Exhibit 10.41 EXECUTION COPY
PENHALL INTERNATIONAL CORP.,
PENHALL COMPANY,
BOB MACK CO., inc.,
PENHALL LEASING, L.L.C.,
AND
PENHALL INVESTMENTS, INC.
(referred to herein individually as "GRANTOR" and collectively as "GRANTORS")
and
GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT
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SECURITY AGREEMENT
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TABLE OF CONTENTS
PAGE
1. DEFINED TERMS.......................................................................2
2. GRANT OF LIEN.......................................................................3
3. AGENT'S AND LENDERS' RIGHTS: LIMITATIONS ON AGENT'S AND LENDERS' OBLIGATIONS.......4
4. REPRESENTATIONS AND WARRANTIES......................................................5
5. COVENANTS...........................................................................8
6. BANK ACCOUNTS; COLLECTION OF ACCOUNTS AND PAYMENTS.................................13
7. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT............................................14
8. REMEDIES: RIGHTS UPON DEFAULT.....................................................15
9. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL...........................17
10. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL...................17
11. REINSTATEMENT......................................................................18
12. SURETYSHIP WAIVERS BY GRANTOR; OBLIGATIONS ABSOLUTE................................18
13. EXPENSES AND ATTORNEY'S FEES.......................................................18
14. NOTICES............................................................................19
15. SEVERABILITY.......................................................................19
16. NO WAIVER; CUMULATIVE REMEDIES.....................................................20
17. LIMITATION BY LAW..................................................................20
18. TERMINATION OF THIS AGREEMENT......................................................20
19. SUCCESSORS AND ASSIGNS.............................................................20
20. COUNTERPARTS.......................................................................20
21. GOVERNING LAW......................................................................21
22. WAIVER OF JURY TRIAL...............................................................21
23. HEADINGS...........................................................................22
24. NO STRICT CONSTRUCTION.............................................................22
25. ADVICE OF COUNSEL..................................................................22
26. BENEFIT OF LENDERS.................................................................22
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of May 22, 2003 (this "Agreement"), by and
among PENHALL INTERNATIONAL CORP., an Arizona corporation ("Holdings"), PENHALL
COMPANY, a California corporation ("Penhall"), PENHALL LEASING, L.L.C., a
California limited liability company ("Penhall Leasing"), BOB MACK CO., INC., a
California corporation ("Bob Mack", and together with Holdings, Penhall and
Penhall Leasing, each referred to herein individually as "Borrower" and
collectively as "Borrowers") and PENHALL INVESTMENTS, INC., a California
corporation ("Penhall Investments", and together with Penhall Leasing, Bob Mack
and Penhall Investments, each a "Subsidiary" and collectively the
"Subsidiaries", and together with Borrowers, each referred to herein
individually as "Grantor" and collectively as "Grantors"), and GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation, in its capacity as Agent (in such
capacity, "Agent") for itself and Lenders from time to time party to the Credit
Agreement as defined below ("Lenders").
WHEREAS:
(A) Pursuant to that certain Credit Agreement dated as of the date
hereof (including all annexes, exhibits and schedules thereto, and
as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement") by and among Grantors, Agent and
Lenders, the Lenders have agreed to make available to Borrowers,
upon the terms and conditions thereof, a certain revolving credit
facility;
(B) Borrowers wish to borrow certain Loans and cause certain Letters of
Credit to be issued (as such terms are defined in the Credit
Agreement);
(C) Penhall is a wholly-owned subsidiary of Holdings, Subsidiaries are
wholly-owned subsidiaries of Penhall, Grantors engage in business
transactions with one another, and Subsidiaries will benefit from
the Loans and other financial accommodations made under the Credit
Agreement; and
(D) in order to induce Agent and Lenders to make the Loans and to incur
the Letter of Credit Obligations (as defined in the Credit
Agreement) to be made and incurred by Lenders as provided for in the
Credit Agreement, each Grantor has agreed to grant a continuing Lien
on the Collateral (as hereinafter defined) to secure the
Obligations.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS
(a) All capitalized terms used but not otherwise defined herein have
the meanings given to them in the Credit Agreement or in Annex A
thereto. All other terms contained in this Agreement, unless the
context indicates otherwise, have the meanings provided for by
the Code to the extent the same are used or defined therein.
(b) "Uniform Commercial Code jurisdiction" means any jurisdiction
that has adopted all or substantially all of Article 9 as
contained in the 2000 Official Text of the Uniform Commercial
Code, as recommended by the National Conference of Commissioners
on Uniform State Laws and the American Law Institute, together
with any subsequent amendments or modifications to the Official
Text.
2. GRANT OF LIEN
(a) To secure the prompt and complete payment, performance and
observance of all of the Obligations and all renewals,
extensions, restructurings and refinancings thereof, and all
obligations, liabilities, and indebtedness of Grantors arising
under this Agreement, each Grantor hereby grants, assigns,
conveys, mortgages, pledges, hypothecates and transfers to
Agent, for itself and the benefit of Lenders, a Lien upon all of
its right, title and interest in, to and under all personal
property and other assets, whether now owned by or owing to, or
hereafter acquired by or arising in favor of such Grantor
(including under any trade names, styles or derivations
thereof), and whether owned or consigned by or to, or leased
from or to, such Grantor, and regardless of where located (all
of which being hereinafter collectively referred to as the
"Collateral"), including:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all General Intangibles (including all Payment
Intangibles trademarks, patents, copyrights, other
intellectual property and licenses thereof, payment
intangibles and Software; provided that trademark
licenses in which such Grantor is the licensee shall not
be considered Collateral if prohibited by the instrument
governing the trademark license);
(v) all Goods (including Inventory, Equipment and Fixtures);
(vi) all Instruments;
(vii) all Investment Property;
(viii) all Deposit Accounts and Commodity Accounts of such
Grantor, including all blocked accounts and all other
bank accounts and all deposits therein;
(ix) all money, cash or Cash Equivalents of such Grantor;
(x) all Supporting Obligations and Letter-of-Credit Rights of
such Grantor; and
(xi) to the extent not otherwise included, all Proceeds, tort
claims, insurance claims and other rights to payments not
otherwise included in the foregoing and products of the
foregoing and all accessions to, substitutions and
replacements for, and income, benefits, rents and profits
of, each of the foregoing and, to the extent related to
any of the foregoing, all books, correspondence, credit
files, records, invoices, and other papers (including
without limitation all tapes, cards, computer runs and
other papers and documents in the possession or under the
control of such Grantor or any computer bureau or service
company from time to time acting for such Grantor);
provided, however, that notwithstanding the foregoing, the
foregoing grant of a security interest in Equipment that is
subject to any prohibition that is in effect on the Closing Date
on granting a security interest in such Equipment to Agent and
binding on the
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Grantor that owns such Equipment shall be postponed and no
security interest shall be granted under this Agreement in such
Equipment unless and until such prohibition ceases to be binding
on such Grantor, and upon such prohibition ceasing to be binding
on such Grantor, Agent shall automatically have a security
interest in such Equipment and all Proceeds thereof. In the
event such prohibition ceases to be binding on a Grantor such
Grantor shall immediately notify Agent and shall take all steps
as may be necessary to perfect such Lien of Agent within 20
Business Days following such prohibition ceasing to be
effective.
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Obligations, all renewals,
extensions, restructurings and refinancings thereof and all
obligations, liabilities and indebtedness of Grantors arising
under this Agreement, and in order to induce Agent and Lenders
as aforesaid, each Grantor hereby grants to Agent, for itself
and the benefit of Lenders, a right of setoff against the
property of such Grantor held by Agent or any Lender, consisting
of property described above in Section 2(a) now or hereafter in
the possession or custody of or in transit to Agent or any
Lender, for any purpose, including safekeeping, collection or
pledge, for the account of such Grantor, or as to which such
Grantor may have any right or power.
3. AGENT'S AND LENDERS' RIGHTS: LIMITATIONS ON AGENT'S AND LENDERS'
OBLIGATIONS
(a) It is expressly agreed by each Grantor that, anything herein or
in any other Loan Document to the contrary notwithstanding, each
Grantor shall remain liable under each of its respective
Contractual Obligations, including all Licenses, to observe and
perform all the conditions and obligations to be observed and
performed by it thereunder. Neither Agent nor any Lender shall
have any obligation or liability under any Contractual
Obligation by reason of or arising out of this Agreement or any
other Loan Document or the granting herein of a Lien thereon or
the receipt by Agent or any Lender of any payment relating to
any Contractual Obligation pursuant hereto. Neither Agent nor
any Lender shall be required or obligated in any manner to
perform or fulfill any of the obligations of any Grantor under
or pursuant to any Contractual Obligation, or to make any
payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of
any performance by any party under any Contractual Obligation,
or to present or file any claims, or to take any action to
collect or enforce any performance or the payment of any amounts
which may have been assigned to it or to which it may be
entitled at any time or times.
(b) Agent may at any time after an Event of Default has occurred and
is continuing (or if any rights of set-off (other than set-offs
against an Account arising under the Contract giving rise to the
same Account) or contra accounts may be asserted with respect to
the following), without prior notice to any Grantor, notify each
Grantor's Account Debtors and all other Persons obligated on any
of the Collateral that Agent has a security interest therein,
and that payments shall be made directly to Agent, for itself
and the benefit of Lenders. Upon the request of Agent, each
Grantor shall so notify its Account Debtors and other Persons
obligated on the Collateral. Once any such notice has been given
to any Account Debtor or other Person obligated on the
Collateral, none of the Grantors shall give any contrary
instructions to such Account Debtor or other Person without
Agent's prior written consent.
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(c) Agent may at any time in Agent's own name, in the name of a
nominee of Agent or in the name of any Grantor communicate (by
mail, telephone, facsimile or otherwise) with Account Debtors,
parties to Contractual Obligations and obligors in respect of
Instruments to verify with such Persons, to Agent's
satisfaction, the existence, amount, terms of, and any other
matter relating to, Accounts, Instruments, Chattel Paper and/or
payment intangibles; provided, that if no Event of Default has
occurred and is continuing, Agent shall only use a nominee name
for such communication. If an Event of Default shall have
occurred and be continuing, each Grantor, at its own expense,
shall cause the independent certified public accountants then
engaged by such Grantor to prepare and deliver to Agent and each
Lender at any time and from time to time promptly upon Agent's
request the following reports with respect to such Grantor: (i)
a reconciliation of all Accounts; (ii) an aging of all Accounts;
(iii) trial balances; and (iv) a test verification of such
Accounts as Agent may request. Each Grantor, at its own expense,
shall deliver to Agent the results of each physical
verification, if any, which such Grantor may in its discretion
have made, or caused any other Person to have made on its
behalf, of all or any portion of its Inventory.
4. REPRESENTATIONS AND WARRANTIES
Each Grantor, jointly and severally, represents and warrants that:
(a) Each Grantor has rights in and the power to transfer each item
of the Collateral upon which it purports to grant a Lien
hereunder free and clear of any and all Liens other than
Permitted Encumbrances.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering
all or any part of the Collateral (other than those instruments
and statements Agent is authorized to terminate and release in
full upon the initial funding of the Loans) is on file or of
record in any public office, except such as may have been filed
(i) by any Grantor in favor of Agent pursuant to this Agreement
or the other Loan Documents, and (ii) in connection with any
other Permitted Encumbrances.
(c) This Agreement is effective to create a valid and continuing
Lien on and, upon the filing of the appropriate financing
statements in the filing offices listed on Schedule I hereto or
the entering into of three-party control agreements, as
applicable, a perfected Lien in favor of Agent, for itself and
the benefit of Lenders, on the Collateral with respect to which
a Lien may be perfected by filing pursuant to the Code. Such
Lien is prior to all other Liens, except Permitted Encumbrances
that would be prior to Liens in favor of Agent for the benefit
of Agent and Lenders as a matter of law, and is enforceable as
such as against any and all creditors of and purchasers from any
Grantor (other than purchasers and lessees of Inventory in the
ordinary course of business and non-exclusive licensees of
General Intangibles in the ordinary course of business). Except
as set forth in Sections 4(h) and 4(i) hereof, action by each of
the Grantors necessary to protect and perfect such Lien on each
item of the Collateral has been duly taken.
(d) Penhall shall use reasonable efforts to obtain, within fifteen
(15) days after the Closing Date, a written consent from the
holders of the Bob Mack Promissory Notes, in accordance with the
terms of the agreement granting to the holders of the Bob Mack
Promissory Notes a first priority security interest in certain
equipment and motor vehicles as security for the payment of the
obligations owing under the Bob Mack Promissory
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Notes, authorizing Agent to obtain a second priority security
interest in the equipment and motor vehicles securing the Bob
Mack Promissory Notes.
(e) Schedule II hereto lists all Instruments, Documents, Letter of
Credit Rights and Chattel Paper (including any Intercompany
Notes but excluding written lease agreements governing
Short-Term Rentals) of each Grantor as of the date hereof. All
actions by each Grantor necessary to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including
the delivery of all originals thereof to Agent and the legending
of all Chattel Paper (excluding written lease agreements
governing Short-Term Rentals) as required by Section 5(b)
hereof) have been duly taken. The Lien of Agent, for the benefit
of Agent and Lenders, on the Collateral listed on Schedule II
hereto is prior to all other Liens, except Permitted
Encumbrances that would be prior to the Liens in favor of Agent
as a matter of law, and is enforceable as such against any and
all creditors of and purchasers from each Grantor.
(f) Each Grantor's name as it appears in official filings in the
state of its incorporation or other organization, all prior
names of each Grantor, as they appeared from time to time in
official filings in the state of its incorporation or other
organization, the type of entity of each Grantor (including
corporation, partnership, limited partnership or limited
liability company), organizational identification number issued
by each Grantor's state of incorporation or organization or a
statement that no such number has been issued, each Grantor's
state of organization or incorporation, the mailing address of
each Grantor as of the date hereof, the location of each
Grantor's chief executive office, principal place of business,
other offices, all warehouses and premises where Collateral is
stored or located, and the locations of each Grantor's books and
records concerning the Collateral are set forth on Schedule
IIIA, Schedule IIIB, Schedule IIIC, Schedule IIID, and Schedule
IIIE, respectively, hereto, as the same may be amended in
accordance with Section 5(k) hereof. Each Grantor is a
registered organization and has only one state of incorporation
or organization.
(g) With respect to the Accounts, except as specifically disclosed
on the most recent Borrowing Base Certificate or other
collateral reports delivered to Agent or as otherwise permitted
pursuant to the Credit Agreement, (i) they represent bona fide
sales of Inventory or rendering of services to Account Debtors
in the ordinary course of each Grantor's business and are not
evidenced by a judgment, Instrument or Chattel Paper; (ii)
except as disclosed to Agent or as to which there would not be a
Material Adverse Effect, there are no set-offs, claims or
disputes existing or asserted with respect thereto and none of
the Grantors has made any agreement with any of its Account
Debtors for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof,
any release of any of its Account Debtors from liability
therefor, or any deduction therefrom except a discount or
allowance allowed by any Grantor in the ordinary course of its
business for prompt payment and disclosed to Agent; (iii) to
each Grantor's knowledge, there are no facts, events or
occurrences which in any way impair the validity or
enforceability thereof or could reasonably be expected to reduce
the amount payable thereunder to the extent that there would be
a Material Adverse Effect as shown on such Grantor's books and
records and any invoices, statements or other collateral report
delivered to Agent and Lenders with respect thereto; (iv) none
of the Grantors has received any notice of proceedings or
actions which are threatened or pending against any of its
Account Debtors which might result in any adverse change in such
Account Debtor's financial condition and which would have a
Material Adverse Effect on any of the Grantors; (v) none of the
Grantors has knowledge that any of its
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Account Debtors is unable generally to pay its debts as they
become due, which inability would result in a Material Adverse
Effect on Grantors; and (vi) they constitute the legally valid
and binding obligation of the applicable Account Debtors.
Further, with respect to the Accounts (x) the amounts shown on
all invoices, statements or other collateral reports which may
be delivered to Agent with respect thereto are actually owing to
such Grantor as indicated thereon and are not in any way
contingent, except for such contingencies as may exist under
trade custom and practice; (y) no payments have been or shall be
made thereon except payments immediately delivered to the
applicable blocked accounts or Agent as required pursuant to the
terms of Annex C to the Credit Agreement; and (z) to each
Grantor's knowledge, all of its Account Debtors have the
capacity to contract.
(h) With respect to any Parts and Supplies and Equipment
constituting vehicles used by a Grantor in the ordinary course
of business ("Rental Equipment"), (i) such Rental Equipment is
located at one of the applicable Grantor's locations set forth
on Schedule IIIA, Schedule IIIB, Schedule IIIC, Schedule IIID or
Schedule IIIE hereto, as applicable, (unless, at any time, such
Rental Equipment is being used at a construction or similar site
or such Rental Equipment is located at the residence of the
driver authorized to drive the Rental Equipment, provided that
such Rental Equipment (A) is covered by a certificate of title
on which the interest of the Agent has been noted, free and
clear of all Liens except those in favor of Agent and Lenders
and Permitted Encumbrances of the type described in clauses (a),
(d), (e) or (g) of the definition of such term, and (B) is
equipped with a global positioning tracking device (that is
permanently affixed to such motor vehicle) that enables such
Borrower to determine at all times the movement and location of
such motor vehicle) (ii) no Rental Equipment is now, or shall at
any time or times hereafter be stored at any other location
without prior notice to Agent, and the applicable Grantor will
concurrently therewith obtain, to the extent required by the
Credit Agreement, bailee, landlord and mortgagee agreements,
(iii) each Grantor has good, indefeasible and merchantable title
to its Rental Equipment and such Rental Equipment is not subject
to any Lien or security interest or document whatsoever except
for the Lien granted to Agent, for the benefit of Agent and
Lenders, and except for Permitted Encumbrances, (iv) except as
specifically disclosed to Agent, such Rental Equipment is of
good and merchantable quality, free from any defects, ordinary
wear and tear excepted, (v) such Rental Equipment is not subject
to any licensing, patent, royalty, trademark, trade name or
copyright agreements with any third parties that would require
any consent of any third party upon sale or other disposition of
that Rental Equipment or the payment of any monies to any third
party upon such sale or other disposition, and (vi) the sale or
other disposition of such Rental Equipment by Agent following an
Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or
agreement to which any Grantor is a party or to which such
property is subject.
(i) Schedule IVA sets forth under the name of each Grantor a
complete and correct list of all issued Patents, registered
Trademarks and registered Copyrights, and pending applications
for the foregoing owned by such Grantor on the date hereof; and
all registrations listed in Schedule IVA are in full force and
effect. This Agreement is effective to create a valid and
continuing Lien on and, upon filing of appropriate financing
statements in the filing offices listed on Schedule I hereto and
of the Copyright Security Agreements with the United States
Copyright Office and filing of the Patent Security Agreements
and the Trademark Security Agreements with the United State
Patent and Trademark Office, perfected Liens in favor of Agent
on each Grantor' s Patents, Trademarks and Copyrights and such
perfected Liens are enforceable as such as
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against any and all creditors of and purchasers from any
Grantor. Upon filing of the Copyright Security Agreements with
the United States Copyright Office and filing of the Patent
Security Agreements and the Trademark Security Agreements with
the United State Patent and Trademark Office and the filing of
appropriate financing statements listed on Schedule I hereto,
all action necessary to protect and perfect Agent's Lien on each
Grantor's Patents, Trademarks or Copyrights shall have been duly
taken.
Schedule IVB sets forth a complete and correct list of all
material licenses and other material agreements included in the
Intellectual Property on the date hereof.
(j) All titled motor vehicles owned by each Grantor as of the
Closing Date are listed under the name of such Grantor on
Schedule VA hereto, by make, model, model year and vehicle
identification number ("VIN"). Each Grantor shall provide twenty
(20) days' prior written notice to Agent of, and shall deliver
to Agent, motor vehicle title certificates for all motor
vehicles owned by such Grantor from time to time that are
covered by a certificate of title, and shall cause such title
certificates to be filed (with Agent's lien noted thereon) in
the appropriate state motor vehicle filing office within twenty
(20) days of acquiring such motor vehicles. Upon the termination
of the Banc of America Agreements and the Bob Mack Promissory
Notes, the applicable Grantor obligated thereunder shall provide
twenty (20) days' prior written notice to Agent of such
termination indicating in such notice the make, model, model
year, VIN and owner of each vehicle, and for all motor vehicles
owned by such Grantor that are covered by a certificate of title
encumbered by a security interest granted pursuant to the terms
of either such agreement, such Grantor shall cause any security
interests encumbering such titles to be released and shall cause
such title certificates to be filed (with Agent's lien noted
thereon) in the appropriate state motor vehicle filing office
within twenty (20) days of acquiring such motor vehicles.
5. COVENANTS
Without limiting any Grantor's covenants and agreements contained in
the Credit Agreement and other Loan Documents, each Grantor
covenants and agrees with Agent, for the benefit of Agent and
Lenders, that from and after the date of this Agreement and until
the Termination Date:
(a) Further Assurances; Pledge of Instruments; Chattel Paper.
(i) At any time and from time to time, upon the written
request of Agent and at the sole expense of such Grantor,
such Grantor shall promptly and duly execute and deliver
any and all such further instruments and documents and
take such further actions as Agent may reasonably request
to obtain the full benefits of this Agreement and of the
rights and powers herein granted, including (A) using
reasonable efforts to secure all consents and approvals
necessary or appropriate for the assignment to or for the
benefit of Agent of any Contractual Obligation, including
any License, held by such Grantor and to enforce the
security interests granted hereunder; and (B) filing any
financing or continuation statements under the Code with
respect to the Liens granted hereunder or under any other
Loan Document as to those jurisdictions that are not
Uniform Commercial Code jurisdictions.
(ii) In the event that any Grantor acquires any Equipment and
in connection therewith grants a security interest in
such Equipment to any Person providing
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purchase money financing to such Grantor for such
Equipment and such security interest and financing does
not contravene any provision of the Credit Agreement and
prohibits the Lien of Agent therein, Agent, at the
request of such Grantor shall release its security
interest in such Equipment or shall subordinate such Lien
(as required by such Person) and shall at the cost and
expense of such Grantor execute such documents as may be
necessary to release such Lien of record; provided,
however, that upon any such prohibition ceasing to be
binding on such Grantor, the Lien of Agent in such
Equipment shall automatically be reinstated and such
Grantor shall immediately notify Agent and shall take all
steps as may be necessary to perfect such Lien of Agent
within twenty (20) Business Days following such
prohibition ceasing to be effective. On each Business Day
following the Closing Date each Grantor shall, until such
Grantor shall have complied with this Section 5(a)(ii) as
to all vehicles covered by a certificate of title and
owned by such Grantor on the Closing Date (other than
those subject to Encumbrances existing on the Closing
Date and securing Indebtedness under the Bank of America
Agreements or the Bob Mack Promissory Notes or other
purchase money Indebtedness), Borrower Representative
shall submit to Agent a list indicating each vehicle for
which a certificate of title and application to note the
Lien of Agent was submitted to the applicable motor
vehicle office on the immediately preceding Business Day
and indicating for each such vehicle its state of
registration, net book value, Appraised Net Orderly
Liquidation Value, VIN and date of such submission and
attaching to such list a copy of evidence of each such
submission.
(iii) Unless Agent shall otherwise consent in writing (which
consent may be revoked), such Grantor shall deliver to
Agent all Collateral consisting of negotiable Documents,
certificated securities, and Instruments (including
Intercompany Notes but excluding written lease agreements
governing Short-Term Rentals) (in each case, accompanied
by stock powers, allonges or other instruments of
transfer executed in blank) promptly after such Credit
Party receives the same. Upon acquiring any negotiable
Documents, certificated securities, Chattel Paper or
Instruments (including any Intercompany Notes but
excluding written lease agreements governing Short-Term
Rentals), in each case in excess of $250,000, such
Grantor will provide prompt written notice thereof to
Agent.
(iv) Such Grantor shall, in accordance with the terms of the
Credit Agreement, obtain waivers or subordinations of
Liens from landlords, bailees and mortgagees, and such
Grantor shall in all instances obtain signed
acknowledgements of Agent's Liens from bailees having
possession of such Grantor's Goods that they hold for the
benefit of Agent.
(v) To the extent required by Agent, such Grantor shall
obtain authenticated control letters in form and
substance reasonably satisfactory to Agent from each
issuer of uncertificated securities, securities
intermediary, or commodities intermediary issuing or
holding any financial assets or commodities to or for
such Grantor. Agent shall not terminate such Grantor's
access to any such financial assets or commodities except
during the continuation of an Event of Default.
(vi) As required by Section 6 of this Agreement, and in
accordance with Section 2.10 of the Credit Agreement,
such Grantor shall obtain a blocked account, lockbox or
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similar agreement with each bank or financial institution
holding a Deposit Account for such Grantor.
(vii) If such Grantor is or becomes the beneficiary of a letter
of credit, such Grantor shall promptly, and in any event
within two (2) Business Days after becoming a
beneficiary, notify Agent thereof and enter into a
tri-party agreement with Agent and the issuer and/or
confirmation bank with respect to Letter-of-Credit Rights
assigning such Letter-of-Credit Rights to Agent and
directing all payments thereunder to the Agent's account
identified in Section 1.4 of the Credit Agreement, all in
form and substance reasonably satisfactory to Agent.
(viii) Such Grantor shall take all steps necessary to grant
Agent control of all electronic Chattel Paper in
accordance with the Code and all "transferable records"
as defined in each of the Uniform Electronic Transactions
Act and the Electronic Signatures in Global and National
Commerce Act.
(ix) Such Grantor hereby irrevocably authorizes Agent at any
time and from time to time to file in any filing office
in any Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of such Grantor
or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within
the scope of Article 9 of the Code or such jurisdiction,
or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information
required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether such
Grantor is an organization, the type of organization and
any organization identification number issued to such
Grantor, and (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral
relates. Such Grantor agrees to furnish any such
information to Agent promptly upon request. Such Grantor
also hereby ratifies its authorization for Agent to have
filed in any Uniform Commercial Code jurisdiction any
initial financing statements or amendments thereto if
filed prior to the date hereof.
(x) Such Grantor shall promptly, and in any event within two
(2) Business Days after the same is acquired by it,
notify Agent of any Commercial Tort Claim (as defined in
the Code) acquired by it and unless otherwise consented
by Agent (which consent may be revoked), such Grantor
shall enter into a supplement to this Agreement, granting
to Agent a Lien in such commercial tort claim.
(b) Maintenance of Records. Such Grantor shall keep and maintain, at
its own cost and expense, satisfactory and complete records of
the Collateral, including a record of any and all payments
received and any and all credits granted with respect to the
Collateral and all other dealings with the Collateral. Such
Grantor shall mark its books and records pertaining to the
Collateral to evidence this Agreement and the Liens granted
hereby. If any Grantor retains possession of any Chattel Paper
or Instruments (including Intercompany Notes but excluding
written lease agreements governing Short-Term Rentals) with
Agent's consent, such Chattel Paper and Instruments (including
Intercompany Notes but excluding written lease agreements
governing Short-Term Rentals) shall be marked with the following
legend: "This writing and the obligations
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evidenced or secured hereby are subject to the security interest
of General Electric Capital Corporation, as Agent, for the
benefit of Agent and certain Lenders."
(c) Covenants Regarding Patent, Trademark and Copyright Collateral.
(i) Such Grantor shall notify Agent immediately if it knows
or has reason to know that any application or
registration relating to any Patent, Trademark or
Copyright (now or hereafter existing) may become
abandoned or dedicated, or of any adverse determination
or development (including the institution of, or any such
determination or development in, any proceeding in the
United States Patent and Trademark Office, the United
States Copyright Office or any court) regarding such
Grantor's ownership of any Patent, Trademark or
Copyright, its right to register the same, or to keep and
maintain the same.
(ii) In no event shall such Grantor, either directly or
through any agent, employee, licensee or designee, file
an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and
Trademark Office, the United States Copyright Office or
any similar office or agency without giving Agent prior
written notice thereof, and, upon request of Agent, such
Grantor shall execute and deliver any and all Patent
Security Agreements, Copyright Security Agreements or
Trademark Security Agreements as Agent may reasonably
request to evidence Agent's Lien on such Patent,
Trademark or Copyright, and the General Intangibles of
such Grantor relating thereto or represented thereby.
(iii) Such Grantor shall take all actions necessary or
reasonably requested by Agent to maintain and pursue (and
not abandon) each application, to obtain the relevant
registration and to maintain the registration of each of
the Patents, Trademarks and Copyrights (now or hereafter
existing), including the filing of applications for
renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and
cancellation proceedings, unless such Grantor shall
determine that such Patent, Trademark or Copyright is not
material to the conduct of its business.
(iv) In the event Grantor learns that any of the Patent,
Trademark or Copyright Collateral is infringed upon, or
misappropriated or diluted by a third party, each Grantor
shall comply with Section 5(a)(ix) of this Agreement.
Such Grantor shall, unless it shall reasonably determine
that such infringement, misappropriation or dilution of
Patent, Trademark or Copyright Collateral is not material
to the conduct of its business or operations, promptly
sue for infringement, misappropriation or dilution and to
recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other
actions as Agent shall deem appropriate under the
circumstances to protect such Patent, Trademark or
Copyright Collateral.
(d) Indemnification. In any suit, proceeding or action brought by
Agent or any Lender relating to any Collateral for any sum owing
with respect thereto or to enforce any rights or claims with
respect thereto, such Grantor will save, indemnify and keep
Agent and Lenders harmless from and against all expense
(including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, set-off, counterclaim,
recoupment or reduction of liability whatsoever of its Account
Debtors or other Person obligated on the Collateral, arising out
of a breach by such Grantor of any obligation
-11-
thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to, or in favor of, such obligor
or its successors from such Grantor, except in the case of Agent
or any Lender, to the extent such expense, loss, or damage is
attributable solely to the gross negligence or willful
misconduct of Agent or such Lender as finally determined by a
court of competent jurisdiction. All such obligations of each
Grantor shall be and remain enforceable against and only against
such Grantor and shall not be enforceable against Agent or any
Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, such Grantor will perform and comply with all
obligations in respect of the Collateral and all other
agreements to which it is a party or by which it is bound
relating to the Collateral.
(f) Limitation on Liens on Collateral. Such Grantor will not create,
permit or suffer to exist, and will defend the Collateral
against, and take such other action as is necessary to remove,
any Lien on any of the Collateral except Permitted Encumbrances,
and will defend the right, title and interest of Agent and
Lenders in and to any of such Grantor's rights under the
Collateral against the claims and demands of all Persons
whomsoever, except claims pursuant to the Permitted
Encumbrances.
(g) Limitations on Disposition. Such Grantor will not sell, license,
lease, transfer or otherwise dispose of any of the Collateral,
or attempt or contract to do so except as permitted by this
Agreement or the Credit Agreement.
(h) Further Identification of Collateral. Such Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent
reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports
in connection with the Collateral as Agent may reasonably
request, all in such detail as Agent may reasonably specify.
Grantor shall promptly notify Agent in writing upon acquiring
any interest hereafter in property that is of a type where a
security interest or Lien must be or may be registered, recorded
or filed under, or notice thereof given under, any federal
statute or regulation and that is not already covered by this
Agreement.
(i) Notices. Such Grantor will advise Agent promptly, in reasonable
detail (i) of any Lien (other than Permitted Encumbrances) or
claim made or asserted against any of the Collateral, and (ii)
of the occurrence of any other event which could reasonably be
expected to have a Material Adverse Effect on the aggregate
value of the Collateral or on the Liens created hereunder or
under any other Loan Document.
(j) Good Standing Certificates. If and whenever requested by Agent,
such Grantor shall provide to Agent a certificate of good
standing from its state of incorporation or organization.
(k) Organizational/Collateral Location Changes; No Reincorporation.
Such Grantor will give Agent at least thirty (30) days prior
written notice of any change required to be made to Schedule
IIIA, Schedule IIIB, Schedule IIIC, Schedule IIID or Schedule
IIIE. Without limiting the prohibitions on mergers involving any
Grantor as contained in the Credit Agreement, none of the
Grantors shall reincorporate or reorganize itself under the laws
of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof without the
prior written consent of Agent.
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(l) Terminations; Amendments Not Authorized. Such Grantor
acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to
any financing statement filed in favor of Agent without the
prior written consent of Agent and agrees that it will not do so
without the prior written consent of Agent, subject to such
Grantor's rights under Section 9-509(d)(2) of the Code.
(m) Authorized Terminations. Agent will promptly deliver to such
Grantor for filing or authorize such Grantor to prepare and file
termination statements and releases in accordance with Section
9.20 of the Credit Agreement.
6. BANK ACCOUNTS; COLLECTION OF ACCOUNTS AND PAYMENTS
Within the time periods specified in the Credit Agreement, each
Grantor shall enter into a bank agency and control agreement ("Bank
Agency and Control Agreement"), in a form specified by Agent, with
each financial institution with which each Grantor maintains from
time to time any Deposit Account. Each Bank Agency and Control
Agreement shall provide, among other things, that (a) all items of
payment deposited in each Deposit Account subject thereto shall be
held by the applicable financial institution as Agent or
bailee-in-possession for Agent, on behalf of itself and Lenders, (b)
the financial institution executing such agreement has no rights of
offset or recoupment of any other claim against any Deposit Account
subject thereto, as the case may be, other than for payment of its
services and other charges directly related to the administration of
each such Deposit Account and for returned checks or other items of
payment, and (c) to the extent provided below, the financial
institution will transfer all amounts held or deposited from time to
time in any such Deposit Account as Agent may so direct. Each
Grantor hereby grants to Agent, for the benefit of Agent and
Lenders, a continuing lien upon, and security interest in, all such
accounts and all funds at any time paid, deposited, credited or held
in such accounts (whether for collection, provisionally or
otherwise) or otherwise in the possession of such financial
institutions, and each such financial institution shall act as
Agent's agent in connection therewith. No Grantor shall establish
any Deposit Account with any financial institution unless prior
thereto Agent and such Grantor shall have entered into a Bank Agency
and Control Agreement satisfactory to Agent with such financial
institution.
To the extent requested by the Agent, each Grantor shall establish a
lockbox account ("Lockbox Account") and blocked accounts
(collectively, "Blocked Accounts") in such Grantor's name with such
banks as are reasonably acceptable to Agent ("Collecting Banks"),
subject to a Bank Agency and Control Agreement pursuant to which all
Account Debtors shall directly remit all payments on Accounts and in
which each Grantor will immediately deposit all cash payments
constituting proceeds of Collateral in the identical form in which
such payment was made, whether by cash or check. All payments
received in the lockboxes shall promptly, subject to Section 6.5 of
the Credit Agreement, (i) first, be applied to the outstanding
Obligations other than Letter of Credit Obligations, until paid in
full and (ii) second, following such payment in full, be remitted to
the Grantors. In addition, Agent, for the benefit of Agent and
Lenders, may establish one or more depository accounts at each
Collecting Bank or at a centrally located bank in the name of Agent
or any one or more Grantors as customer (collectively, the
"Concentration Accounts"). From and after receipt by any Collecting
Bank of written notice from Agent to such Collecting Bank that an
Event of Default has occurred and is continuing, all amounts held or
deposited from time to time in the Blocked Accounts held by such
Collecting Bank shall be transferred on a daily basis to Agent (as
Agent may direct) or any of the Concentration Accounts; provided,
that whether or not an Event of Default is continuing all accounts
credited to the Lockbox Account shall be transferred to Agent's
account on a daily basis. Subject to the foregoing, each Grantor
hereby agrees that all payments received by Agent or any Lender
whether by cash, check, wire transfer
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or any other instrument, made to such Blocked Accounts, Lockbox
Account or Concentration Accounts or otherwise received by Agent or
any Lender and whether on the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of
Lenders. Each Grantor, and any of its Affiliates, employees, agents
and other Persons acting for or in concert with such Grantor shall,
acting as trustee for Agent and Lenders, receive, as the sole and
exclusive property of Lenders, any moneys, checks, notes, drafts or
other payments relating to and/or constituting proceeds of Accounts
or other Collateral which come into the possession or under the
control of such Grantor or any Affiliates, employees, agent, or
other Persons acting for or in concert with such Grantor, and
immediately upon receipt thereof, such Grantor or such Persons shall
deposit the same or cause the same to be deposited in kind, in a
Blocked Account or other account subject to a Bank Agency and
Control Agreement.
If at any time a Collecting Bank is obligated to transfer to Agent
or any Concentration Account all amounts held or deposited in the
Blocked Accounts held by such Collecting Bank, no Grantor shall, and
no Grantor shall permit any Subsidiary to, accumulate or maintain
cash in any disbursement or payroll account, as of any date, in an
amount in excess of checks outstanding against such account as of
such date and amounts necessary to meet minimum balance
requirements.
Each Grantor shall close each of its deposit accounts (and promptly
establish replacement deposit accounts with a financial institution
which has executed, or is willing to execute, a Bank Agency and
Control Agreement) maintained with any financial institution which
is the subject of a notice from Agent that the creditworthiness of
such financial institution or any of its affiliates is no longer
acceptable to Agent, or that the operating performance, funds
transfer or availability procedures or performance with respect to
any Bank Agency and Control Agreement of such financial institution
is no longer acceptable in Agent's reasonable judgment.
7. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT
On the Closing Date each Grantor shall execute and deliver to Agent
a power of attorney (the "Power of Attorney") substantially in the
form attached hereto as Exhibit A. The power of attorney granted
pursuant to the Power of Attorney is a power coupled with an
interest and shall be irrevocable until the Termination Date. The
powers conferred on Agent, for the benefit of Agent and Lenders,
under the Power of Attorney are solely to protect Agent's interests
(for the benefit of Agent and Lenders) in the Collateral and shall
not impose any duty upon Agent or any Lender to exercise any such
powers. Agent agrees that (a) except for the powers granted in
clause (h) of the Power of Attorney, it shall not exercise any power
or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing, and (b) Agent shall account
for any moneys received by Agent in respect of any foreclosure on or
disposition of Collateral pursuant to the Power of Attorney provided
that none of Agent nor any Lender shall have any duty as to any
Collateral, and Agent and Lenders shall be accountable only for
amounts they actually receive as a result of the exercise of such
powers. NONE OF AGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE
RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY
POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES.
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8. REMEDIES: RIGHTS UPON DEFAULT
(a) In addition to all other rights and remedies granted to it under
this Agreement, the Credit Agreement, the other Loan Documents
and under any other instrument or agreement securing, evidencing
or relating to any of the Obligations, if any Event of Default
shall have occurred and be continuing, Agent may exercise all
rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, each Grantor expressly
agrees that in any such event Agent, without demand of
performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public
or private sale) to or upon any Grantor or any other Person (all
and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code and
other applicable law), may forthwith (personally or through its
agents) enter upon the premises where any Collateral is located
through self-help, without judicial process, without first
obtaining a final judgment or giving any Grantor or any other
Person notice and opportunity for a hearing on Agent's claim or
action and may take possession of, collect, receive, assemble,
process, appropriate, remove and realize upon the Collateral, or
any part thereof, and may forthwith sell, lease, license,
assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver said Collateral (or contract to
do so), or any part thereof, in one or more parcels at a public
or private sale or sales, at any exchange at such prices as it
may deem acceptable, for cash or on credit or for future
delivery without assumption of any credit risk. Agent or any
Lender shall have the right upon any such public sale or sales
and, to the extent permitted by law, upon any such private sale
or sales, to purchase for the benefit of Agent and Lenders, the
whole or any part of said Collateral so sold, free of any right
or equity of redemption, which equity of redemption each Grantor
hereby releases. Such sales may be adjourned and continued from
time to time with or without notice. Agent shall have the right
to conduct such sales on each Grantor's premises or elsewhere
and shall have the right to use each Grantor's premises without
charge for such time or times as Agent deems necessary or
advisable.
If any Event of Default shall have occurred and be continuing,
each Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at a place or places
designated by Agent which are reasonably convenient to Agent and
such Grantor, whether at such Grantor's premises or elsewhere.
Without limiting the foregoing, Agent shall also have the right
to require that each Grantor store and keep any Collateral
pending further action by Agent, and while Collateral is so
stored or kept, provide such guards and maintenance services as
shall be necessary to protect the same and to preserve and
maintain Collateral in good condition. Until Agent is able to
effect a sale, lease, license or other disposition of
Collateral, Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its
value or for any other purpose deemed appropriate by Agent.
Agent shall not have any obligation to any Grantor to maintain
or preserve the rights of any Grantor as against third parties
with respect to Collateral while Collateral is in the possession
of Agent. Agent may, if it so elects, seek the appointment of a
receiver or keeper to take possession of Collateral and to
enforce any of Agent's remedies (for the benefit of Agent and
Lenders), with respect to such appointment without prior notice
or hearing as to such appointment. Agent shall apply the net
proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Obligations as
provided in the Credit Agreement, and only after so paying over
such net proceeds, and after the payment by Agent of any other
amount required by any provision of law, need Agent account for
the surplus, if any, to any Grantor. To the maximum extent
permitted
-15-
by applicable law, each Grantor waives all claims, damages, and
demands against Agent or any Lender arising out of the
repossession, retention or sale of the Collateral except such as
arise solely out of the gross negligence or willful misconduct
of Agent or such Lender as finally determined by a court of
competent jurisdiction. Each Grantor agrees that ten (10) days
prior notice by Agent of the time and place of any public sale
or of the time after which a private sale may take place is
reasonable notification of such matters. Notwithstanding any
such notice of sale, Agent shall not be obligated to make any
sale of Collateral. In connection with any sale, lease, license
or other disposition of Collateral, Agent may disclaim any
warranties that might arise in connection therewith and Agent
shall have no obligation to provide any warranties at such time.
Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any attorneys'
fees or other expenses incurred by Agent or any Lender to
collect such deficiency.
(b) Except as otherwise specifically provided herein, each Grantor
hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(c) To the extent that applicable law imposes duties on Agent to
exercise remedies in a commercially reasonable manner, each
Grantor acknowledges and agrees that it is not commercially
unreasonable for Agent (i) to fail to incur expenses reasonably
deemed significant by Agent to prepare Collateral for
disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for
disposition, (ii) if not required by other law, to fail to
obtain governmental or third party consents for the collection
or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Account
Debtors or other Persons obligated on Collateral or to remove
Liens on or any adverse claims against Collateral, (iv) to
exercise collection remedies against Account Debtors and other
Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or
media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other Persons, whether
or not in the same business as any Grantor, for expressions of
interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in
the disposition of Collateral, whether or not the Collateral is
of a specialized nature, (viii) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets
of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather
than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase
insurance or credit enhancements to insure Agent against risks
of loss, collection or disposition of Collateral or to provide
to Agent a guaranteed return from the collection or disposition
of Collateral, or (xii) to the extent deemed appropriate by
Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in
the collection or disposition of any of the Collateral. Each
Grantor acknowledges that the purpose of this Section 8(c) is to
provide non-exhaustive indications of what actions or omissions
by Agent would be commercially reasonable in Agent's exercise of
remedies against the Collateral and that other actions or
omissions by Agent shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 8(c).
Without limitation upon the foregoing, nothing contained in this
Section 8(c) shall be construed to grant any rights to any
Grantor or to impose any duties on Agent that would
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not have been granted or imposed by this Agreement or by
applicable law in the absence of this Section 8(c).
(d) Neither Agent nor any Lender shall be required to make any
demand upon, or pursue or exhaust any of their rights or
remedies against, any Grantor, any other obligor, guarantor,
pledgor or any other Person with respect to the payment of the
Obligations or to pursue or exhaust any of their rights or
remedies with respect to any Collateral therefor or any direct
or indirect guarantee thereof. Neither Agent nor any Lender
shall be required to marshal the Collateral or any guarantee of
the Obligations or to resort to the Collateral or any such
guarantee in any particular order, and all of its and their
rights hereunder or under any other Loan Document shall be
cumulative. To the extent it may lawfully do so, each Grantor
absolutely and irrevocably waives and relinquishes the benefit
and advantage of, and covenants not to assert against Agent or
any Lender, any valuation, stay, appraisement, extension,
redemption or similar laws and any and all rights or defenses it
may have as a surety now or hereafter existing which, but for
this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any
court, or privately under the power of sale conferred by this
Agreement, or otherwise.
9. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL
For the purpose of enabling Agent to exercise rights and remedies
under Section 8 hereof (including, without limiting the terms of
Section 8 hereof, in order to take possession of, hold, preserve,
process, assemble, prepare for sale, market for sale, sell or
otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor
hereby grants to Agent, for the benefit of Agent and Lenders, an
irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Grantor) to use, license or
sublicense any Intellectual Property now owned or hereafter acquired
by such Grantor, and wherever the same may be located, and including
in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof and an
irrevocable license (exercisable without payment of rent or other
compensation to such Grantor) to use and occupy all real estate
owned or leased by such Grantor; provided, however, that if and to
the extent that the grant of license to Agent would result in a
violation of any agreements relating to the Intellectual Property or
the real estate or cause any such agreement to be void or voidable,
the license granted hereunder shall be deemed limited to only such
license or rights as Grantors may be authorized to give without
consent under such agreements without breaching or voiding such
agreements.
10. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL
Agent and each Lender shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither Agent nor
any Lender shall have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent
or nominee of Agent or such Lender, or any income thereon or as to
the preservation of rights against prior parties or any other rights
pertaining thereto. Agent shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in
the value thereof, by reason of the act or omission of any
warehousemen, carrier, forwarding agency, consignee or other agent
or bailee selected by Agent in good faith.
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11. REINSTATEMENT
This Agreement shall remain in full force and effect and continue to
be effective should any petition be filed by or against any Grantor
for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or
any significant part of any Grantor's assets, and shall continue to
be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
12. SURETYSHIP WAIVERS BY GRANTOR; OBLIGATIONS ABSOLUTE
(a) Except as expressly provided herein, each Grantor waives demand,
notice, protest, notice of acceptance of this Agreement, notice
of loans made, credit extended, collateral received or delivered
or other action taken in reliance hereon and all other demands
and notices of any description thereof, all in such manner and
at such time or times as Agent may deem advisable. Agent shall
have no duty as to the collection or protection of the
Collateral or any income thereon, nor as to the preservation of
rights against prior parties, nor as to the preservation of any
rights pertaining thereto beyond the safe custody thereof.
(b) All rights of Agent hereunder, the Security Interests and all
obligations of each Grantor hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document,
any agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing,
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document, or any other
agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release
or amendment or waiver of or consent under or departure from or
any acceptance of partial payment thereon and or settlement,
compromise or adjustment of any Obligation or of any guarantee,
securing or guaranteeing all or any of the Obligations, or (d)
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, such Grantor in respect of the
Obligations or this Agreement.
13. EXPENSES AND ATTORNEY'S FEES
Without limiting any Grantor's obligations under the Credit
Agreement or the other Loan Documents, Grantors agree, jointly and
severally, to promptly pay all fees, costs and expenses (including
reasonable attorneys' fees and expenses and allocated costs of
internal legal staff) incurred in connection with (a) protecting,
storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, (b) creating, perfecting, maintaining
and enforcing Agent's Liens and (c) collecting, enforcing, retaking,
holding, preparing for disposition, processing and disposing of
Collateral.
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14. NOTICES
Any notice or other communication required shall be in writing
addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or
U.S. mail and shall be deemed to have been given: (a) if delivered
in person, when delivered; (b) if delivered by fax, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. New
York Time; (c) if delivered by overnight courier, one (1) Business
Day after delivery to the courier properly addressed; or (d) if
delivered by U.S. mail, four (4) Business Days after deposit with
postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to any Grantor: c/o PENHALL COMPANY
1801 W. Penhall Way
Anaheim, California 92801
Attn: Chief Financial Officer
Fax No.: (714) 778-5638
With a copy to: DECHERT LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attn: Gary L. Green, Esq.
Fax No.: (215) 994-2222
If to Agent or GE Capital: GENERAL ELECTRIC CAPITAL CORPORATION
335 Madison Avenue, 12th Floor
New York, NY 10017
Attn: Penhall Account Officer
Fax: (212) 983-8767
With a copy to: GENERAL ELECTRIC CAPITAL CORPORATION
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attn: Corporate Counsel
Corporate Financial Services -
Merchant Banking
Fax: (203) 316-7899
and
GENERAL ELECTRIC CAPITAL CORPORATION
500 West Monroe Street
Chicago, Illinois 60661
Attn: Corporate Counsel
Corporate Financial Services -
Merchant Banking
Fax: (312) 441-6876
15. SEVERABILITY
The invalidity, illegality, or unenforceability in any jurisdiction
of any provision under the Loan Documents shall not affect or impair
the remaining provisions in the Loan Documents.
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16. NO WAIVER; CUMULATIVE REMEDIES
Neither Agent nor any Lender shall by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by
Agent of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which Agent would
otherwise have had on any future occasion. No failure to exercise
nor any delay in exercising on the part of Agent or any Lender, any
right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any
rights and remedies provided by law. None of the terms or provisions
of this Agreement may be waived, altered, modified or amended except
by an instrument in writing, duly executed by Agent and each
Grantor.
17. LIMITATION BY LAW
All rights, remedies and powers provided in this Agreement may be
exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of
this Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this
Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of
any applicable law.
18. TERMINATION OF THIS AGREEMENT
Subject to Section 11 hereof, this Agreement shall terminate upon
the Termination Date. Following the termination of this agreement,
Agent shall, upon reasonable request, and at the sole cost and
expense of Grantors, execute such termination statements and other
releases (in form and substance reasonably satisfactory to Agent)
with respect to security granted hereunder, and Agent shall at such
time transfer any Instrument or Chattel Paper or other item of
Collateral delivered to the Agent hereunder to the Grantors, without
recourse and without representation of warranty.
19. SUCCESSORS AND ASSIGNS
This Agreement and all obligations of each Grantor hereunder shall
be binding upon the successors and permitted assigns of such Grantor
(including any debtor-in-possession on behalf of such Grantor) and
shall, together with the rights and remedies of Agent, for the
benefit of Agent and Lenders, hereunder, inure to the benefit of
Agent and Lenders, all future holders of any instrument evidencing
any of the Obligations and their respective successors and permitted
assigns except that Grantors may not assign any of their rights or
obligations hereunder without the written consent of all Lenders
which assignment without such consent shall be void. No sales of
participations, other sales, assignments, transfers or other
dispositions of any agreement governing or instrument evidencing the
Obligations or any portion thereof or interest therein shall in any
manner impair the Lien granted to Agent, for the benefit of Agent
and Lenders, hereunder.
20. COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts
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together shall constitute but one in the same instrument. This
Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto.
21. GOVERNING LAW
(a) THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES WHICH SHALL BE
DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
(b) EACH GRANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN NEW YORK COUNTY, STATE OF NEW YORK
AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. EACH GRANTOR HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE UPON SUCH GRANTOR BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH
GRANTOR, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE
SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN
POSTED. IN ANY LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE
RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS OF GRANTORS, CREDIT PARTIES OR ANY OF THEIR AFFILIATES
SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING AGENTS OF GRANTORS
OR SUCH CREDIT PARTIES FOR PURPOSES OF ALL APPLICABLE LAW OR
COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR
TESTIMONY (WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE).
GRANTORS AND CREDIT PARTIES AGREE THAT AGENT'S OR ANY LENDER'S
COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE
ANY OF THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT
ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE USED IN THAT
PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. GRANTORS AND
CREDIT PARTIES IN ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE
EFFORTS TO PRODUCE IN ANY SUCH DISPUTE RESOLUTION PROCEEDING, AT
THE TIME AND IN THE MANNER REQUESTED BY AGENT OR ANY LENDER, ALL
PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER
FORM) OR OTHER THINGS UNDER THEIR CONTROL AND RELATING TO THE
DISPUTE.
22. WAIVER OF JURY TRIAL
EACH GRANTOR HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY
AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH GRANTOR
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ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, AND THAT AGENT HAS RELIED ON THE WAIVER IN
ENTERING INTO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE
DEALINGS. EACH GRANTOR WARRANTS AND REPRESENTS THAT SUCH GRANTOR HAS
HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL
COUNSEL, AND THAT SUCH GRANTOR KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS.
23. HEADINGS
Section and subsection headings are included herein for convenience
of reference only and shall not constitute a part of this Agreement
for any other purposes or be given substantive effect.
24. NO STRICT CONSTRUCTION
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
25. ADVICE OF COUNSEL
Each of the parties represents to each other party hereto that it
has discussed this Agreement and, specifically, the provisions of
Section 21 and Section 22, with its counsel.
26. BENEFIT OF LENDERS
All Liens granted or contemplated hereby shall be for the benefit of
Agent and Lenders, and all proceeds or payments realized from
Collateral in accordance herewith shall be applied to the
Obligations in accordance with the terms of the Credit Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.
PENHALL COMPANY,
AS A GRANTOR
By: ____________________________________
Name: _____________________________
Title: _____________________________
BOB MACK CO., INC.,
AS A GRANTOR
By: ____________________________________
Name: _____________________________
Title: _____________________________
PENHALL LEASING, L.L.C.,
AS A GRANTOR
BY: PENHALL COMPANY, ITS SOLE MEMBER
By: ____________________________________
Name: _____________________________
Title: _____________________________
PENHALL INTERNATIONAL CORP.,
AS A GRANTOR
By: ____________________________________
Name: _____________________________
Title: _____________________________
PENHALL INVESTMENTS, INC.,
AS A GRANTOR
By: ____________________________________
Name: _____________________________
Title: _____________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, AS AGENT
By: ____________________________________
Name: _____________________________
Title: _____________________________