateral shall be automatically released. In connection with such
release, the Collateral Agents shall execute and deliver to any Grantor, at such
Grantor's expense, all UCC termination statements and other documents that such
Grantor shall reasonably request to evidence such termination or release. Any
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execution and delivery of UCC termination statements and similar documents
pursuant to this Section 7.12(b) shall be without recourse to or warranty by the
Collateral Agents.
SECTION 7.13. ADDITIONAL GRANTORS. To the extent any Domestic Subsidiary
shall be required to become a Grantor pursuant to any Loan Document, upon
execution and delivery by the Collateral Agents and such Domestic Subsidiary of
an instrument in the form of ANNEX I hereto, such Domestic Subsidiary shall
become a Grantor hereunder with the same force and effect as if originally named
as a Grantor herein. Each such Domestic Subsidiary shall at such time deliver to
each Collateral Agent a completed Perfection Certificate. The execution and
delivery of any such instrument shall not require the consent of any other
Grantor hereunder. The rights and obligations of each Grantor thereunder shall
remain in full force and effect notwithstanding the addition of any new Grantor
as a party to this Agreement.
SECTION 7.14. FINANCING STATEMENTS. Each Grantor hereby irrevocably
authorizes each Collateral Agent at any time and from time to time to file in
any relevant jurisdiction (a) any filing with the United States Patent and
Trademark Office or United States Copyright Office (or any successor office or
any similar office in any other country), (b) any initial financing statements
(including fixture filings) and amendments thereto that contain the information
required by Article 9 of the Uniform Commercial Code of each applicable
jurisdiction for the filing of any financing statement or amendment relating to
the Collateral, including (i) whether such Grantor is an organization, the type
of organization and any organizational identification number issued to such
Grantor, (ii) any financing or continuation statements or other documents
without the signature of such Grantor where permitted by law, including the
filing of a financing statement describing the Collateral as "all assets in
which the Grantor now owns or hereafter acquires rights, and the proceeds
thereof" and (iii) in the case of a financing statement filed as a fixture
filing or covering Collateral constituting minerals or the like to be extracted
or timber to be cut, a sufficient description of the real property to which such
Collateral relates, and (c) any other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interests granted
by each Grantor without the signature of any Grantor. Each Grantor agrees to
provide all information described in the immediately preceding sentence to each
Collateral Agent promptly upon request. Copies of such financing statements, as
filed, should be sent promptly to the Borrower at its address provided in
Section 9.01of the Credit Agreement.
SECTION 7.15. NO DEEMED DIVIDEND. Notwithstanding the foregoing, no Loan
Party shall be required to take any action pursuant to this Agreement that the
Borrower has reasonably determined would either result in adverse tax
consequences under Section 956 of the Code or would contravene any applicable
law, rule or regulation.
SECTION 7.16. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Subject to the
terms of the Collateral Sharing Agreement, each Grantor hereby appoints each
Collateral Agent the attorney-in-fact of such Grantor for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument that either Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Subject to the terms of the Collateral Sharing
Agreement, without limiting the generality of the foregoing, the Collateral
Agent shall have the right, upon the occurrence and during the continuance of an
Event of Default, with full power of substitution either in the Collateral
Agent's name or in the name of such Grantor, (a) to receive, endorse, assign or
deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof; (b) to
demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to ask for, demand, xxx for,
collect, receive and give acquittance for any and all moneys due or to become
due under and by virtue of any Collateral; (d) to sign the name of any Grantor
on any invoice or xxxx of lading relating to any of the Collateral; (e) to send
verifications of Accounts to any Account Debtor; (f) to commence and prosecute
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any and all suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (g) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (h) to notify, or to require any
Grantor to notify Account Debtors to make payment directly to the Collateral
Agent; and (i) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things necessary to carry out the purposes of this Agreement, as
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; PROVIDED that nothing herein contained shall be
construed as requiring or obligating either Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by such Collateral Agent, or to present or file any claim or notice, or
to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby.
The Collateral Agents and the other Secured Parties shall be accountable only
for amounts actually received as a result of the exercise of the powers granted
to them herein, and neither they nor their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence, willful misconduct or bad
faith.
SECTION 7.17. CONCERNING COLLATERAL AGENT. Notwithstanding anything to the
contrary contained herein, the Second Lien Collateral Agent covenants that is
shall not exercise any rights or remedies under this Agreement or any other
Security Document, including the Control Agreements, (other than make any
filings in order to protect, preserve and maintain the Second Lien Collateral
Agent's security interest hereunder) until the Discharge of First Lien
Obligations. The Second Lien Collateral Agent hereby appoints the First Lien
Collateral Agent as its agent with power and authority to accept, hold,
administer and enforce, for the benefit of the Second Lien Collateral Agent, all
interests, rights and remedies under any and all (i) Collateral in which the
security interest is perfected by possession by the First Lien Collateral Agent,
(ii) Investment Property with respect to which the First Lien Collateral Agent
is the registered owner and (iii) Deposit Accounts, Securities Accounts and
Commodity Accounts subject to Control Agreements. Upon the Discharge of First
Lien Obligations, the First Lien Collateral Agent shall (i) deliver all
Collateral in its possession to the Second Lien Collateral Agent, including any
amounts held in the Collateral Account, and (ii) instruct each applicable
Grantor to comply with provisions of the second sentence of Section 3.05(c) with
respect to the Second Lien Collateral Agent. The First Lien Collateral Agent
hereby acknowledges with respect to any existing and future Collateral which it
holds in its possession that it also holds such Collateral for the Second Lien
Collateral Agent. The First Lien Collateral Agent hereby further acknowledges
with respect to any existing and future Deposit Accounts, Securities Accounts
and Commodity Accounts subject to Control Agreements, that the Collateral Agent
also acts as agent for the Second Lien Secured Parties under such Control
Agreements; provided that the Second Lien Secured Parties shall not have any
right to direct the disposition of funds in such Deposit Accounts, Securities
Accounts and Commodity Accounts until the Discharge of First Lien Obligations.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
POLYMER GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx III
---------------------------------------
Name: Xxxxxx X. Xxxxx III
Title: Chief Financial Officer
BONLAM (S.C.), INC.
CHICOPEE, INC.
DOMINION TEXTILE (USA) INC.
FABPRO ORIENTED POLYMERS, INC.
FABRENE CORP.
FABRENE GROUP L.L.C.
FIBERGOL CORPORATION
FIBERTECH GROUP, INC.
FNA ACQUISITION, INC.
FNA POLYMER CORP.
LORETEX CORPORATION
PGI EUROPE, INC.
PGI POLYMER, INC.
PNA CORP.
POLY-BOND INC.
POLYIONIX SEPARATION TECHNOLOGIES, INC.
PRISTINE BRANDS CORPORATION
TECHNETICS GROUP, INC.,
as Subsidiary Guarantors
By: /s/ Xxxxxx X. Xxxxx III
--------------------------------------------
Name: Xxxxxx X. Xxxxx III
Title: Chief Financial Officer
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CITICORP NORTH AMERICA, INC., as First Lien
Collateral Agent and as Second Lien
Collateral Agent
By: /s/ Xxxxx Xxxxxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Vice President
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SCHEDULE I
Security Agreement
DOMESTIC SUBSIDIARIES
NAME
BONLAM (S.C.), INC.
CHICOPEE, INC.
DOMINION TEXTILE (USA) INC.
FABPRO ORIENTED POLYMERS, INC.
FABRENE CORP.
FABRENE GROUP L.L.C.
FIBERGOL CORPORATION
FIBERTECH GROUP, INC.
FNA ACQUISITION, INC.
FNA POLYMER CORP.
LORETEX CORPORATION
PGI EUROPE, INC.
PGI POLYMER, INC.
PNA CORP.
POLY-BOND INC.
POLYIONIX SEPARATION TECHNOLOGIES, INC.
PRISTINE BRANDS CORPORATION
TECHNETICS GROUP, INC.
TECHNETICS GROUP, INC.
Annex I to the
Security Agreement
FORM OF JOINDER AGREEMENT
SUPPLEMENT NO. ___ dated as of [ ], to the Security Agreement (the
"SECURITY AGREEMENT") dated as of April 27, 2004, among POLYMER GROUP, INC., a
Delaware corporation (the "BORROWER"), each Domestic Subsidiary of the Borrower
listed on SCHEDULE I thereto (collectively, together with each Domestic
Subsidiary that becomes a party thereto, the "SUBSIDIARY GUARANTORS" and,
together with Borrower, the "GRANTORS"), CITICORP NORTH AMERICA, INC., as
collateral agent (the "FIRST LIEN COLLATERAL AGENT") on behalf of the First Lien
Secured Parties (as defined in the Credit Agreement) and WILMINGTON TRUST
COMPANY, as collateral agent (the "SECOND LIEN COLLATERAL AGENT") on behalf of
the Second Lien Secured Parties (as defined in the Credit Agreement) pursuant to
the Credit Agreement (as hereinafter defined), as pledgee, assignee and secured
party (the First Lien Collateral Agent and the Second Lien Collateral Agent are
referred to collectively as the "COLLATERAL AGENTS").
A. Reference is made to (a) the Credit Agreement dated as of April 27,
2004 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among the Borrower, the Collateral Agents, Citicorp North
America, Inc., as administrative agent (in such capacity and together with any
successors in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders (as
defined herein), as documentation agent (in such capacity, the "DOCUMENTATION
AGENT"), and as syndication agent (in such capacity, the "SYNDICATION AGENT");
and Citigroup Global Markets Inc. ("CGMI"), as sole lead arranger and sole
bookrunner (in such capacity, the "LEAD ARRANGER"), and the lending institutions
from time to time party thereto (the "LENDERS"), (b) the Guarantee Agreement
dated as of April 27, 2004 (as amended, supplemented or otherwise modified from
time to time, the "GUARANTEE AGREEMENT"), among the Domestic Subsidiaries and
the Collateral Agents, and (c) the Pledge Agreement dated April 27, 2004 among
certain Grantors and the Collateral Agents (as amended, supplemented or
otherwise modified from time to time, the "PLEDGE AGREEMENT", and together with
the Security Agreement and the Guarantee Agreement, the "COLLATERAL DOCUMENTS").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement.
C. Pursuant to Section 5.16 of the Credit Agreement, each Domestic
Subsidiary of Borrower that was not in existence or not a Domestic Subsidiary on
the date of the Credit Agreement is required to enter into the Collateral
Documents upon becoming a Domestic Subsidiary. Each of the Collateral Documents
provides that such Domestic Subsidiary may become a party to the Collateral
Documents by execution and delivery of an instrument in the form of this
Supplement. The undersigned Domestic Subsidiary (the "NEW DOMESTIC SUBSIDIARY")
is executing this Supplement in accordance with the requirements of the Credit
Agreement to become a party to the Collateral Documents.
Accordingly, the Collateral Agents and the New Domestic Subsidiary agree as
follows:
SECTION 1. In accordance with Section 5.16 of the Credit Agreement,
the New Domestic Subsidiary by its signature below becomes a Grantor and
Pledgor under each of the Collateral Documents with the same force and
effect as if originally named therein as a party thereto and hereby (a)
agrees to all terms and provisions of the Collateral Documents applicable
to it as a Grantor and Pledgor thereunder and (b) represents and warrants
that the represen-
tations and warranties made by it as a Grantor and Pledgor thereunder are
true and correct in all material respects on and as of the date hereof. In
furtherance of the foregoing, the New Domestic Subsidiary, as security for
the payment and performance in full of the Obligations (as defined in the
Security Agreement), does hereby create and grant to each Collateral Agent,
its permitted successors and assigns, for the benefit of the respective
Secured Parties and their permitted successors and assigns, a security
interest in and lien on all of the New Domestic Subsidiary's right, title
and interest in and to the Collateral (as defined in the Security
Agreement) of the New Domestic Subsidiary. Each of the Collateral Documents
is hereby incorporated herein by reference.
SECTION 2. The New Domestic Subsidiary represents and warrants to
each Collateral Agent and the other Secured Parties that this Supplement
has been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in accordance
with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when
each Collateral Agent shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New Domestic
Subsidiary and the Collateral Agents. Delivery of an executed signature
page to this Supplement by facsimile transmission shall be as effective as
delivery of a manually signed counterpart of this Supplement.
SECTION 4. The New Domestic Subsidiary hereby represents and warrants
that (a) all information set forth in the Perfection Certificate, including
the schedules annexed thereto, has been duly prepared, completed and
executed and the information set forth therein is correct and complete in
all material respects and (c) set forth on Schedule II attached hereto is a
true and correct schedule describing the securities of the New Domestic
Subsidiary being pledged hereunder.
SECTION 5. Except as expressly supplemented thereby, each of the
Collateral Documents shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 7. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Collateral Documents shall not in
any way be affected or impaired thereby (it being understood that the
invalidity a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other
jurisdiction). The parties hereto shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in
writing and given as provided in Section 7.01 of the Security Agreement.
All communications and notices
-2-
hereunder of the New Domestic Subsidiary shall be given to it at the
address set forth under its signature below.
SECTION 9. The New Domestic Subsidiary agrees to reimburse each
Collateral Agent for its reasonable out-of-pocket expenses in connection
with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Collateral Agents.
IN WITNESS WHEREOF, the New Domestic Subsidiary and the Collateral Agents
have duly executed this Supplement to the Security Agreement as of the day and
year first above written.
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[Name Of New Subsidiary],
By:
-------------------------------------
Name:
Title:
Address:
CITICORP NORTH AMERICA, INC.,
as First Lien Collateral Agent and as
Second Lien Collateral Agent,
By:
-------------------------------------
Name:
Title:
S-1
SCHEDULE I
to the Joinder Agreement
GUARANTORS
SCHEDULE II
to the Joinder Agreement
PLEDGED SECURITIES OF THE NEW GRANTOR
PLEDGED STOCK
Number of Number and Percentage
Issuer Certificate Registered Owner Class of Shares of Shares
------------ --------------- ------------------ ----------------- ------------
DEBT SECURITIES
Issuer Principal Amount Date of Note Maturity Date
------------- -------------------- ---------------- -----------------
Annex II to the
Security Agreement
FORM OF PERFECTION CERTIFICATE
Annex III to the Security Agreement
FORM OF NOTICE TO BAILEE OF SECURITY INTEREST IN COLLATERAL
CERTIFIED MAIL -- RETURN RECEIPT REQUESTED
[ ], 200[ ]
TO: [Bailee's Name]
[Bailee's Address]
Re: [BORROWER]
Ladies and Gentlemen:
In connection with that certain Security Agreement, dated as of April 27,
2004 (the "SECURITY AGREEMENT"), made by Borrower, the Grantors party thereto
and Citicorp North America, Inc. ("CITICORP"), as First Lien Collateral Agent,
and Wilmington Trust Company, as Second Lien Collateral Agent (collectively, the
"COLLATERAL AGENTS"), we have granted to the Collateral Agents a security
interest in substantially all of our personal property, including our inventory.
This letter constitutes notice to you, and your signature below will
constitute your acknowledgment, of the Collateral Agents' continuing security
interests in all goods with respect to which you are acting as bailee. Until you
are notified in writing to the contrary by either Collateral Agent, however, you
may continue to accept instructions from us regarding the delivery of goods
stored by you.
Your acknowledgment also constitutes a waiver and release, for Collateral
Agents's benefit, of any and all claims, liens, including bailee's liens, and
demands of every kind which you have or may later have against such property
(including any right to include such property in any secured financing to which
you may become party).
In order to complete our records, kindly have a duplicate of this letter
signed by an officer of your company and return same to us at your earliest
convenience.
Very truly yours,
Receipt acknowledged, confirmed and
approved:
[BAILEE] [APPLICABLE GRANTOR]
By: By:
---------------------------------- ---------------------------------
Name: Name:
Title: Title:
cc: Citicorp North America, Inc.
Wilmington Trust Company
