1
EXHIBIT 10.16
FOURTH AMENDMENT AND WAIVER OF
CREDIT AGREEMENT AND GUARANTY
FOURTH AMENDMENT AND WAIVER OF CREDIT AGREEMENT AND GUARANTY dated as
of December 11, 1995 ("Fourth Amendment and Waiver") among BROOKWOOD COMPANIES
INCORPORATED, a Delaware corporation (the "Borrower"), KENYON INDUSTRIES, INC.,
a Delaware corporation ("Kenyon"), BROOKWOOD LAMINATING, INC., a Delaware
corporation ("Brookwood Laminating"), (Kenyon Industries and Brookwood
Laminating each a "Guarantor" and collectively, the "Guarantors"), and THE
CHASE MANHATTAN BANK, N.A. ("Chase"), as a Bank, and Chase, as Agent for the
Banks (as defined in the Credit Agreement referred to below) (in such capacity,
together with its successors in such capacity, the "Agent").
PRELIMINARY STATEMENT. The Borrower, Kenyon, Chase and the Agent have
entered into a Credit Agreement and Guaranty dated as of December 9, 1992, as
amended by the First Amendment to Credit Agreement and Guaranty dated as of
March 31, 1993, as further amended by the Second Amendment to Credit Agreement
and Guaranty dated as of September 27, 1994, and as further amended by the
Third Amendment to Credit Agreement and Guaranty, Waiver and Line Letter dated
as of June 23, 1995 (as so amended, the "Credit Agreement"). Any term used in
this Fourth Amendment and Waiver and not otherwise defined in this Fourth
Amendment and Waiver shall
Page 25
2
have the meaning assigned to such term in the Credit Agreement.
The Borrower, each Guarantor, Chase and the Agent have agreed to amend
and waive certain provisions of the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 4 hereof, hereby amended as
follows:
(a) The following definitions are added in their proper
alphabetical order:
"Fourth Amendment and Waiver" means the Fourth
Amendment and Waiver the Credit and Guaranty dated as of
December 11, 1995 among the Borrower, each Guarantor, Chase
and the Agent.
"Brookwood Laminating Security Agreement" means the
Brookwood Laminating Security Agreement in the form of Exhibit
A to the Fourth Amendment and Waiver.
(b) The definitions of "Guarantor" and "Security Agreements" are
each amended in their entirety to read as follows:
"Guarantor(s)" means Kenyon or Brookwood
Laminating, or both as the context may require.
"Security Agreements" means, collectively, the
Borrower Pledge Agreement, the Borrower Security Agreement,
the Hallwood Pledge Agreement, the Kenyon Security Agreement,
and the Brookwood Laminating Security Agreement.
2 Page 26
3
(c) Section 10.04, Investments, is amended by adding after
"Kenyon" in the last line thereof the following: "or Brookwood Laminating".
SECTION 2. Guaranty. Brookwood Laminating agrees to be and is,
effective as of the date hereof, and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, a Guarantor under the
Credit Agreement and, as such, agrees to be bound by the terms and provisions
of the Credit Agreement applicable to a Guarantor. In addition, the Borrower
also agrees that Brookwood Laminating is a Guarantor.
SECTION 3. Waiver. Because the Borrower failed to deliver the
consolidated and consolidating balance sheet of the Borrower and its
Consolidated Subsidiaries as of the July 31, 1995 Fiscal Year end and the
consolidated and consolidating statement of income and retained earnings,
statement of changes in stockholder's equity and statement of cash flows of the
Borrower and its Consolidated Subsidiaries for such Fiscal Year, there is an
Event of Default under Section 9.08(1), Annual Financial Statements, of the
Credit Agreement.
The Borrower has requested that the Bank waive such Event of
Default. Upon the satisfaction of the conditions precedent set forth in Section
4 hereof, the Bank waives such Event of Default. The Bank does not waive any
future noncompliance with Section 9.08(1).
3 Page 27
4
SECTION 4. Conditions of Effectiveness. This Fourth Amendment
and Waiver shall become effective as of the date of this Fourth Amendment and
Waiver when and if the Agent shall have received on or before such date each
of the following documents, in form and substance satisfactory to the Agent and
its counsel, and each of the following conditions has been fulfilled:
(1) Fourth Amendment and Waiver. This Fourth Amendment and Waiver
duly executed by the Borrower, each Guarantor, Chase and the Agent;
(2) Evidence of Due Organization of Brookwood Laminating.
Certified copies, dated the date hereof, of the Certificate of Incorporation
and By-Laws of Brookwood Laminating and all amendments thereto;
(3) Evidence of All Corporate Action of Brookwood Laminating.
Certified copies, dated the date hereof, of all corporate action taken by
Brookwood Laminating, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of this Fourth Amendment
and Waiver and each of the other documents Brookwood Laminating is delivering
in connection with this Fourth Amendment and Waiver;
(4) Incumbency and Signature Certificate of Brookwood Laminating.
A certificate, dated the date hereof, of the Secretary of Brookwood Laminating,
certifying the names and true signatures of the officers of Brookwood
Laminating, authorized to sign the Loan Documents to which it is a party
4 Page 28
5
and the other documents to be delivered pursuant to this Fourth Amendment and
Waiver;
(5) Good Standing Certificates. A certificate, dated within ten
(10) days of the date hereof, from the Secretary of State (or other appropriate
official) of the jurisdiction of incorporation of Brookwood Laminating
certifying as to the due incorporation and good standing of Brookwood
Laminating and certificates, dated within ten (10) days of the date hereof,
from the Secretary of State (or other appropriate official) of each other
jurisdiction where Brookwood Laminating is required to be qualified to conduct
business, certifying that Brookwood Laminating is duly qualified to do such
business and is in good standing in such state;
(6) Brookwood Laminating Security Agreement. The Brookwood
Laminating Security Agreement duly executed by Brookwood Laminating together
with (a) financing statements (UCC-1) to be filed under the Uniform Commercial
Code of all jurisdictions necessary or, in the opinion of the Agent or any
Bank, desirable to perfect the Lien created by the Brookwood Laminating
Security Agreement; (b) duly executed copies of financing statements (UCC-3) to
be filed under the Uniform Commercial Code of all jurisdictions necessary, or
in the opinion of the Agent or any Bank, desirable to terminate any Liens in
favor or any party other than the Agent; and (c) Uniform Commercial Code
searches identifying all of the financing statements on file with respect to
the
5 Page 29
6
Borrower in all jurisdictions referred to under (a), including the financing
statements filed by the Agent against the Borrower, indicating that no party
other than the Agent claims an interest in any of the Collateral;
(7) Amendment to Borrower Pledge Agreement. The execution and
delivery of a second amendment to the Borrower Pledge Agreement pursuant to
which the Borrower grants a Lien on the stock of Brookwood Laminating, together
with the certificates representing the shares pledged by the Borrower pursuant
to such amendment and undated stock powers executed in blank for each such
certificate;
(8) Officer's Certificate. The following statements shall be true
and the Agent shall have received a certificate signed by a duly authorized
officer of the Borrower dated the date hereof stating that, after giving effect
to this Fourth Amendment and Waiver and the transactions contemplated hereby:
(a) The representations and warranties contained in each
of the Loan Documents are correct in all material
respects on and as of the date hereof as though made
on and as of such date; and
(b) No Default or Event of Default has occurred and is
continuing; and
(9) Other Documents. The Agent shall have received such other
approvals, opinions or documents as the Agent may reasonably request.
SECTION 5. Reference to and Effect on the Loan Documents. (a)
Upon the effectiveness of Section 1 hereof,
6 Page 30
7
on and after the date hereof each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof "herein" or words of like import, and each
reference in the other Loan Documents to the Credit Agreement, shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Fourth
Amendment and Waiver shall not operate as a waiver of any right, power or
remedy of the Banks or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents, and, except
as specifically provided herein, the Credit Agreement and each other Loan
Document shall remain in full force and effect and are hereby ratified and
confirmed.
SECTION 6. Costs, Expenses and Taxes. The Borrower agrees to
reimburse the Agent on demand for all out-of-pocket costs, expenses and
charges (including, without limitation, all fees and charges of external legal
counsel for the Agent) incurred by the Agent in connection with the
preparation, reproduction, execution and delivery of this Fourth Amendment and
Waiver and any other instruments and documents to be delivered hereunder. In
addition, the Borrower shall pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution and
delivery, filing or
7 Page 31
8
recording of this Fourth Amendment and Waiver and the other instruments and
documents to be delivered hereunder, and agrees to save the Banks and the
Agent harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
SECTION 7. Governing Law. This Fourth Amendment and Waiver
shall be governed by and construed in accordance with the laws of the State of
New York.
SECTION 8. Headings. Section headings in this Fourth Amendment
and Waiver are included herein for convenience of reference only and shall not
constitute a part of this Fourth Amendment and Waiver for any other purpose.
SECTION 9. Counterparts. This Fourth Amendment and Waiver may
be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute this
Fourth Amendment and Waiver by signing any such counterpart.
[INTENTIONALLY LEFT BLANK.]
8 Page 32
9
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment and Waiver to be duly executed as of the day and year first above
written.
BROOKWOOD COMPANIES INCORPORATED
By /s/ DUANE O. SCHMIDT
-----------------------------
Name: Duane 0. Schmidt
Title: Vice President Finance
KENYON INDUSTRIES, INC.
By /s/ DUANE O. SCHMIDT
-----------------------------
Name: Duane 0. Schmidt
Title: Treasurer and
Secretary
BROOKWOOD LAMINATING, INC.
By /s/ DUANE O. SCHMIDT
-----------------------------
Name: Duane 0. Schmidt
Title: Treasurer and
Secretary
9 Page 33
10
THE CHASE MANHATTAN BANK, N.A.,
as Agent
By /s/ JO ZALON MEER
-----------------------------
Name: Jo Zalon Meer
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
as Bank
By /s/ JO ZALON MEER
-----------------------------
Name: Jo Zalon Meer
Title: Vice President
10 Page 34
11
FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT
FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT, dated as of
December 11, 1995, made by BROOKWOOD COMPANIES INCORPORATED, a Delaware
corporation, (the "Borrower") to each of the Banks (as defined below) party to
the Credit Agreement (as defined below) and THE CHASE MANHATTAN BANK, N.A., as
Agent for the Banks (in such capacity, together with its successors in such
capacity, the "Agent").
PRELIMINARY STATEMENT. Reference is made to each of (1) the
Credit Agreement and Guaranty dated as of December 9, 1992 among the Borrower,
Kenyon Industries, Inc., and The Chase Manhattan Bank, N.A. ("Chase"), as a
Bank, and the Agent, as amended by the First Amendment to Credit Agreement and
Guaranty dated as of March 31, 1993, as further amended by the Second Amendment
to Credit Agreement and Guaranty dated as of September 27, 1994, as further
amended by the Third Amendment to Credit Agreement and Guaranty, Waiver and
Line Letter dated as of June 23, 1995, and as further amended by the Fourth
Amendment and Waiver of Credit Agreement and Guaranty dated as of December
11, 1995 (the Credit Agreement and Guaranty, as it may be further amended or
otherwise modified from time to time, being the "Credit Agreement") and (2) the
Stock Pledge Agreement dated as of December 9, 1992 made by the Borrower to
each of the Banks and the Agent (the "Pledge Agreement") Any term used
Page 35
12
herein and not otherwise defined herein shall have the meaning assigned to such
term in the Pledge Agreement.
The Borrower hereby advises the Banks and the Agent that it
owns all the issued and outstanding stock of Brookwood Laminating, Inc.
("Brookwood Laminating") and agrees to amend the Pledge Agreement as
hereinafter set forth to pledge all of such stock to each Bank and to the
Agent.
SECTION 1. Amendments to Pledge Agreement. The Pledge
Agreement is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 2 hereof, hereby amended by
deleting Schedule I thereto in its entirety and replacing it with Schedule I
hereto to reflect both the Borrower's ownership of the stock of Brookwood
Laminating and the Borrower's pledge thereof pursuant to the Pledge Agreement.
SECTION 2. Conditions of Effectiveness. This First Amendment
shall become effective as of the date of this First Amendment when and if the
Agent shall have received on or before such date each of the following
documents, in form and substance satisfactory to the Agent and its counsel, and
each of the following conditions has been fulfilled:
(1) First Amendment. This First Amendment duly executed
by the Borrower;
(2) Resolutions of the Borrower. Resolutions of the
Borrower's Board of Directors, authorizing the
2 Page 36
13
execution, delivery, and performance of this First Amendment; and
(3) Other Documents. The Agent shall have received such
other approvals, opinions or documents as the Agent may reasonably request.
SECTION 3. Reference to and Effect on the Loan Documents. (a)
Upon the effectiveness of Section 1 hereof, on and after the date hereof each
reference in the Pledge Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the other Loan
Documents to the Pledge Agreement, shall mean and be a reference to the Pledge
Agreement as amended hereby.
(b) Except as specifically amended above, the Pledge
Agreement and all other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
First Amendment shall not operate as a waiver of any right, power or remedy of
the Banks or the Agent under any of the Loan Documents, nor constitute a waiver
of any provision of any of the Loan Documents, and, except as specifically
provided herein, the Pledge Agreement and each other Loan Document shall remain
in full force and effect and are hereby ratified and confirmed.
SECTION 4. Costs, Expenses and Taxes. The Borrower agrees to
reimburse the Agent on demand for all out-of-pocket costs, expenses and
charges (including,
3 Page 37
14
without limitation, all fees and charges of external legal counsel for the
Agent) incurred by the Agent in connection with the preparation, reproduction,
execution and delivery of this First Amendment and any other instruments and
documents to be delivered hereunder. In addition, the Borrower shall pay any
and all stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery, filing or recording of this First
Amendment and the other instruments and documents to be delivered hereunder,
and agrees to save the Banks and the Agent harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees.
SECTION 5. Governing Law. This First Amendment shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 6. Headings. Section headings in this First Amendment
are included herein for convenience of reference only and shall not constitute
a part of this First Amendment for any other purpose.
IN WITNESS WHEREOF, the party hereto has caused this First
Amendment to be duly executed as of the day and year first above written.
BROOKWOOD COMPANIES INCORPORATED
By /s/ DUANE O. SCHMIDT
--------------------------------
Name: Duane O. Schmidt
Title: Vice President - Finance
4 Page 38
15
SECURITY AGREEMENT dated as of December 11, 1995 ("Security
Agreement"), made by BROOKWOOD LAMINATING, INC., a Delaware corporation (the
"Guarantor"), to each of the Banks (as defined below) party to the Credit
Agreement (as defined below) and The Chase Manhattan Bank, N.A., as agent for
the Banks (in such capacity, together with its successors in such capacity, the
"Agent").
PRELIMINARY STATEMENTS. 1. Reference is made to the Credit
Agreement and Guaranty dated as of December 9, 1992, among the Brookwood
Companies Incorporated (the "Borrower"), Kenyon Industries, Inc. and the other
guarantors signatory thereto, the banks party thereto (each a "Bank" and,
collectively, the "Banks") and the Agent, as amended by the First Amendment to
Credit Agreement and Guaranty dated as of March 31, 1993, as further amended by
the Second Amendment to Credit Agreement and Guaranty dated as of September 27,
1994, as further amended by the Third Amendment to Credit Agreement and
Guaranty, Waiver and Line Letter dated as of June 23, 1995, and as further
amended by the Fourth Amendment and waiver of Credit Agreement and Guaranty
dated as of December 11, 1995 (Credit Agreement and Guaranty, as it may
hereafter be amended or otherwise modified from time to time, being the "Credit
Agreement"). The terms defined in the Credit Agreement and not otherwise defined
in this Security Agreement which are used in this Security Agreement shall
have the meanings set forth in the Credit Agreement.
2. It is a condition precedent to the obligation of
Chase and the Banks to continue to provide the Credit Facilities to the
Borrower as provided in the Credit Agreement that the Guarantor shall have
granted the security interest contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce Chase and the Banks to continue to provide the Credit Facilities to
the Borrower as provided in the Credit Agreement, the Guarantor hereby agrees
as follows:
SECTION 1. Grant of Security. The Guarantor hereby grants to
each Bank and hereby grants to the Agent for the benefit of each Bank a Lien
in and on all of the Guarantor's right, title and interest in and to all of the
following, whether now owned or hereafter acquired or existing (the
"Collateral"):
Page 39
16
(a) All accounts, accounts receivable, contract rights,
chattel paper, instruments, acceptances, drafts, and other obligations of any
kind, whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services, together with all ledger sheets, files,
records and documents relating to any of the foregoing including all computer
records, programs, storage media and computer software useful or required in
connection therewith, and all rights now or hereafter existing in and to all
security agreements, leases, and other contracts securing or otherwise relating
to any such Receivables, and any and all such leases, security agreements and
other contracts (the "Receivables");
(b) All monies and claims for money due or to become due
to the Guarantor under any agreement pursuant to which the Guarantor sells,
assigns or transfers any of its Receivables to a factor under or pursuant to a
factoring agreement, including, without limitation, all Factoring Agreements
(any and all such monies and claims for money being the "Factor Credit
Balances");
(c) All equipment in all of its forms, wherever located,
including, without limitation, all machinery and other goods, furniture,
furnishings, fixtures, office supplies and all other tangible personal property
and all parts thereof and all accessions thereto, together with all parts,
fittings, special tools, alterations, substitutions, replacements and
accessions thereto (any and all such equipment, parts and accessions being the
"Equipment");
(d) Any and all documents, documents of title, shipping
documents, warehouse receipts, policies or certificates of insurance and other
documents accompanying or relating to any instrument (including, without
limitation, drafts, receipts, acceptances, teletransmissions and other written
demands for payment) drawn under any Letter of Credit, and any and all
inventory or other property or assets shipped under or pursuant to or in
connection with any such Letter of Credit or in any way relative thereto or to
any of such instruments drawn thereunder or documents or documents of title in
any way relative to or referred to in any such Letter of Credit (any and all
such documents, inventory and property being the "Inventory");
(e) All rights under all contracts or agreements to which
the Guarantor is a party (other than contracts or agreements which by their
terms expressly prohibit the granting of a Lien thereon);
2 Page 40
17
(f) All general intangibles, including but not limited to
good will and tax refunds, (the "General Intangibles); and
(g) All proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds which constitute property
of the types described in clauses (a) through (f) of this Section 1) and, to
the extent not otherwise included, all payments under insurance (whether or not
the Agent is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing items.
SECTION 2. Security for Guaranty Obligations. The Collateral
secures the prompt and complete payment when due of its Guaranty Obligations.
SECTION 3. Guarantor Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Guarantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Security Agreement had not been executed, (b) the exercise by
the Agent or any Bank of any of the rights hereunder shall not release the
Guarantor from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) neither the Agent nor any
Bank shall have any obligation liability under the contracts and agreements
included in the Collateral by reason of this Security Agreement, nor shall the
Agent or any Bank be obligated to perform any of the obligations or duties of
the Guarantor thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
SECTION 4. Representations and Warranties. The Guarantor
represents and warrants to the Agent and each Bank as follows:
(a) All of the Equipment and Inventory are located at the
places specified in Schedule I hereto. The chief place of business and chief
executive office of the Guarantor and the office where the Guarantor keeps its
records concerning Receivables and Factor Credit Balances are located at the
addresses specified on Schedule I hereto. All originals of all chattel paper
which evidence Receivables and Factor Credit Balances have been delivered to
the Agent. None of the Receivables or Factor Credit Balances is evidenced by a
promissory note or other instrument.
(b) The Guarantor owns the Collateral free and clear of
any Lien, except for (1) the Lien created by this
3 Page 41
18
Security Agreement and (2) Liens permitted pursuant to Section 10.03 of the
Credit Agreement. No effective financing statement or other instrument similar
in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Agent
relating to this Security Agreement.
(c) The Guarantor conducts no business under any names or
trade names other than Brookwood Laminating, Inc., and the Guarantor conducts
no business through or under the name of any Subsidiary, division or Affiliate.
(d) The Guarantor has exclusive possession and control of
the Equipment and Inventory.
(e) This Security Agreement creates a valid first
priority Lien in the Collateral, securing the payment of the Guaranty
Obligations, and except for the filing of financing statements under the
Uniform Commercial Code or comparable law of any jurisdiction necessary to
perfect such Lien, all other actions necessary or desirable to perfect and
protect such Lien have been duly taken.
(f) Except as referred to in Subsection (e) above, no
authorization, approval or other action by, and no notice to or filling with,
any Governmental Authority is required either (1) for the grant by the
Guarantor of the Lien granted hereby or for the execution, delivery or
performance of this Security Agreement by the Guarantor or of (2) for the
perfection of or the exercise by the Agent or any Bank of their respective
rights and remedies hereunder.
SECTION 5. Further Assurances. (a) The Guarantor agrees that
from time to time, at the expense of the Guarantor, the Guarantor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Agent or any of the
Banks may request, in order to perfect and protect any Lien granted or
purported to be granted hereby or to enable the Agent or any of the Banks to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, the Guarantor
will: (1) mark conspicuously each document and agreement included in the
Collateral and, at the request of the Agent or any of the Banks, each of its
records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Agent and all of the Banks indicating that such Collateral
is subject to the Lien granted hereby; (2) if any Receivable or Factor Credit
Balance shall be evidenced by a promissory note or other instrument or chattel
paper deliver such to the Agent duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and
4 Page 42
19
substance satisfactory to the Agent and all of the Banks; and (3) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the Agent
or any Bank may request, in order to perfect and preserve the Lien granted or
purported to be granted hereby.
(b) The Guarantor hereby authorizes the Agent and each of
the Banks to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of the Guarantor where permitted by law. A carbon, photographic or
other reproduction of this Security Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted bylaw.
(c) The Guarantor will furnish to the Agent and each of
the Banks from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent or any or the Banks may request, all in reasonable
detail.
(d) The Guarantor will defend the Collateral against all
claims and demands of all Persons (other than the Agent and the Banks) claiming
an interest therein. The Guarantor will pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent where there is a Good Faith Contest to the
validity thereof. In connection with any such Good Faith Contest the Guarantor
will, at the request of the Agent or any Bank, promptly provide a bond, cash
deposit or other security reasonably satisfactory to protect the Lien of
the Agent and the Banks should such Good Faith Contest be unsuccessful.
SECTION 6. As to Receivables and Factor Credit Balances. (a)
The Guarantor shall keep its chief place of business and chief executive office
and the office where it keeps its records concerning the Receivables and Factor
Credit Balances at the location therefor specified in Schedule I hereto or,
upon 30 days' prior written notice to the Agent and each Bank, at such other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to Receivables and Factor Credit Balances. The
Guarantor will hold and preserve such records and will permit representatives
of the Agent or any Bank to inspect and make abstracts from such records.
5 Page 43
20
(b) Except as otherwise provided in this subsection (b),
the Guarantor shall continue to collect, at its own expense, all amounts due or
to become due to the Guarantor under the Receivables. In connection with such
collections, the Guarantor may take (and, at the Agent's discretion, shall
take) such action as the Guarantor or the Agent may deem necessary or advisable
to enforce collection of the Receivables; provided, however, that the Agent
shall have the right at any time, upon the occurrence of a Default or Event of
Default upon written notice to the Guarantor of its intention to do so, to
notify the account debtors or obligors under any Receivables of the assignment
of such Receivables to the Agent and each of the Banks and to direct such
account debtors or obligor to make payment of all amounts due or to become due
to the Guarantor thereunder directly to the Agent and, upon such notification
and at the expense of the Guarantor, to enforce collection of any such
Receivables and to adjust, settle or compromise the amount or payment thereof,
in the same manner and to the same extent as the Guarantor might have done.
After receipt by the Guarantor of the notice from the Agent referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
instruments) received by the Guarantor in respect of the Receivables shall be
received in trust for the benefit of the Agent and all the Banks hereunder,
shall be segregated from other funds of the Guarantor and shall be forthwith
paid over to the Agent in the same form as so received (with any necessary
endorsement) to be held as Cash Collateral, or be applied as provided by
Section 13 (b), as determined by the Required Banks, and (2) the Guarantor
shall not adjust, settle or compromise the amount or payment of any Receivable
or release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon, other than any discount allowed for prompt payment.
(c) The Guarantor shall notify the account debtors or
obligors under any Factor Credit Balances of the assignment of such Factor
Credit Balances to the Agent and each of the Banks and shall direct such
account debtors or obligors to make payment of all amounts due or to become due
to the Guarantor thereunder directly to the Agent. The Agent shall have the
right, at the expense of the Guarantor, to enforce collection of any such
Factor Credit Balances and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as the Guarantor
might have done. All amounts and proceeds (including instruments) received by
the Guarantor in respect of the Factor Credit Balances shall be received in
trust for the benefit of the Agent and all the Banks hereunder, shall be
segregated from other funds of the Guarantor and shall be forthwith paid over
to the Agent in the same form as so received (with any necessary endorsement)
to be held as Cash Collateral, or be applied as provided by Section 13(b), as
6 Page 44
21
determined by the Required Banks. The Guarantor shall not adjust, settle or
compromise the amount or payment of any Factor Credit Balance or release wholly
or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
SECTION 7. As to Equipment and Inventory. The Guarantor shall:
(a) Keep the Equipment at the places therefor specified
in Schedule I hereto; import the Inventory only into the ports of entry
specified in Schedule I hereto; keep the Inventory at the places therefor
specified in Schedule I hereto (or, in each case, upon 30 days; prior written
notice to the Agent and each of the Banks, at such other places in
jurisdictions where all action required by Section 5 shall have been taken with
respect to the Equipment or Inventory, as applicable);
(b) Cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary wear and
tear excepted, and shall forthwith, or in the case of any loss or damage to any
of the Equipment as quickly as practicable after the occurrence thereof, make
or cause to be made all repairs, replacements, and other improvements in
connection therewith which are necessary or desirable to such end;
(c) Permit the Agent or any Bank or any agent thereof to
have access to the Inventory and Equipment for purposed of inspection;
(d) Promptly notify the Agent and each Bank in writing of
any material loss or damage to the Inventory or Equipment;
(e) Not sell, assign, lease, mortgage, transfer or
otherwise dispose of any interest in the Inventory or Equipment, except as
permitted in the Credit Agreement;
(f) Not use or permit the Inventory or Equipment to be
used for any unlawful purpose or in violation of any Law or for hire; and
(g) Not permit the Equipment to become a part of or to
be affixed to any real property of any Person.
SECTION 8. Insurance. (a) The Guarantor shall, at its own
expense, maintain insurance with respect to the Equipment and Inventory in such
amounts, against such risks, in such form and with such insurers, as shall be
satisfactory to the Agent and each of the Banks from time to time. Each policy
for: (1) liability insurance shall
7 Page 45
22
provide for all losses to be paid on behalf of the Agent and the Guarantor as
their respective interests may appear; and (2) property damage insurance shall
provide for all losses to be paid directly to the Agent. Each such policy shall
in addition: (1) name the Banks and the Agent as insured parties thereunder
(without any representation or warranty by or obligation upon the Agent or the
Banks) as their interests may appear; (2) contain the agreement by the insurer
that any loss thereunder shall be payable to the Agent notwithstanding any
action, inaction or breach of representation and warranty by the Guarantor; (3)
provide that there shall be no recourse against the Agent or any Bank for
payment of premiums or other amounts with respect thereto; and (4) provide that
at least thirty (30) days; prior written notice of amendment to, cancellation
of or lapse shall be given to the Agent and each Bank by the insurer. The
Guarantor shall, if so requested by the Agent or any Bank, deliver to the Agent
and the Banks original or duplicate policies of such insurance and, as often as
the Agent or any Bank may request, a report of a reputable insurance broker
with respect to such insurance. Further, the Guarantor shall, at the request of
the Agent or any Bank, duly execute and deliver instruments of assignment of
such insurance policies to comply with the requirements of Section 5 and cause
the respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance
maintained by the Guarantor pursuant to this Section 8 may be paid directly to
the Person who shall have incurred liability covered by such insurance. In case
of any loss involving damage to Equipment or Inventory when subsection (c) of
this Section 8 is not applicable, the Guarantor shall make or cause to be made
the necessary repairs to or replacements of such Equipment or Inventory, and
any proceeds of insurance maintained by the Guarantor pursuant to this Section
8 shall be paid to the Guarantor as reimbursement for the costs of such repairs
or replacements.
(c) Upon the occurrence of any Event of Default all
insurance payments in respect of such Equipment or Inventory shall be paid to
and applied by the Agent and the Banks as specified in Section 13(b).
SECTION 9. Transfer and Other Liens. The Guarantor shall not:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted in the Credit
Agreement.
8 Page 46
23
(b) Except as permitted in the Credit Agreement, create
or suffer to exist any Lien upon or with respect to any of the Collateral to
secure Debt of any Person.
SECTION 10. Agent Appointed Attorney-in-Fact. The Guarantor
hereby irrevocably appoints the Agent the Guarantor's attorney-in-fact, with
full authority in the place and stead of the Guarantor and in the name of the
Guarantor, the Agent or otherwise, after the occurrence of a Default or Event
of Default, from time to time in the Agent's discretion, to take any action and
to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to
the Agent pursuant to Section 8;
(b) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
(c) to receive, endorse, assign, and collect any and all
checks, notes, drafts and other negotiable and non-negotiable instruments,
documents and chattel paper, in connection with clause (a) or (b) above, and the
Guarantor waives notice of presentment, protest and non-payment of any
instrument, document or chattel paper so endorsed or assigned;
(d) to file any claims or take any action or institute
any proceedings which the Agent or any Bank may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights of
any Bank with respect to any of the Collateral; and
(e) to sell, transfer, assign or otherwise deal in or
with the Collateral or the proceeds or avails thereof, as fully and effectually
as if the Agent were the absolute owner thereof.
The Guarantor hereby ratifies and approves all acts of the
Agent, as its attorney in-fact, pursuant to this Section 10, and the Agent, as
its attorney in-fact, will not be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law. This power,
being coupled with an interest, is irrevocable so long as this Security
Agreement remains in effect.
The Guarantor also authorizes the Agent, at any time and from
time to time, to communicate in its own name with any party to any contract,
agreement or instrument
9 Page 47
24
included in the Collateral with regard to the assignment of such contract,
agreement or instrument and other matters relating thereto.
SECTION 11. Agent May Perform. If the Guarantor fails to
perform any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Guarantor under Section 14(b).
SECTION 12. The Agent's Duties. The powers conferred on the
Agent and each of the Banks hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except For the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Agent and the
Banks shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 13. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code (the "Code") in effect at that time (whether
or not the Code applies to the affected Collateral) and also may (i) require
the Guarantor to, and the Guarantor hereby agrees that it will at its expense
and upon the request of the Agent forthwith, assemble all or part of the
Collateral as directed by the Agent and make it available to the Agent at a
place to be designated by the Agent which is reasonably convenient to both
parties and (ii) to enter the premises where any of the Collateral is located
and take and carry away the same, by any of its representatives, with or
without legal process, to Agent's place of storage, and (iii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery and upon such other terms
as the Agent may deem commercially reasonable. The Guarantor agrees that, to
the extent notice of sale shall be required by law, at least five (5) days
notice to the Guarantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Agent may adjourn any
public or private sale from time to time by announcement
10 Page 48
25
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect or any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Agent, be held by the Agent as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the Agent
and each of the Banks pursuant to Section 14) in whole or in part by the Agent
against, all or any part of the Guaranty Obligations in such order as the Agent
shall elect. Any surplus of such cash or cash proceeds held by the Agent and
remaining after payment in full of all the Guaranty Obligations to the Agent
and all of the Banks shall be paid over to the Guarantor or to whomsoever may
be lawfully entitled to receive such surplus. If the proceeds of the sale of
the Collateral are insufficient to pay all the Guaranty Obligations the
Guarantor agrees to pay upon demand any deficiency to the Agent and each of the
Banks.
SECTION 14. Indemnity and Expenses. (a) The Guarantor agrees
to indemnify the Agent and each of the Banks from and against any and all
claims, losses and liabilities growing out of or resulting from this Security
Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from the Agent's or
such Bank's gross negligence or willful misconduct.
(b) The Guarantor will upon demand pay to the Agent and
each of the Banks the amount of any and all expenses, including the fees and
out of pocket disbursements of their counsel and of any experts and agents,
which the Agent or any of the Banks may incur in connection with (1) the
administration of this Security Agreement, (2) filing or recording fees
incurred in connection with this Security Agreement, (3) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (4) the exercise or enforcement of any
of the rights of the Agent or any of the Banks hereunder, or (5) the failure by
the Guarantor to perform or observe any of the provisions hereof. Neither the
Agent nor any Bank shall be liable to Guarantor for damages as a result of
delays, temporary withdrawals of the Equipment from service or other causes.
SECTION 15. Amendments; Etc. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by the
Guarantor herefrom shall in any event be effective unless the same shall be in
writing
11 Page 49
26
and signed by the Agent and the Required Banks, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 16. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to the
Guarantor, mailed or delivered by messenger or sent by facsimile, addressed to
it at the address of the Guarantor specified on the signature page hereof; if
to a Bank, mailed or delivered by messenger or sent by facsimile to it,
addressed to it at the address of such Bank specified in the Credit Agreement;
if to the Agent, mailed or delivered by messenger or sent by facsimile to it,
addressed to it at the address of the Agent specified in the Credit Agreement;
or as to any other party at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and other communications shall, when
mailed or delivered by messenger or sent by facsimile, respectively, be
effective when received in the mails or delivered to the messenger or sent by
facsimile, respectively, addressed as aforesaid.
SECTION 17. Continuing Lien; Transfer of Notes. This Agreement
shall create a continuing Lien in the Collateral and shall (1) remain in full
force and effect until payment in full of the Obligations (after the
Termination Date), (2) be binding upon the Guarantor, its successors and
assigns, and (3) inure to the benefit of the Agent and each Bank and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (3), subject to the terms of the Credit Agreement the
Agent and each Bank may assign or otherwise transfer all or a portion of its
rights and obligations under the Credit Agreement and the Credit Facility to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to the Agent or such Bank herein or
otherwise. Upon the payment in full of the Obligations (after the Termination
Date), the Lien granted hereby shall terminate and all rights to the Collateral
shall revert to the Guarantor. Upon any such termination, the Agent will, at
the Guarantor's expense, execute and deliver to the Guarantor such documents as
the Guarantor shall reasonably request to evidence such termination.
SECTION 18. Governing Law; Terms. This Security Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, except as required by mandatory provisions of law and except to the
extent that the validity or perfection of the Liens hereunder, or remedies
hereunder, in respect of any particular Collateral
12 Page 50
27
are governed by the laws of a jurisdiction other than the State of New York.
Unless otherwise defined herein or in the Credit Agreement, terms used in
Article 9 of the Uniform Commercial Code in the State of New York are used
herein as therein defined.
SECTION 19. Miscellaneous. This Security Agreement is in
addition to and not in other rights and remedies the Agent or any of the Banks
may have by virtue of any other instrument or agreement heretofore,
contemporaneously herewith or hereafter executed by Guarantor or by Law or
otherwise. If any provision of this Security Agreement is contrary to
applicable Law, such provision shall be deemed ineffective without invalidating
the remaining provisions hereof. If and to the extent that applicable Law
confers any rights or imposes any duties inconsistent with or in addition to
any of the provisions of this Security Agreement, the affected provision shall
be considered amended to conform thereto. Neither the Agent nor any Bank shall
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder. A waiver by the Agent or any Bank of any right or
remedy hereunder on any one occasion shall not be construed as a bar to or
waiver of any such right or remedy which the Agent or such Bank would have had
on any future occasion, nor shall the Agent or any Bank be liable for
exercising or failing to exercise any such right or remedy.
IN WITNESS WHEREOF, the Guarantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
BROOKWOOD LAMINATING, INC.
By /s/ DUANE O. SCHMIDT
-------------------------------
Name: Duane O. Schmidt
Title: Treasurer and Secretary
Address for Notices:
36 Sherman Avenue
Kenyon, Rhode Island 02836
13 Page 51
28
SCHEDULE I
to Security Agreement
Place of Business and Locations of Collateral
Chief Place of Business
and Chief Executive Office:
1425 Kingston Road
Peacedale, Rhode Island 02883
Locations of Records
Evidencing Receivables
and Factor Credit Balances:
36 Sherman Avenue
Kenyon, Rhode Island 02836
Locations of Equipment:
1425 Kingston Road
Peacedale, Rhode Island 02833
Locations of inventory:
1425 Kingston Road
Peacedale, Rhode Island 02883
Ports of Entry for Inventory:
Los Angeles, California
Boston, Massachusetts
New York, New York
Providence, Rhode Island
Page 52