SECURITY AGREEMENT
THIS AGREEMENT is executed as of March 31, 1995, by MAGNETEK, INC., a
Delaware corporation ("BORROWER/DEBTOR"), and the other undersigned debtors
("SUBSIDIARY/DEBTORS"), for the benefit of NATIONSBANK OF TEXAS, N.A., a
national banking association (in its capacity as Agent for the Lenders now or in
the future party to the Credit Agreement described below "SECURED PARTY").
Borrower/Debtor, Secured Party, and Lenders have executed the Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
dated as of March 31, 1995, and certain other Loan Documents. Borrower/Debtor
owns all of the issued and outstanding capital stock of each Subsidiary/Debtor,
except as disclosed on SCHEDULE 7.3 to the Credit Agreement. The execution and
delivery of this agreement are requirements to Secured Party's and Lenders'
execution of the Credit Agreement and other Loan Documents, are integral to the
transactions contemplated by the Loan Documents, and are conditions precedent to
Lenders' obligations to extend credit under the Credit Agreement.
ACCORDINGLY, for adequate and sufficient consideration, Borrower/Debtor and
Subsidiary/Debtors jointly and severally agree with Secured Party for the
benefit of Lenders as follows:
1. DEFINITIONS. Terms defined in the Credit Agreement or the UCC have
the same meanings when used -- unless otherwise defined -- in this agreement.
If the definition given a term in the Credit Agreement conflicts with the
definition given that term in the UCC, then the Credit Agreement definition
controls to the extent allowed by Law. If the definition given a term in
CHAPTER 9 of the UCC conflicts with the definition given that term in any other
chapter of the UCC, then the CHAPTER 9 definition controls. Furthermore, as
used in this agreement:
ACCOUNTS means, for each Debtor, all of its present and future accounts,
instruments, receivables, accounts receivable, chattel paper, documents, and
book debts arising from its sale or lease of goods or rendition of services,
including, without limitation, all present and future (a) amounts due to it from
a factor, (b) returned, reclaimed, refused, or repossessed goods, and (c) books
and records pertaining to, and security and guaranties for, any of the
foregoing.
BORROWER/DEBTOR is defined in the preamble to this agreement and includes,
without limitation, Borrower/Debtor, Borrower/Debtor as a debtor-in-possession,
and any receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower/Debtor's
assets under any Debtor Law.
COLLATERAL is defined in PARAGRAPH 4 below.
CREDIT AGREEMENT is defined in the recitals to this agreement.
DEBTORS means Borrower/Debtor and Subsidiary/Debtors.
FINANCING STATEMENT means a financing statement executed by each Debtor and
Secured Party for filing in the jurisdictions listed in SCHEDULE 6 to the Credit
Agreement, and in substantially the form of ANNEX 2 to this agreement.
INVENTORY means, for each Debtor, all of its present and future inventory,
including, without limitation, all present and future (a) materials, goods and
work-in-process, finished goods, and other tangible property held for sale or
lease or being processed for sale or lease in its present or future business,
whether to be furnished under contracts or used or consumed in that Debtor's
business, (b) documents (including documents of title) covering any of the
foregoing, and (c) such property the sale
or other disposition of which has given rise to accounts and which has not been
returned to or repossessed or stopped in transit by that Debtor.
OBLIGOR means any Person obligated with respect to any of the Collateral,
whether as a party to a contract, an account debtor, issuer of any securities,
or otherwise.
OBLIGATION means the "OBLIGATION," as defined in the Credit Agreement,
including, without limitation, all present and future indebtedness, liabilities,
and obligations of each Debtor arising under this agreement, and all present and
future costs, attorneys' fees, and expenses reasonably incurred by Secured Party
or any Lender to enforce any Debtor's or any other obligor's payment of any of
the Obligation, including, without limitation (to the extent lawful), all
present and future amounts that would become due but for the operation of
Sections 502 or 506 or any other provision of TITLE 11 of the UNITED STATES CODE
and all present and future accrued and unpaid interest (including, without
limitation, all post-petition interest if any Debtor voluntarily or
involuntarily becomes subject to any Debtor Law).
PLEDGED SECURITIES means, whether now owned or acquired in the future by
any Debtor, (a) all present and future shares of capital stock issued by any of
the following subsidiaries and (b) 65% of all present and future shares of
capital stock issued by MagneTek Europe, N.V., and in either case, including,
without limitation, all present and future increases, profits, combinations,
reclassifications, dividends, and substitutes and replacements for any of the
foregoing (SO LONG AS the Pledged Securities do not include more than the number
of voting shares required to be pledged under the Credit Agreement):
MagneTek Century Electric, Inc., MagneTek National Electric Coil,
Inc., MagneTek Ohio Transformer, Inc., MagneTek Electric, Inc.,
MagneTek Controls, Inc., MagneTek Tempe, Inc., MagneTek Credit
Corporation, MagneTek Leasing Corporation and MagneTek Airport
Systems, Inc.,
SECURED PARTY is defined in the preamble to this agreement and includes its
successor appointed under SECTION 13 of the Credit Agreement and acting as AGENT
for Lenders under the Loan Documents.
SECURITY INTEREST means the security interests granted and the transfers,
pledges, and assignments made under PARAGRAPH 2 below, which is a "LENDER LIEN,"
as defined in the Credit Agreement.
SUBSIDIARY/DEBTORS is defined in the preamble to this agreement.
UCC means the UNIFORM COMMERCIAL CODE as adopted in Texas or any other
applicable jurisdiction.
2. SECURITY INTEREST. To secure the prompt, unconditional, and complete
payment and performance of the Obligation when due, each Debtor jointly and
severally grants to Secured Party a security interest in the Collateral
identified for it in PARAGRAPH 4 below and jointly and severally pledges and
collaterally transfers and assigns that Collateral to Secured Party, all upon
and subject to the terms and conditions of this agreement. If the grant,
pledge, or collateral transfer or assignment of any specific item of the
Collateral is expressly prohibited by any contract, then the Security Interest
nonetheless remains effective to the extent allowed by UCC Section 9.318 or
other applicable Law but is otherwise limited by that prohibition.
3. NO ASSUMPTION OR MODIFICATION. The Security Interest is given as
security only in order to secure the prompt, unconditional, and complete payment
and performance of the Obligation
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when due. Neither Secured Party nor any Lender assumes or may become liable for
any Debtors' liabilities, duties, or obligations under or in connection with the
Collateral. Neither Secured Party's acceptance of this agreement nor its taking
any action in carrying out this agreement, constitutes Secured Party's approval
of the Collateral or Secured Party's assumption of any obligation under or in
connection with the Collateral. This agreement does not affect or modify any
Debtors' obligations with respect to any Collateral.
4. COLLATERAL. The term "COLLATERAL" means the following items and types
of property -- wherever located and now or in the future acquired or existing:
- For each Debtor, all of its Accounts, Inventory, and Pledged
Securities; and
- All cash and noncash proceeds of any other Collateral, including,
without limitation, all cash, accounts, general intangibles,
documents, instruments, chattel paper, goods, and any other property
received upon the sale or disposition of any other Collateral and all
insurance proceeds of any kind paid at any time in connection with any
other Collateral.
5. FRAUDULENT CONVEYANCE. Notwithstanding any contrary provision, each
Debtor agrees that, if -- but for the application of this paragraph -- any of
the Obligation or the Security Interest would constitute a preferential transfer
under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section
548, or a fraudulent conveyance or transfer under any state fraudulent
conveyance, fraudulent transfer, or similar Law in effect from time to time
(each a "FRAUDULENT CONVEYANCE"), then the Obligation and Security Interest
remains enforceable to the maximum extent possible without causing any of the
Obligation or the Security Interest to be a fraudulent conveyance, and this
agreement is automatically amended to carry out the intent of this paragraph.
6. REPRESENTATIONS AND WARRANTIES. Debtors jointly and severally
represent and warrant to Secured Party on behalf of Lenders that:
(a) CREDIT AGREEMENT. Each Debtor acknowledges that certain (a)
representations and warranties in the Credit Agreement are applicable to it or
its assets or operations and confirms that each such representation and warranty
is true and correct, (b) covenants, agreements, and other provisions in the
Credit Agreement (INCLUDING, WITHOUT LIMITATION, INDEMNIFICATION AND RELATED
PROVISIONS IN SECTION 8.12 OF THE CREDIT AGREEMENT) are applicable to it or are
imposed upon it and agrees to promptly and properly comply with or be bound by
each of them, AND (c) IT IRREVOCABLY CONSENTS AND APPROVES TO THE VENUE, SERVICE
OF PROCESS, AND WAIVER OF JURY TRIAL PROVISIONS OF SECTION 14.11 OF THE CREDIT
AGREEMENT.
(b) BORROWING BASE. Any item of Collateral submitted or represented
to Secured Party as being eligible under the Credit Agreement to be included in
the Borrowing Base fully meets the requirements for eligibility provided in the
Credit Agreement.
(c) BINDING OBLIGATION. This agreement creates a legal, valid, and
binding Lender Lien in and to the Collateral (subject to delivery to Secured
Party of the stock certificates for the Pledged Securities) in favor of Secured
Party and enforceable against the Debtor owning that Collateral. For Collateral
in which the Security Interest may be perfected by the filing of Financing
Statements, once those Financing Statements have been property filed in the
jurisdictions described on SCHEDULE 6 to the Credit Agreement, the Security
Interest in that Collateral will be fully perfected. For the Pledged
Securities, the taking by Secured Party of physical possession in Texas of the
stock certificates representing the Pledged Securities will perfect the Security
Interest in that Collateral. Once perfected, the Security Interest will
constitute a first-priority Lender Lien on the Collateral,
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subject only to Permitted Liens. The creation of the Security Interest does not
require the consent of any Person that has not been obtained.
(d) LOCATIONS. The attached ANNEX 1 accurately describes (i) the
location of each Debtor's principal place of business and chief executive
office, (ii) if different from CLAUSE (i), the one or more locations of its
books and records concerning its Accounts, (iii) the locations where any of its
Inventory (EXCEPT when temporarily in the hands of a third-party contractor for
processing and until sold in the ordinary course of business) is currently and
will -- SUBJECT TO PARAGRAPH 7(b) below -- in the future be maintained. EXCEPT
as stated in CLAUSE (III) above, each Debtor's Inventory is currently and will
be in its possession.
(e) ACCOUNTS. Each Debtor's Accounts (i) arise from its sales or
rendition of services, (ii) are due to that Debtor, and (iii) are not, if
represented to be eligible for inclusion in the Borrowing Base, subject to any
material setoff, counterclaim, defense, allowance, adjustment (OTHER THAN
discounts for prompt payment shown on the invoice), or material dispute,
objection, or complaint by any Obligor.
(f) SECURITIES. All Pledged Securities are duly authorized, validly
issued, fully paid, and non-assessable, and the transfer of them is not subject
to any restrictions OTHER THAN restrictions imposed by applicable Laws. The
Pledged Securities are approximately the maximum number of shares of each
Subsidiary that may be pledged without creating a material Tax obligation for
the Companies that would not otherwise exist. Copies of the certificates
evidencing the Pledged Securities of MagneTek Europe are annexed to this
agreement as ANNEX 4 (however, the failure of those copies to be accurate or
complete does not affect or impair the Security Interest in them).
(g) ADDITIONAL COLLATERAL. The foregoing representations and
warranties will be true and correct in all respects with respect to any
additional Collateral or additional specific descriptions of certain Collateral
delivered to Secured Party in the future by any Debtor.
The failure of any of these representations or warranties to be accurate and
complete does not impair the Security Interest in any Collateral.
7. COVENANTS. While any Lender is committed to lend or extend credit
under the Credit Agreement and until the Obligation are fully paid and
performed, each Debtor jointly and severally covenants and agrees with Secured
Party on behalf of Lenders that, without first obtaining Secured Party's written
notice of Determining Lenders' consent to the contrary:
(a) CREDIT AGREEMENT. Each Debtor shall promptly and fully comply
with and perform all covenants and agreements in the Credit Agreement that are
applicable to it or its assets or operations, each of which is ratified and
confirmed.
(b) CERTAIN RELOCATIONS AND CHANGES. Each Debtor shall give Secured
Party 30-days-written notice before any proposed (i) relocation of its principal
place of business or chief executive office, (ii) change of its name, (iii)
relocation of the place where its books and records concerning its Accounts are
kept, and (iv) relocation of any Collateral (OTHER THAN delivery of Inventory in
the ordinary course of business to third-party contractors for processing and
sales of Inventory in the ordinary course of business or as permitted by the
Credit Agreement) to a location not described on the attached ANNEX 1.
(c) ESTOPPEL AND OTHER AGREEMENTS AND MATTERS. Each Debtor shall:
(i) Within 30 days after the date of this agreement and at all
times after that time -- with respect to any of its Inventory having a
value of at least $1,500,000 that is
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from time to time delivered to any third-party contractor for processing in
the ordinary course of business -- deliver to Secured Party a bailee,
estoppel, and subordination agreement providing that such third-party
contractor holds that Inventory as Secured Party's bailee, subordinates to
the Security Interest all right, title, and interest it may have in and to
that Inventory, and covenants to keep that Inventory segregated and clearly
marked as being owned by that Debtor, which agreement must otherwise be in
form and substance reasonably acceptable to Secured Party and its special
counsel; and
(ii) EITHER (unless waived by Secured Party in its sole judgment
without requiring approval of any other Lender) (A) cause the landlord or
lessor for each location where any of its Inventory (OTHER THAN Inventory
with a fair market value not to exceed $1,500,000) is maintained to execute
and deliver to Secured Party an estoppel and subordination agreement in
substantially the form of the attached ANNEX 3 or such other form as may be
reasonably acceptable to Secured Party and its special counsel, OR (B)
deliver to Secured Party a legal opinion or other evidence (in each case
that is reasonably satisfactory to Secured Party and it special counsel)
that neither the applicable lease nor the Laws of the jurisdiction in which
that location is situated provide for contractual, common Law, or statutory
landlord's Liens that is senior to the Security Interest.
(d) OTHER NOTICES AND ACTIONS. Each Debtor shall promptly notify
Secured Party of (i) any change in any material fact or circumstance represented
or warranted by any Debtor with respect to any of the Collateral, and (ii) any
claim, action, or proceeding challenging the Security Interest or affecting
title to all or any material portion of the Collateral or the Security Interest
(and, at Secured Party's request, that Debtor shall appear in and defend any
such action or proceeding at that Debtor's expense). In case of any default or
event of default by any other party under or in connection with any material
portion (individually or collectively) of the Collateral, Debtor shall
immediately use reasonable efforts to remedy the same or immediately demand that
the same be remedied),
(e) RECORD OF COLLATERAL. Each Debtor shall maintain at its chief
executive office a current record of where all of its Collateral is located and
permit Secured Party or its representatives to inspect and make copies from
those records pursuant to the Credit Agreement and furnish to Secured Party upon
request, from time to time, such documents, lists, descriptions, certificates,
and other information necessary or helpful to keep Secured Party informed with
respect to the identity, location, status, condition, terms of, parties to, and
value of the Collateral.
(f) COLLATERAL IN TRUST. While a Default or Potential Default
exists, each Debtor shall upon request of Secured Party (unless prevented by
operation of Law from making that request, in which event each Debtor shall) (i)
hold in trust (and not commingle with its other assets) for Secured Party all of
its Collateral that is chattel paper, instruments, or documents of title at any
time received by it, (ii) promptly deliver that Collateral to Secured Party
unless Secured Party at its option gives Debtor written permission to retain any
of it, and (iii) cause each chattel paper, instrument, or document of title so
retained to be marked to state that it is assigned to Secured Party and each
instrument to be endorsed to the order of Secured Party (but failure to be so
marked or endorsed may not impair the Security Interest in any such Collateral).
(g) PERFORM OBLIGATION. Each Debtor shall perform all of its
material obligations under or in connection with all of its Collateral in
accordance with customary business practices.
(h) IMPAIRMENT OF COLLATERAL. No Debtor may do or permit any act
that is reasonably likely to adversely impair the value or usefulness any
material portion of any Collateral.
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8. REMEDIES UPON DEFAULT. While a Default exists, Secured Party is,
subject to Credit Agreement, entitled to exercise any one or more of the
following Rights.
(a) RIGHTS. Secured Party may exercise any and all Rights available
to a secured party under the UCC, in addition to any and all other Rights
afforded by this agreement and the other Loan Documents, at law, in equity, or
otherwise, including, without limitation (i) requiring Debtors to assemble
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to the applicable Debtor and
Secured Party, (ii) applying by appropriate judicial proceedings for appointment
of a receiver for Collateral, (iii) applying to the Obligation any cash held by
Secured Party under this agreement, (iv) reducing any claim to judgment, (v)
exercising the Rights of offset or banker's Lien against the interest of each
Debtor in and to every account and other property of each Debtor in Secured
Party's possession to the extent of the full amount of the Obligation, (vi)
foreclosing the Security Interest and any other Liens Secured Party may have or
otherwise realize upon any and all of the Rights Secured Party may have in and
to Collateral, and (vii) bringing suit or other proceedings before any Tribunal
either for specific performance of any covenant or condition contained in any of
the Loan Documents or in aid of the exercise of any Right granted to Secured
Party in any Loan Document.
(b) NOTICE. If any Collateral threatens to decline speedily in value
or is of the type customarily sold on a recognized market, Secured Party may
sell or otherwise dispose of that Collateral without notification,
advertisement, or other notice of any kind. Otherwise, reasonable notice of the
time and place of any public sale of the Collateral -- or reasonable
notification of the time after which any private sale or other intended
disposition of the Collateral is to be made -- shall be sent to Debtor and to
any other Person entitled to notice under the UCC. Notice sent or given not
less than ten calendar days prior to the taking of the action to which the
notice relates is reasonable notice. It is not necessary that the Collateral be
at the location of the sale.
(c) SALES OF SECURITIES. In connection with the sale of any
Collateral that is securities, Secured Party is authorized, but not obligated,
to limit prospective purchasers to the extent deemed necessary or desirable by
Secured Party to render that sale exempt from the registration and similar
requirements under applicable Laws, and no sale so made in good faith by Secured
Party may be deemed not to be "COMMERCIALLY REASONABLE" because so made.
(d) OTHER SALES. Secured Party's sale of less than all Collateral
does not exhaust Secured Party's Rights under this agreement and Secured Party
is specifically empowered to make successive sales until all Collateral is sold.
If the proceeds of a sale of less than all Collateral is less than the
Obligation, then this agreement and the Security Interest remain in full force
and effect as to the unsold portion of the Collateral just as though no sale had
been made. In the event any sale under this agreement is not completed or is,
in Secured Party's opinion, defective, that sale does not exhaust Secured
Party's Rights under this agreement, and Secured Party is entitled to cause a
subsequent sale or sales to be made. All statements of fact or other recitals
made in any bill of sale or assignment or other instrument evidencing any
foreclosure sale under this agreement -- whether about nonpayment of the
Obligation, the occurrence of any Default, Secured Party's having declared all
of the Obligation to be due and payable, notice of time, place, and terms of
sale and the properties to be sold having been duly given, or any other act or
thing having been duly done by Secured Party -- shall be taken as PRIMA FACIE
evidence of the truth of the facts so stated and recited. Secured Party may
appoint or delegate any one or more Persons as agent to perform any act or acts
necessary or incident to any sale held by Secured Party, including the sending
of notices and the conduct of sale, but such acts must be done in the name and
on behalf of Secured Party.
(e) OBLIGORS. While a Default exists, Secured Party may notify or
require each Obligor to make payment directly to Secured Party, and Secured
Party may take control of the proceeds paid to Secured Party. Until Secured
Party elects to exercise these Rights, each Debtor is
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authorized to collect and enforce the Collateral and to retain and expend all
payments made on Collateral. While Secured Party is entitled to and elects to
exercise these Rights, Secured Party has the Right in its own name or in the
name of the applicable Debtor to (i) compromise or extend time of payment with
respect to Collateral for such amounts and upon such terms as Secured Party may
reasonably determine, (ii) demand, collect, receive, receipt for, sue for,
compound, and give acquittance for any and all amounts due or to become due with
respect to Collateral, (iii) take control of cash and other proceeds of any
Collateral, (iv) endorse the applicable Debtor's name on any notes, acceptances,
checks, drafts, money orders, or other evidences of payment on Collateral that
may come into Secured Party's possession, (v) sign the applicable Debtor's name
on any invoice or bill of lading relating to any Collateral, on any drafts
against Obligors or other Persons making payment with respect to Collateral, on
assignments and verifications of accounts or other Collateral, and on notices to
Obligors making payment with respect to Collateral, (vi) send requests for
verification of obligations to any Obligor, and (vii) do all other acts and
things reasonably necessary to carry out the intent of this agreement. If any
Obligor fails to make payment on any Collateral when due while a Default exists,
Secured Party is authorized, in its sole discretion, either in its own name or
in the applicable Debtor's name, to take such action as Secured Party reasonably
shall deem appropriate for the collection of any amounts owed with respect to
Collateral or upon which a delinquency exists. However, Secured Party is
NEITHER (x) liable for its failure to collect, or for its failure to exercise
diligence in the collection of, any amounts owed with respect to Collateral
(EXCEPT for its own fraud, gross negligence, willful misconduct, or violation of
any Law), NOR (y) under any duty whatever to anyone except the applicable Debtor
and Lenders to account for funds that it shall actually receive under this
agreement. A receipt given by Secured Party to any Obligor is a full and
complete release, discharge, and acquittance to that Obligor, to the extent of
any amount so paid to Secured Party. While a Default exists, Secured Party may
apply or set off amounts paid and the deposits against any liability of the
applicable Debtor to Secured Party. Regarding the existence of any Default for
purposes of this agreement, each Debtor agrees that the Obligors on any
Collateral may rely upon written certification from Secured Party that a Default
exists.
(f) POWER-OF-ATTORNEY. Secured Party is deemed to be irrevocably
appointed as each Debtor's agent and attorney-in-fact with all Right to enforce
all of that Debtor's Rights under or in connection with the Collateral effective
and operable at all times while a Default exists. All reasonable costs,
expenses and liabilities incurred and all payments made by Secured Party as that
Debtor's agent and attorney-in-fact (including, without limitation, reasonable
attorney's fees and expenses) are considered a loan by Secured Party to that
Debtor that is repayable on demand, accrues interest at the Default Rate until
paid, and is part of the Obligation.
(g) APPLICATION OF PROCEEDS. While a Default exists, Secured Party
shall apply the proceeds of any sale or other disposition of Collateral in the
following order: (i) Payment of all its reasonable expenses incurred in
retaking, holding, and preparing any Collateral for disposition, in arranging
for such disposition, and in actually disposing of the same (all of which are
part of the Obligation); (ii) repayment of amounts reasonably expended by
Secured Party under PARAGRAPH 9 below; (iii) payment of the balance of the
Obligation in the order and manner specified in the Credit Agreement; and (iv)
delivery EITHER (A) to Borrower/Debtor for the account of all Debtors OR (B) as
a court of competent jurisdiction may direct.
9. OTHER RIGHTS.
(a) PERFORMANCE. If any Debtor fails to preserve the priority
(subject to Permitted Liens) of the Security Interest in any Collateral or
otherwise fails to perform any of its obligations under any Loan Document with
respect to any Collateral, then Secured Party may, at its option, but without
being required to do so, after five Business Days or earlier, if Secured Party
in its reasonable judgment deems it necessary, prosecute or defend any suits in
relation to the Collateral or take any other action that such Debtor is required
- - - -- but has failed -- to take. Any amount that is reasonably
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expended or paid by Secured Party in connection with the foregoing (including,
without limitation, court costs and reasonable attorneys' fees and expenses)
bears interest at the Default Rate from the date spent or incurred until repaid
and is payable (with that interest) by Debtors to Secured Party upon demand and
is part of the Obligation.
(b) COLLATERAL IN SECURED PARTY'S POSSESSION. If, while a Default
exists, any Collateral comes into Secured Party's possession, Secured Party may
use that Collateral for the purpose of preserving it or its value pursuant to
the order of a court of appropriate jurisdiction or in accordance with any other
Rights held by Secured Party in respect of that Collateral. Debtors jointly and
severally covenant to promptly reimburse and pay to Secured Party, at Secured
Party's request, the amount of all reasonable expenses, costs, Taxes, and other
charges incurred by Secured Party in connection with its custody and
preservation of that Collateral, all of which bear interest at the Default Rate
from the date spent or incurred until repaid and are (with that interest)
payable by Debtors to Secured Party upon demand and are part of the Obligation.
EXCEPT for Secured Party's own fraud, gross negligence, or willful misconduct
(i) the risk of accidental loss or damage to, or diminution in value of, any
Collateral is on Debtors, (ii) Secured Party has no liability for failure to
obtain or maintain insurance or to determine whether any insurance in effect is
adequate as to amount or risks insured, (iii) Secured Party has no duty to fix
or preserve Rights against any Obligors in respect of any Collateral and is
never liable for any failure to use diligence to collect any amount payable in
respect of any Collateral (OTHER THAN to account to Debtors and Lenders for what
Secured Party may actually collect or receive).
(c) RECORD OWNERSHIP OF SECURITIES. While a Default exists, Secured
Party may have any Collateral that is securities and that is in the possession
of Secured Party, or its nominee or nominees, registered in its name, or in the
name of its nominee or nominees, as pledgee.
(d) VOTING OF SECURITIES. As long as no Default exists, the
applicable Debtor may exercise all voting Rights pertaining to any Collateral
that is securities. While a Default exists, the Right to vote any Collateral
that is securities is vested exclusively in Secured Party. Accordingly, each
applicable Debtor irrevocably constitutes and appoints Secured Party as that
Debtor's proxy and attorney-in-fact -- effective only after notice to the
applicable Debtor while a Default exists but with full power of substitution --
to vote, and to act with respect to, any Collateral that is securities standing
in the name of that Debtor or with respect to which that Debtor is entitled to
vote and act. That proxy is coupled with an interest, is irrevocable, and
continues until the Obligation are fully paid and performed.
(e) CERTAIN PROCEEDS. The provisions of this CLAUSE (e) are
applicable only while a Default exists. Notwithstanding any contrary provision,
all dividends or distributions of property in respect of, and all proceeds of,
any Collateral that is securities -- whether those dividends, distributions, or
proceeds result from a subdivision, combination, or reclassification of the
outstanding capital stock of any issuer or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which any issuer may
be a party, or otherwise -- are part of the Collateral, shall, if received by
any Debtor, be held in trust for Secured Party's benefit, and shall immediately
be delivered to Secured Party (accompanied by proper instruments of assignment
or stock or bond powers executed by the applicable Debtor in accordance with
Secured Party's instructions) to be held subject to the terms of this agreement.
Any cash proceeds of any Collateral that come into Secured Party's possession
(including, without limitation, insurance proceeds) may, at Secured Party's
option, be applied in whole or in part to the Obligation (to the extent then
due), be fully or partially released to or under the written instructions of
that applicable Debtor for any general or specific purpose, or be fully or
partially retained by Secured Party as additional Collateral. Any cash
Collateral in Secured Party's possession may be invested by Secured Party in
certificates of deposit issued by Secured Party, any Lender, or any other state
or national bank having combined capital and surplus greater than $100,000,000
or in securities issued or guaranteed by the United States of America or any of
its
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agencies. Secured Party is never obligated to make any investment and never has
any liability to any Debtor or any Lender for any loss that may result from any
investment or non-investment. All interest and other amounts earned from any
investment may be dealt with by Secured Party in the same manner as other cash
Collateral.
(f) INDEMNIFICATION. DEBTORS JOINTLY AND SEVERALLY ASSUME ALL
LIABILITY FOR ALL COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE,
POSSESSION, MAINTENANCE, AND MANAGEMENT OF, ALL COLLATERAL (INCLUDING, WITHOUT
LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH, THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT) AND JOINTLY AND SEVERALLY AGREE TO
ASSUME LIABILITY FOR, AND TO INDEMNIFY AND HOLD SECURED PARTY, EACH LENDER, AND
THEIR RESPECTIVE REPRESENTATIVE (THE "INDEMNIFIED PARTIES") HARMLESS FROM AND
AGAINST, AND DEFEND EACH INDEMNIFIED PARTY AGAINST, ALL CLAIMS, CAUSES OF
ACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS AND DAMAGE TO
PROPERTY HOWSOEVER ARISING FROM OR INCIDENT TO SUCH USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT (WHETHER SUCH PERSONS BE AGENTS OR EMPLOYEES OF
DEBTOR OR OF THIRD PARTIES, OR SUCH DAMAGE BE TO PROPERTY OF DEBTOR OR OF
OTHERS) AND ALL CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES, INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES, HOWSOEVER ARISING OR
INCURRED BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO COLLATERAL OR ANY USE,
POSSESSION, MAINTENANCE, OR MANAGEMENT OF IT. (THE "INDEMNIFIED LIABILITIES").
HOWEVER, NO INDEMNIFIED PARTY IS ENTITLED TO INDEMNITY UNDER THIS PARAGRAPH FOR
ITS OWN GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD OR FOR ANY INDEMNIFIED
LIABILITY ARISING FROM ITS ACTIONS AFTER SECURED PARTY HAS FORECLOSED THE
SECURITY INTEREST OR ACCEPTED CONVEYANCE IN LIEU OF FORECLOSURE OR (EXCEPT FOR
THE PLEDGED SECURITIES) TAKEN POSSESSION OF ANY COLLATERAL. The provisions of
this paragraph survive the payment and performance of the Obligation and the
release of the Security Interest. The foregoing indemnity shall be subject to
the provisions of SECTION 8.12 of the Credit Agreement.
10. MISCELLANEOUS.
(a) TERM. This agreement terminates when no Lender has any
commitment to lend or extend credit under the Credit Agreement and the
Obligation are fully paid and performed. No Obligor on any Collateral is
obligated to inquire about the termination of this agreement and is fully
protected in making payments directly to Secured Party if SECTION 8(e) applies,
which payments Secured Party shall pay to Borrower/Debtor on behalf of Debtors
after termination of this agreement.
(b) NO RELEASE. Neither the Security Interest, any Debtor's
obligations, nor Secured Party's or any Lenders' Rights under this agreement are
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) The taking or accepting of any other
security or assurance for any Obligation; (ii) any release, surrender, exchange,
subordination, or loss of any security or assurance at any time existing in
connection with any Obligation; (iii) the modification of, amendment to, or
waiver of compliance with any terms of any other Loan Document without the
consent of Debtors EXCEPT as required in that Loan Document; (iv) any present or
future insolvency, bankruptcy, or lack of corporate or trust power of any party
at any time liable for the payment of any Obligation; (v) EXCEPT as specifically
required by any other Loan Document, any renewal, extension, or rearrangement of
the payment of any Obligation (either with or without notice to or consent of
any Debtor) or any adjustment, indulgence, forbearance, or compromise that may
be granted or given by Secured Party or any Lender to any Debtor; (vi) any
neglect, delay, omission, failure, or refusal of Secured Party or any Lender to
take or prosecute any action in connection with any agreement, document,
guaranty, or instrument evidencing, securing, or assuring the payment of any
Obligation; (vii) any failure of Secured Party or any Lender to notify any
Debtor of any renewal, extension, or assignment of any Obligation, or the
release of any security under any other document or instrument, or of any other
action taken or refrained from being taken by
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Secured Party or any Lender against any Debtor, or any new agreement between
Secured Party, any Lender, and any Debtor, it being understood that, except as
expressly required by the Credit Agreement, neither Secured Party nor any Lender
is required to give any Debtor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Obligation, including,
without limitation, notice of acceptance of this agreement or any Collateral
ever delivered to or for the account of Secured Party under this agreement;
(viii) the illegality, invalidity, or unenforceability of any Obligation against
any third party obligated with respect to it by reason of the fact that the
Obligation, or the interest paid or payable with respect to any of it, exceeds
the amount permitted by Law, the act of creating any of it is ULTRA VIRES, or
the officers, partners, or trustees creating any of it acted in excess of their
authority, or for any other reason; or (ix) if any payment by any party
obligated with respect to any Obligation is held to constitute a preference
under applicable Laws or for any other reason Secured Party or any Lender is
required to refund any payment on any Obligation or pay the amount of it to
someone else.
(c) WAIVERS. To the maximum extent lawful, except to the extent
expressly otherwise provided in this agreement or in any other Loan Document,
Debtors jointly and severally waive (i) any Right to require Secured Party or
any Lender to proceed against any other Person, to exhaust Rights in Collateral,
or to pursue any other Right that Secured Party or any Lender may have; (ii)
with respect to the Obligation, presentment and demand for payment, protest,
notice of protest and nonpayment, notice of acceleration, and notice of intent
to accelerate; and (iii) all Rights of marshaling in respect of any Collateral.
(d) FINANCING STATEMENT. Secured Party may at any time file this
agreement (or a carbon, photographic, or other reproduction of this agreement)
as a financing statement, but the failure of Secured Party to do so does not
impair the validity or enforceability of this agreement.
(e) INFORMATION. Except as otherwise provided by Law, Secured
Party's charge for furnishing each statement of account or each list of
Collateral is $10.00.
(f) LOAN DOCUMENT. This agreement is a Loan Document and is subject
to the applicable provisions of SECTIONS 1 and 14 of the Credit Agreement, all
of which are incorporated in this agreement by reference the same as if set
forth in this agreement verbatim.
(g) COMMUNICATIONS. For purposes of SECTION 14.2 of the Credit
Agreement, each Debtor's address and telecopy number are the same as
Borrower/Debtor's.
(h) AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this agreement is valid unless it is in writing and is signed by the party
against whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 14.8 of the Credit Agreement.
(i) ENTIRETY. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH
ANY DEBTOR IS PARTY REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
(j) SECURED PARTY AND LENDERS. Secured Party is the agent for each
Lender under the Credit Agreement. The Security Interest and all Rights granted
to Secured Party under or in connection with this agreement are for each
Lender's ratable benefit. Secured Party may, without the joinder of any Lender,
exercise any Rights in Secured Party's or Lenders' favor under or in connection
with this agreement, including, without limitation, conducting any foreclosure
sales and executing full or partial releases of, amendments or modifications to,
or consents or waivers under this agreement.
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Secured Party's and each Lender's Rights and obligations VIS-A-VIS each other
may be subject to one or more separate agreements between those parties.
However, no Debtor need inquire about any such agreement or is subject to any
terms of it. Therefore, neither any Debtor nor its successors or assigns is
entitled to any benefits or provisions of any such separate agreement or is
entitled to rely upon or raise as a defense any party's failure or refusal to
comply with the provisions of it.
(k) PARTIES. This agreement benefits Secured Party, Lenders, and
their respective successors and assigns and binds each Debtor and its successors
and assigns. Upon appointment of any successor AGENT under the Credit
Agreement, all of the Rights of Secured Party under this agreement automatically
vests in that new AGENT as successor Secured Party on behalf of Lenders without
any further act, deed, conveyance, or other formality OTHER THAN that
appointment. The Rights of Secured Party and Lenders under this agreement may
be transferred with any assignment of the Obligation. The Credit Agreement
contains provisions governing assignments of the Obligation and of Rights and
obligations under this agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
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EXECUTED as of the date first stated above.
MAGNETEK, INC., AS BORROWER/DEBTOR
MAGNETEK CENTURY ELECTRIC, INC., MAGNETEK
ELECTRIC, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.,
MAGNETEK OHIO TRANSFORMER, INC.,
AS SUBSIDIARY/DEBTORS
By
--------------------------------------------
John Colling, Jr., Vice President and
Treasurer of all of the foregoing Companies
Secured Party executes this agreement in acknowledgement of PARAGRAPH 10(i)
above.
NATIONSBANK OF TEXAS, N.A., as Agent for Lenders
as SECURED PARTY
By
--------------------------------------------
Andrea P. Collias, Vice President
The undersigned agree that to the extent that any of the stock certificates
evidencing any of the capital stock that is included in the Collateral bear any
restrictive legend in respect of the transfer of those certificates, then, in
each case, the undersigned waive the requirements of those restrictive legends
in respect of the pledge of those shares of capital stock to Secured Party.
MAGNETEK CENTURY ELECTRIC, INC.,
MAGNETEK ELECTRIC, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.,
MAGNETEK OHIO TRANSFORMER, INC.,
MAGNETEK CONTROLS, INC.,
MAGNETEK TEMPE, INC.,
MAGNETEK CREDIT CORPORATION,
MAGNETEK EUROPE, N.V.,
MAGNETEK LEASING CORPORATION,
MAGNETEK AIRPORT SYSTEMS, INC.
AS SUBSIDIARY/DEBTORS
By
--------------------------------------------
John Colling, Jr., Vice President and
Treasurer of all of the foregoing Companies
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