EXHIBIT 10(xcv)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of December 17, 2002 by and among HAMILTON BEACH/PROCTOR-SILEX, INC., a Delaware
corporation (the "Company"), its U.S. Subsidiaries identified as U.S. Subsidiary
Borrowers on the signature pages hereto and any additional U.S. Subsidiaries of
the Company which become parties hereto from time to time (the "U.S. Subsidiary
Borrowers") (hereinafter, the Company and U.S. Subsidiary Borrowers are
collectively referred to as the "Obligors" and individually as a "Obligor"), and
WACHOVIA BANK, NATIONAL ASSOCIATION, in its capacity as the administrative agent
under the Credit Agreement referred to below (in such capacity, the
"Administrative Agent" or the "Agent").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement"), among the Company, the other Borrowers identified
therein, the Lenders party thereto from time to time, the Agent, and ABN AMRO
Bank N.V., Canada Branch, as Canadian Agent, the U.S. Lenders have agreed to
make U.S. Revolving Loans and to issue or participate in Letters of Credit under
the Credit Agreement and the Canadian Lenders have agreed to make Canadian
Revolving Loans and to create Bankers' Acceptances under the Credit Agreement
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement, the obligation of the U.S. Lenders to make their respective U.S.
Revolving Loans and to issue or participate in Letters of Credit under the
Credit Agreement and the Canadian Lenders to make Canadian Revolving Loans and
to create Bankers' Acceptances under the Credit Agreement that the Obligors
shall have executed and delivered this Security Agreement to the Agent for the
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the
Credit Agreement, and the following terms which are defined in the
Uniform Commercial Code from time to time in effect in the State of New
York (the "UCC") are used herein as so defined: Accessions, Accounts,
As-Extracted Collateral, Chattel Paper, Commercial Tort Claims,
Consumer Goods, Control, Deposit Accounts, Documents, Equipment, Farm
Products, Fixtures, General Intangibles, Goods, Instruments, Inventory,
Investment Property, Letter-of-Credit Rights,
Manufactured Homes, Proceeds, Securities Intermediary, Software,
Supporting Obligations and Tangible Chattel Paper. For purposes of this
Security Agreement, the term "Lender" shall include any Affiliate of
any Lender which has entered into a Lender Hedging Agreement (to the
extent the obligations of any Borrower thereunder constitute Secured
Obligations).
(b) In addition, the following terms shall have the
following meaning:
"Copyright Licenses": any written agreement providing for the
grant by or to any Obligor of any right under any Copyright including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Copyrights": (a) all copyrights in all Works, now existing or
hereafter created or acquired (and whether or not registered in the
United States and/or any other jurisdiction), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and
applications in the United States Copyright Office or in any similar
office or agency of any other country including, without limitation,
any thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
"Insurance Account": has the meaning ascribed thereto in
Section 7 hereof.
"Intellectual Property": all Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks, Trademark Licenses and all other
intellectual property of the Obligors.
"Material Intellectual Property": (a) the Intellectual
Property listed on Schedule 1.1B to the Credit Agreement and (b) all
Intellectual Property material to the business of an Obligor.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 1(b) hereto,
and (b) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Secured Obligations": (a) all of the Obligations, howsoever
evidenced, created, incurred or acquired, whether primary, secondary,
direct, contingent, or joint and several and (b) all reasonable
expenses and charges, legal and otherwise, incurred by the Agent and/or
the Lenders in collecting or enforcing any Obligation or in realizing
on or protecting any security therefor, including without limitation
the security granted hereunder.
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"Trademark License": means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
"Work": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code or under the legislation
of any other country.
2. Grant of Security Interest in the Collateral. To secure the
prompt payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Obligor hereby grants to the Agent, for the benefit of the Lenders, a
continuing security interest in, and a right to set off against, any and all
right, title and interest of such Obligor in and to the following, whether now
owned or existing or owned, acquired, or arising hereafter (collectively, the
"Collateral"):
(a) all Accounts;
(b) all cash and Cash Equivalents;
(c) all Chattel Paper;
(d) those certain Commercial Tort Claims of the Obligors
in which an Obligor is the claimant set forth on
Schedule 2(d) attached hereto (as such Schedule may
be updated from time to time by the Obligors);
(e) all Copyrights;
(f) all Copyright Licenses;
(g) all Deposit Accounts;
(h) all Documents;
(i) all Equipment;
(j) all Fixtures;
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(k) all General Intangibles;
(l) all Goods;
(m) all Instruments;
(n) the Insurance Account and all cash deposited therein
from time to time;
(o) all Inventory;
(p) all Investment Property (subject to the percentage
restrictions described in Section 2 of the Pledge
Agreement);
(q) all Letter-of-Credit Rights;
(r) the U.S. Lockbox Accounts, the Wachovia Clearing
Account, the Wachovia Account and any replacement or
successor accounts relating thereto;
(s) all Material Contracts and all such other agreements,
contracts, leases, licenses, tax sharing agreements
or hedging arrangements now or hereafter entered into
by an Obligor, as such agreements may be amended or
otherwise modified from time to time (collectively,
the "Assigned Agreements"), including without
limitation, (i) all rights of an Obligor to receive
moneys due and to become due under or pursuant to the
Assigned Agreements, (ii) all rights of an Obligor to
receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned
Agreements, (iii) claims of an Obligor for damages
arising out of or for breach of or default under the
Assigned Agreements and (iv) the right of an Obligor
to terminate the Assigned Agreements, to perform
thereunder and to compel performance and otherwise
exercise all remedies thereunder;
(t) all Patent Licenses;
(u) all Patents;
(v) all Software;
(w) all Supporting Obligations;
(x) all Trademarks;
(y) all Trademark Licenses;
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(z) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and
related data processing software (owned by such
Obligor or in which it has an interest) that at any
time evidence or contain information relating to any
Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon;
(aa) all other personal property of any kind or type
whatsoever owned by such Obligor; and
(bb) to the extent not otherwise included, all Accessions,
Proceeds and products of any and all of the
foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising, (ii) is not to be
construed as an assignment or sale of any Intellectual Property or a right to
use any Intellectual Property unless and until an Event of Default shall have
occurred and be continuing and (iii) shall not include any specific contract
rights to the extent the granting of a security interest therein is prohibited
by or would constitute a default under any agreement or document related thereto
(so long as such agreement is otherwise permitted under the Credit Agreement)
(but only to the extent such prohibition is enforceable under applicable law);
provided, however, that in no event, shall this provision have the effect of
limiting the "blanket" lien nature of the foregoing granting clause except with
respect to any such specific contract rights.
3. Provisions Relating to Accounts, Contracts and Agreements.
(a) Anything herein to the contrary notwithstanding, each
of the Obligors shall remain liable under each of its Accounts,
contracts and agreements to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such
Account or the terms of such contract or agreement. Neither the Agent
nor any Lender shall have any obligation or liability under any Account
(or any agreement giving rise thereto), contract or agreement by reason
of or arising out of this Security Agreement or the receipt by the
Agent or any Lender of any payment relating to such Account, contract
or agreement pursuant hereto, nor shall the Agent or any Lender be
obligated in any manner to perform any of the obligations of an Obligor
under or pursuant to any Account (or any agreement giving rise
thereto), contract or agreement, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any
Account (or any agreement giving rise thereto), contract or agreement,
to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or
times.
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(b) At any time and from time to time, the Agent shall
have the right, but not the obligation, to make test verifications of
the Accounts in any manner and through any medium that it reasonably
considers advisable, and the Obligors shall furnish all such assistance
and information as the Agent may require in connection with such test
verifications. Upon the Agent's request and at the expense of the
Obligors, the Obligors shall cause independent public accountants or
others satisfactory to the Agent to furnish to the Agent reports
showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts, to the extent provided for in the Credit
Agreement. The Agent in its own name or in the name of others may
communicate with account debtors on the Accounts to verify with them to
the Agent's satisfaction the existence, amount and terms of any
Accounts.
4. Representations and Warranties. Each Obligor hereby represents
and warrants to the Agent, for the benefit of the Lenders, on the Closing Date
and the date on which any Loan is made or Letter of Credit or Bankers'
Acceptance is issued, that:
(a) Chief Executive Office; Books and Records; Legal
Name; State of Formation. Each Obligor's chief executive office and
chief place of business are (and for the prior four months has been)
located at the locations set forth on Schedule 6.22 to the Credit
Agreement and each Obligor keeps its books and records at such
locations. Each Obligor's exact legal name is as shown in this Security
Agreement and its state of formation is (and for the prior four months
has been) the state set forth on Schedule 6.22 to the Credit Agreement.
No Obligor has in the past four months changed its name, been party to
a merger, consolidation or other change in structure or used any trade
name not disclosed on Schedule 6.23 to the Credit Agreement.
(b) Location of Tangible Collateral. The location of all
tangible Collateral owned by each Obligor is as shown on Schedule 6.22
to the Credit Agreement.
(c) Ownership. Each Obligor is the legal and beneficial
owner of its Collateral and has the right to pledge, sell, assign or
transfer the same.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of such Obligor and, when
properly perfected by filing or upon the Agent obtaining Control of
such Collateral, shall constitute a valid first priority, perfected
security interest in such Collateral, to the extent such security
interest can be perfected by filing or through Control under the UCC
(or equivalent local law), free and clear of all Liens except for
Permitted Liens.
(e) Consents. Except for the filing or recording of UCC
financing statements (or comparable Canadian filings, as applicable) or
obtaining Control to perfect the Liens created by this Security
Agreement that may be perfected through the filing of a UCC financing
statement (or comparable Canadian filing, as applicable) or obtaining
Control, no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator
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or Governmental Authority and no consent of any other Person
(including, without limitation, any stockholder, member or creditor of
such Obligor), is required (except as such have been duly obtained,
made or given, or will be duly obtained, made or given prior to or
contemporaneously with the granting of the security interest hereunder,
and are in full force and effect) (i) for the grant by such Obligor of
the security interest in the Collateral granted hereby or for the
execution, delivery or performance of this Security Agreement by such
Obligor or (ii) for the perfection of such security interest or the
exercise by the Agent of the rights and remedies provided for in this
Security Agreement (other than as may be required by laws affecting the
offering and sale of securities).
(f) Types of Collateral. None of the Collateral consists
of, or is the Proceeds of, As-Extracted Collateral, Consumer Goods,
Farm Products, Manufactured Homes or standing timber.
(g) Accounts. With respect to the Accounts of the
Obligors: (i) the goods sold and/or services furnished giving rise to
each Account are not subject to any security interest or Lien except
the first priority, perfected security interest granted to the Agent
herein and except for Permitted Liens; (ii) each Account and the papers
and documents of the applicable Obligor relating thereto are genuine
and in all material respects what they purport to be; (iii) each
Account arises out of a bona fide transaction for goods sold and
delivered (or in the process of being delivered) by an Obligor or for
services actually rendered by an Obligor, which transaction was
conducted in the ordinary course of the Obligor's business and was
completed in accordance with the terms of any documents pertaining
thereto; (iv) no Account of an Obligor is evidenced by any Instrument
or Chattel Paper unless such Instrument or Chattel Paper has been
endorsed over and delivered to, or submitted to the control of, the
Agent; (v) the amount of each Account as shown on the applicable
Obligor's books and records, and on all invoices and statements which
may be delivered to the Agent with respect thereto, is due and payable
to the applicable Obligor; (vi) to each of the Obligors' knowledge, the
account debtor with respect to each Account has the capacity to
contract; and (vii) no surety bond was required or given in connection
with any Account of an Obligor or the contracts or purchase orders out
of which they arose.
(h) Inventory. No Inventory of an Obligor is held by a
third party (other than a Credit Party) pursuant to a consignment, sale
or return, sale on approval or similar arrangement.
(i) Intellectual Property.
(i) Schedule 1(b) hereto includes all registered
and unregistered Copyrights, Patents and Trademarks owned by
or licensed (pursuant to a written license) by or to the
Obligors as of the date hereof.
(ii) Except as set forth on Schedule 1(b) hereto,
all Material Intellectual Property of each Obligor is valid,
subsisting, unexpired, enforceable
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and has not been abandoned, and each Obligor is legally
entitled to use each of its trade names.
(iii) Except as set forth on Schedule 1(b) hereto,
as of the date hereof, none of the Intellectual Property of
the Obligors is the subject of any licensing or franchise
agreement.
(iv) No holding, decision or judgment has been
rendered by any Governmental Authority which would limit,
cancel or question the validity of any Material Intellectual
Property of the Obligors, other than any such holding,
decision or judgment with respect to an immaterial portion of
any Patent application which application constitutes Material
Intellectual Property.
(v) No action or proceeding is pending seeking
to limit, cancel or question the validity of any Material
Intellectual Property of the Obligors, other than any such
action or proceeding which the Obligor and the Agent determine
to be frivolous in their reasonable independent judgment.
(vi) All applications pertaining to the Material
Intellectual Property of each Obligor have been duly and
properly filed, and all registrations or letters pertaining to
the Material Intellectual Property of such Obligor have been
duly and properly filed and issued.
(vii) No Obligor has made any assignment or
agreement in conflict with the security interest of the Agent
in the Intellectual Property of each Obligor hereunder.
(j) Documents, Instruments and Chattel Paper. All
Documents, Instruments and Chattel Paper describing, evidencing or
constituting Collateral are, to the Obligors' knowledge, complete,
valid, and genuine, in all material respects.
(k) Equipment. With respect to each Obligor's Equipment:
(i) such Obligor has good and marketable title thereto or a valid
leasehold interest therein; and (ii) all such Equipment is in normal
operating condition and repair, other than ordinary wear and tear and
normal obsolescence, and is suitable for the uses to which it is
customarily put in the conduct of such Obligor's business.
(l) Restrictions on Security Interest. Other than as
shown on Schedule 4(l) hereto, none of the Obligors is party to any
material license or any material lease that contains legally
enforceable restrictions on the granting of a security interest therein
unless such restrictions have been waived in writing to the
satisfaction of the Agent.
5. Covenants. Each Obligor covenants that so long as any of the
Secured Obligations remain outstanding or any Credit Document or Lender Hedging
Agreement is in
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effect or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims
and demands of all third parties claiming an interest therein, and keep
the Collateral free from all Liens, except for Permitted Liens. Neither
the Agent nor any Lender authorizes any Obligor to, and no Obligor
shall, sell, exchange, transfer, assign, lease or otherwise dispose of
the Collateral or any interest therein, except as permitted under the
Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in
good order, condition and repair in all material respects; not use the
Collateral in violation of the provisions of this Security Agreement;
not use the Collateral in violation of the provisions of any policy
insuring the Collateral; and not use the Collateral in violation of the
provisions of any applicable statute, law, bylaw, rule, regulation or
ordinance, unless such violations, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(c) Possession or Control of Certain Collateral. If (i)
any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument, Tangible Chattel Paper
or Supporting Obligation or (ii) if any Collateral shall be stored or
shipped subject to a Document or (iii) if any Collateral shall consist
of Investment Property in the form of certificated securities,
immediately notify the Agent of the existence of such Collateral and,
at the request of the Agent, deliver such Instrument, Chattel Paper,
Supporting Obligation, Document or Investment Property to the Agent,
duly endorsed in a manner satisfactory to the Agent, to be held as
Collateral pursuant to this Security Agreement. If any Collateral shall
consist of Deposit Accounts, Chattel Paper in electronic form,
Letter-of-Credit Rights or uncertificated Investment Property, execute
and deliver (and, with respect to any Collateral consisting of
uncertificated Investment Property, cause the Securities Intermediary,
if any, with respect to such Investment Property to execute and
deliver) to the Agent, upon the Agent's request, all control
agreements, assignments, instruments or other documents as reasonably
requested by the Agent for the purposes of obtaining and maintaining
Control of such Collateral within the meaning of the UCC (or equivalent
local law).
(d) Changes in Corporate Structure or Location. Not,
without providing 30 days prior written notice to the Agent and without
filing (or confirming that the Agent has filed) such amendments to any
previously filed financing statements as the Agent may require, (i)
alter its corporate existence or, in one transaction or a series of
transactions, merge into or consolidate with any other entity, or sell
all or substantially all of its assets, (ii) change its state of
incorporation or formation, (iii) change its registered corporate name,
(iv) change the location of its chief executive office and chief place
of business (as well as its books and records) from the locations set
forth on Schedule 6.22 to the Credit Agreement (as such Schedule may be
updated from time to time pursuant to Section 7.21 of the Credit
Agreement) or (v) change the location of its Collateral from the
locations set
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forth for such Obligor on Schedule 6.22 to the Credit Agreement (as
such Schedule may be updated from time to time pursuant to Section 7.21
of the Credit Agreement).
(e) Inspection. Allow the Agent or its representatives to
visit and inspect the Collateral as set forth in Section 7.12 of the
Credit Agreement.
(f) Perfection of Security Interest. Authorize the Agent
to prepare and file such financing statements (including renewal
statements and in lieu statements) or amendments thereof or supplements
thereto or other instruments as the Agent may from time to time deem
necessary or appropriate in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC (or equivalent
local law). Any financing statement filed by the Agent may contain a
general description of the collateral covered thereby, as permitted by
the UCC, which may state that the security interest attaches to all
personal property of the debtor. Each Obligor shall also execute, if
necessary, and deliver to the Agent such agreements, assignments or
instruments (including affidavits, notices, reaffirmations and
amendments and restatements of existing documents, as the Agent may
reasonably request) and do all such other things as the Agent may
reasonably deem necessary or appropriate (i) to assure to the Agent its
security interests hereunder are perfected, including (A) such
financing statements (including renewal statements and in lieu
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder
in accordance with the UCC and any other personal property security
legislation in the appropriate state(s) or province(s), (B) with regard
to Copyrights, a Notice of Grant of Security Interest in Copyrights for
filing with the United States Copyright Office or in any similar office
or agency of the United States or any other country, substantially in
the form of Schedule 5(f)(i) attached hereto, (C) with regard to
Patents, a Notice of Grant of Security Interest in Patents for filing
with the United States Patent and Trademark Office or in any similar
office or agency of the United States or any other country,
substantially in the form of Schedule 5(f)(ii) attached hereto and (D)
with regard to Trademarks, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark
Office or in any similar office or agency of the United States or any
other country, substantially in the form of Schedule 5(f)(iii) attached
hereto, (ii) to consummate the transactions contemplated hereby and
(iii) to otherwise protect and assure the Agent of its rights and
interests hereunder. To that end, each Obligor hereby makes,
constitutes and appoints the Agent, its nominee or any other person
whom the Agent may designate, as such Obligor's attorney-in-fact with
full power and for the limited purpose to sign in the name of such
Obligor any such financing statements, or amendments and supplements to
financing statements, in lieu statements, renewal financing statements,
notices or any similar documents which in the Agent's reasonable
discretion would be necessary, appropriate or convenient in order to
perfect and maintain perfection of the security interests granted
hereunder, such power, being coupled with an interest, being and
remaining irrevocable so long as any of the Secured Obligations remain
outstanding or any Credit Document or Lender Hedging Agreement is in
effect or any Letter of Credit shall remain outstanding and until all
of the Commitments shall have terminated. Each
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Obligor hereby agrees that a carbon, photographic or other reproduction
of this Security Agreement or any such financing statement is
sufficient for filing as a financing statement by the Agent without
notice thereof to such Obligor wherever the Agent may in its sole
discretion desire to file the same. In the event for any reason the law
of any jurisdiction other than New York, Canada or any province thereof
becomes or is applicable to the Collateral of any Obligor or any part
thereof, or to any of the Secured Obligations, such Obligor agrees to
execute and deliver all such instruments and to do all such other
things as the Agent in its sole discretion reasonably deems necessary
or appropriate to preserve, protect and enforce the security interests
of the Agent under the law of such other jurisdiction (and, if an
Obligor shall fail to do so promptly upon the request of the Agent,
then the Agent may execute any and all such requested documents on
behalf of such Obligor pursuant to the power of attorney granted
hereinabove). Each Obligor agrees to mark its books and records to
reflect the security interest of the Agent in the Collateral.
(g) Collateral Held by Warehouseman, Bailee, etc. If any
Collateral valued at $100,000 or more is at any time in the possession
or control of a warehouseman, bailee or any agent or processor of such
Obligor, (i) notify the Agent of such possession, (ii) notify such
Person of the Agent's security interest for the benefit of the Lenders
in such Collateral, and (iii) assist the Agent in obtaining executed
Acknowledgment Agreements from such Person.
(h) Treatment of Accounts. (i) Comply with all provisions
of the Credit Agreement relating to the establishment and maintenance
of the Lockboxes, (ii) comply with all reporting requirements set forth
in the Credit Agreement with respect to Accounts, (iii) not grant or
extend the time for payment of any Account, or compromise or settle any
Account for less than the full amount thereof, or release any person or
property, in whole or in part, from payment thereof, or allow any
credit or discount thereon, other than as normal and customary in the
ordinary course of an Obligor's business and (iv) maintain at its
principal place of business a record of Accounts consistent with
customary business practices.
(i) Covenants Relating to Inventory.
(i) Maintain, keep and preserve its Inventory in
good salable condition at its own cost and expense, other than
a de minimis amount of Inventory which, in the ordinary course
of the Obligors' business, fails to be so maintained, kept and
preserved.
(ii) Comply with all reporting requirements set
forth in the Credit Agreement with respect to Inventory.
(iii) If any of the Inventory is at any time
evidenced by a document of title, promptly upon request by the
Agent, deliver such document of title to the Agent.
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(j) Covenants Relating to Copyrights.
(i) Employ the Copyright for each material work
which is subject to copyright protection pursuant to Title 17
of the United States Code with such notice of copyright as may
be required by law to secure copyright protection, except as
could not reasonably be expected to have a Material Adverse
Effect.
(ii) Not do any act or knowingly omit to do any
act whereby any Copyright of the Obligors may become
invalidated, except to the extent that the invalidation of
such Copyright could not reasonably be expected to have a
Material Adverse Effect and (A) not do any act, or knowingly
omit to do any act, whereby any Copyright constituting
Material Intellectual Property may become injected into the
public domain; (B) promptly notify the Agent if it has
knowledge that any Copyright constituting Material
Intellectual Property may become injected into the public
domain or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any proceeding in any
court or tribunal in the United States or any other country)
regarding an Obligor's ownership of any such Copyright or its
validity; (C) take all necessary steps as it shall deem
appropriate under the circumstances, to maintain and pursue
each application (and to obtain the relevant registration) and
to maintain each registration of each Copyright constituting
Material Intellectual Property owned by an Obligor, including,
without limitation, filing of applications for renewal where
necessary; and (D) promptly notify the Agent of any
infringement of any Copyright of an Obligor constituting
Material Intellectual Property of which it becomes aware and
take such actions as it shall reasonably deem appropriate
under the circumstances to protect such Copyright, including,
where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all
damages for such infringement.
(iii) Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each
Obligor hereunder.
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(k) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Trademark
constituting Material Intellectual Property in order to
maintain such Trademark in full force free from any claim of
abandonment for non-use, (B) maintain as in the past the
quality of products and services offered under such Trademark,
(C) employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark
unless the Agent, for the benefit of the Lenders, shall obtain
a perfected security interest in such mark pursuant to this
Security Agreement, and (E) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do
any act whereby any such Trademark may become invalidated.
(ii) Not do any act, or omit to do any act,
whereby any Patent constituting Material Intellectual Property
may become abandoned or dedicated to the public domain.
(iii) Promptly notify the Agent if it has
knowledge that any application or registration relating to any
Patent or Trademark constituting Material Intellectual
Property may become abandoned or dedicated to the public
domain, or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any proceeding in the
United States Patent and Trademark Office or any court or
tribunal in Canada or in any other country) regarding an
Obligor's ownership of any such Patent or Trademark or its
right to register the same or to keep, maintain and use the
same.
(iv) Whenever an Obligor, either by itself or
through an agent, employee, licensee or designee, shall file
an application for the registration of any Patent or Trademark
with the United States Patent and Trademark Office or any
similar office or agency in Canada or in any other country or
any political subdivision thereof, such Obligor shall report
such filing to the Agent and the Lenders quarterly, together
with the officer's certificate delivered pursuant to Section
7.1(d) of the Credit Agreement. Upon request of the Agent, an
Obligor shall execute and deliver any and all agreements,
instruments, documents and papers as the Agent may request to
evidence the Agent's and the Lenders' security interest in any
Patent or Trademark and the goodwill and General Intangibles
of such Obligor relating thereto or represented thereby.
(v) Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar
office or agency in Canada or in any other country or any
political subdivision thereof, to maintain and pursue each
application, to obtain the relevant registration and to
maintain each registration of the Patents and Trademarks,
including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability,
except to the extent that the
13
failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(vi) Promptly notify the Agent and the Lenders
after it learns that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third
party to an extent that could reasonably be expected to have a
Material Adverse Effect and promptly sue for infringement,
misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other
actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(vii) Not make any assignment or agreement in
conflict with the security interest in the Patents or
Trademarks of any Obligor hereunder.
(l) New Patents, Copyrights and Trademarks. Provide the
Agent (i) quarterly, together with the officer's certificate delivered
pursuant to Section 7.1(d) of the Credit Agreement, a listing of all
applications, if any, for new Copyrights, Patents or Trademarks
(together with a listing of the issuance of registrations or letters on
present applications), which new applications and issued registrations
or letters shall be subject to the terms and conditions hereunder and
of all license agreements entered into with respect to any Copyright,
Patent or Trademark, and (ii) promptly, from time to time upon the
written request of the Agent, (A) with respect to Copyrights, a duly
executed Notice of Grant of Security Interest in Copyrights, (B) with
respect to Patents, a duly executed Notice of Grant of Security
Interest in Patents, (C) with respect to Trademarks, a duly executed
Notice of Grant of Security Interest in Trademarks or (D) such other
duly executed documents as the Agent may reasonably request in a form
reasonably acceptable to the Agent and suitable for recording to
evidence the security interest in the Copyright, Patent or Trademark
which is the subject of such new application.
(m) Commercial Tort Claims; Notice of Litigation. (i)
Quarterly, together with the officer's certificate delivered pursuant
to Section 7.1(d) of the Credit Agreement, forward to the Agent written
notification of any and all Commercial Tort Claims of the Obligors in
which an Obligor is the claimant, including, but not limited to, any
and all actions, suits, and proceedings before any court or
Governmental Authority by or affecting such Obligor or any of its
Subsidiaries and (ii) execute and deliver such statements, documents
and notices and do and cause to be done all such things as may be
required by the Agent, or required by law, including all things which
may from time to time be necessary under the UCC (or equivalent local
law) to fully create, preserve, perfect and protect the priority of the
Agent's security interest in any such Commercial Tort Claims.
(n) Bank Accounts. At all times, maintain the U.S.
Lockbox Accounts, the Wachovia Clearing Account and the Wachovia
Account and any replacement or successor accounts relating thereto in
accordance with the terms of the Lockbox
14
Agreements and the Credit Agreement, as applicable, and in accordance
with the terms of the applicable Lockbox Agreement and the Credit
Agreement, cause all amounts received in the U.S. Lockboxes relating
thereto to be deposited into the applicable U.S. Lockbox Account, the
Wachovia Clearing Account or the Wachovia Account, as the case may be,
and to be applied as set forth in the applicable Lockbox Agreement and
the Credit Agreement, as appropriate. All amounts on deposit in the
U.S. Lockbox Accounts, the Wachovia Clearing Account and the Wachovia
Account and any replacement or successor accounts relating thereto
shall be subject to the Lien of the Agent hereunder.
(o) Insurance. Insure, repair and replace the Collateral
of such Obligor as set forth in the Credit Agreement and herein. All
insurance proceeds shall be subject to the security interest of the
Agent hereunder.
(p) Covenants Relating to the Material Contracts.
(i) Upon the reasonable request of the Agent,
each Obligor shall, at its expense, (A) furnish to the Agent
copies of all material notices, requests and other documents
received by such Obligor under or pursuant to the Material
Contracts, and such other information and reports regarding
the Material Contracts and (B) make to any other party to any
Material Contracts such demands and requests for information
and reports or for action as an Obligor is entitled to make
thereunder and as may be reasonably related to obtaining the
principal benefits of such Material Contract.
(ii) Subject to the provisions of Section 9.13 of
the Credit Agreement, unless the applicable Obligor believes
it is necessary or advisable in the prudent conduct of its
business, no Obligor shall (A) cancel or terminate any
Material Contracts of such Obligor or consent to or accept any
cancellation or termination thereof; (B) amend or otherwise
modify any Material Contracts of such Obligor or give any
consent, waiver or approval thereunder; (C) waive any default
under or breach of any Material Contracts of such Obligor; or
(D) take any other action in connection with any Material
Contracts of such Obligor which would impair the value of the
interest or rights of such Obligor thereunder or which would
impair the interests or rights of the Agent.
(q) New Material Contracts. Whenever an Obligor shall
enter into a Material Contract, such Obligor shall, as soon as
available or practicable and in any event no later than quarterly,
together with the officer's certificate delivered pursuant to Section
7.1(d) of the Credit Agreement, provide the Agent with a true and
complete copy of such Material Contract and such other related
documents as the Agent may reasonably request in a form acceptable to
the Agent and, if reasonably requested by the Agent, execute and
deliver (or use commercially reasonable efforts to cause to be executed
and delivered) to the Agent a collateral assignment of such Material
Contract and a consent to such collateral assignment, in each case in a
form acceptable to the Agent. Upon the reasonable request of the Agent,
an Obligor will do any act, or execute any additional
15
documents required by the Agent to ensure to the Agent the
effectiveness and first priority of its security interest in such
Material Contract.
6. Special Provisions Regarding Inventory.
(a) Notwithstanding anything to the contrary contained in
this Security Agreement, each Obligor may, unless and until an Event of
Default occurs and is continuing and the Agent instructs such Obligor
otherwise, without further consent or approval of the Agent, use,
consume, sell, lease and exchange its Inventory in the ordinary course
of its business as presently conducted, whereupon, in the case of such
a sale or exchange, the security interest created hereby in the
Inventory so sold or exchanged (but not in any Proceeds arising from
such sale or exchange) shall cease immediately without any further
action on the part of the Agent.
(b) Upon the Lenders' making any Loan pursuant to the
Credit Agreement, the Issuing Bank issuing any Letter of Credit or any
Canadian Lender creating a Bankers' Acceptance pursuant to the Credit
Agreement, each Obligor shall be deemed to have warranted that all
warranties of such Obligor set forth in this Security Agreement with
respect to its Inventory are true and correct in all material respects
with respect to such Inventory, including without limitation that such
Inventory is located at a location set forth on Schedule 6.22 to the
Credit Agreement, as the same may be updated from time to time pursuant
to Section 7.21 of the Credit Agreement.
7. Special Provisions Regarding Insurance Account.
(a) Promptly upon and at all times after the receipt of
any cash proceeds of a Casualty Loss required to be paid to the Agent
pursuant to Section 7.6 of the Credit Agreement (the "Insurance
Proceeds"), the Company shall establish and shall thereafter maintain
an additional cash collateral account (the "Insurance Account") at the
offices of the Agent or such other bank as the Company and the Agent
may agree (the "Insurance Account Bank"), under the dominion and
control of the Agent. Forthwith upon such establishment, the Company
shall notify the Agent of the location, account name and account number
of such account. The Company hereby agrees to cause any Insurance
Proceeds received from time to time after the establishment of the
Insurance Account to be deposited therein as set forth in this
paragraph. Any income received with respect to the balance from time to
time standing to the credit of the Insurance Account, including any
interest or capital gains on investments therein, shall remain, or be
deposited, in the Insurance Account. All right, title and interest in
and to the cash amounts on deposit from time to time in the Insurance
Account together with any investments from time to time made pursuant
to clause (c) of this Section shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations
until applied thereto as hereinafter provided.
(b) The balance from time to time standing to the credit
of the Insurance Account shall be subject to withdrawal only upon the
instructions of the Agent. Except
16
upon the occurrence and continuation of an Event of Default or with
respect to amounts attributable to proceeds deposited in the Insurance
Account which the Agent has elected to apply to repay the Loans in
accordance with Section 7.6(c) of the Credit Agreement, the Agent
agrees to give instructions to distribute amounts standing to the
credit of the Insurance Account to the Company at such times and in
such amounts as the Company shall request for the purpose of repairing,
reconstructing or replacing the property in respect of which such
Insurance Proceeds were received. Any such request shall be accompanied
by a certificate of a Senior Financial Officer of the Company setting
forth in detail reasonably satisfactory to the Agent the repair,
reconstruction or replacement for which such funds will be expended. If
immediately available cash on deposit in the Insurance Account is not
sufficient to make any distribution to the Company referred to in the
previous sentence of this Section 7(b), the Agent shall cause to be
liquidated as promptly as practicable such investments in the Insurance
Account designated by the Company as required to obtain sufficient cash
to make such distribution and, notwithstanding any other provision of
this Section 7, such distribution shall not be made until such
liquidation has taken place. Upon the occurrence and continuation of an
Event of Default, the Agent may apply (subject to collection) any or
all of the balance from time to time standing to the credit of the
Insurance Account in the manner specified in Section 4.7 of the Credit
Agreement.
(c) Amounts on deposit in the Insurance Account shall be
invested and re-invested from time to time in such Cash Equivalents as
the Company shall determine, which Cash Equivalents shall be held under
the dominion and control of the Agent; provided that, if an Event of
Default has occurred and is continuing, the Agent may cause such Cash
Equivalents to be liquidated and apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the
manner specified in Section 4.7 of the Credit Agreement.
8. Performance of Obligations; Advances by Agent. On failure of
any Obligor to perform any of the covenants and agreements contained herein, the
Agent may, at its sole option and in its sole discretion, perform or cause to be
performed the same and in so doing may expend such sums as the Agent may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien (other than a Permitted
Lien), expenditures made in defending against any adverse claim and all other
expenditures which the Agent may make for the protection of the security
interest hereof or may be compelled to make by operation of law. All such sums
and amounts so expended shall be repayable by the Obligors on a joint and
several basis promptly upon timely notice thereof and demand therefor, shall
constitute additional Secured Obligations and shall bear interest from the date
said amounts are expended at the default rate set forth in Section 4.2(b) of the
Credit Agreement. No such performance of any covenant or agreement by the Agent
on behalf of any Obligor, and no such advance or expenditure therefor, shall
relieve the Obligors of any default under the terms of this Security Agreement,
the other Credit Documents or any Lender Hedging Agreement. The Agent may make
any payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the
17
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by an Obligor in appropriate
proceedings and against which adequate reserves are being maintained in
accordance with U.S. GAAP.
9. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an event of default hereunder (an "Event
of Default").
10. Remedies.
(a) General Remedies. Upon the occurrence and during the
continuance of an Event of Default, the Lenders shall have, in addition
to the rights and remedies provided herein, in the Credit Documents, in
any Lender Hedging Agreement or by law (including, but not limited to,
levy of attachment, garnishment and the rights and remedies set forth
in the Uniform Commercial Code (or equivalent local law) of the
jurisdiction applicable to the affected Collateral), the rights and
remedies of a secured party under the UCC (regardless of whether the
UCC is the law of the jurisdiction where the rights and remedies are
asserted and regardless of whether the UCC applies to the affected
Collateral), and further, the Agent may, with or without judicial
process or the aid and assistance of others, (i) enter on any premises
on which any of the Collateral may be located and, without resistance
or interference by the Obligors, take possession of the Collateral,
(ii) dispose of any Collateral on any such premises, (iii) require the
Obligors to assemble and make available to the Agent at the expense of
the Obligors any Collateral at any place and time designated by the
Agent which is reasonably convenient to both parties, (iv) remove any
Collateral from any such premises for the purpose of effecting sale or
other disposition thereof, and/or (v) without demand and without
advertisement, notice, hearing or process of law, all of which each of
the Obligors hereby waives to the fullest extent permitted by law, at
any place and time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, by one or more contracts,
in one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Agent deems advisable, in its sole
discretion. Neither the Agent's compliance with any applicable state or
federal law in the conduct of such sale, nor its disclaimer of any
warranties relating to the Collateral, shall be considered to adversely
affect the commercial reasonableness of such sale. In addition to all
other sums due the Agent and the Lenders with respect to the Secured
Obligations, the Obligors shall pay the Agent and each of the Lenders
all reasonable costs and expenses incurred by the Agent or any such
Lender, including, but not limited to, reasonable attorneys' fees and
court costs, in obtaining or liquidating the Collateral, in enforcing
payment of the Secured Obligations, or in the prosecution or defense of
any action or proceeding by or against the Agent or the Lenders or the
Obligors concerning any matter arising out of or connected with this
Security Agreement, any Collateral or the Secured Obligations,
including, without limitation, any of the foregoing arising in, arising
under or related to a case under any bankruptcy, insolvency or similar
law. To the extent the rights of notice cannot be legally waived
18
hereunder, each Obligor agrees that any requirement of reasonable
notice shall be met if such notice is personally served on or mailed,
postage prepaid, to the Company in accordance with the notice
provisions of Section 14.1 of the Credit Agreement at least ten (10)
days before the time of sale or other event giving rise to the
requirement of such notice. The Agent and the Lenders shall not be
obligated to make any sale or other disposition of the Collateral
regardless of notice having been given. To the extent permitted by law,
the Agent and any Lender may be a purchaser at any such sale. To the
extent permitted by applicable law, each of the Obligors hereby waives
all of its rights of redemption with respect to any such sale. Subject
to the provisions of applicable law, the Agent and the Lenders may
postpone or cause the postponement of the sale of all or any portion of
the Collateral by announcement at the time and place of such sale, and
such sale may, without further notice, to the extent permitted by law,
be made at the time and place to which the sale was postponed, or the
Agent and the Lenders may further postpone such sale by announcement
made at such time and place. Upon the occurrence and during the
continuance of an Event of Default, the Company shall endorse over and
deliver to the Agent any checks that it receives in its capacity as
sublessor of any real property and shall not first deposit the funds
evidenced thereby into an account of the Company or otherwise commingle
such funds with its own.
(b) Remedies Relating to Accounts. Upon the occurrence
and during the continuance of an Event of Default, whether or not the
Agent has exercised any or all of its rights and remedies hereunder,
the Agent shall have the right to enforce any Obligor's rights against
any account debtors and obligors on such Obligor's Accounts. Each
Obligor acknowledges and agrees that the Proceeds of its Accounts
remitted to or on behalf of the Agent in accordance with the provisions
hereof shall be solely for the Agent's own convenience and that such
Obligor shall not have any right, title or interest in such Proceeds or
in any such other amounts except as expressly provided herein. The
Agent and the Lenders shall have no liability or responsibility to any
Obligor for acceptance of a check, draft or other order for payment of
money bearing the legend "payment in full" or words of similar import
or any other restrictive legend or endorsement or be responsible for
determining the correctness of any remittance. The Agent shall have no
obligation to apply or give credit for any item included in proceeds of
Accounts or other Collateral until the applicable Lockbox Bank has
received final payment therefor at its offices in cash. However, if the
Agent does permit credit to be given for any item prior to a Lockbox
Bank receiving final payment therefor and such Lockbox Bank fails to
receive such final payment or an item is charged back to the Agent or
any Lockbox Bank for any reason, the Agent may at its election in
either instance charge the amount of such item back against any such
U.S. Lockbox Accounts, together with interest thereon at a rate per
annum equal to the default rate set forth in Section 4.2(b) of the
Credit Agreement. Each Obligor hereby agrees to indemnify the Agent and
the Lenders from and against all liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and reasonable attorneys'
fees suffered or incurred by the Agent or the Lenders (each, an
"Indemnified Party") because of the maintenance of the foregoing
arrangements except as relating to or arising out of the gross
negligence or willful misconduct of an Indemnified Party or its
officers, employees or agents. In the
19
case of any investigation, litigation or other proceeding, the
foregoing indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by an Obligor, its
directors, shareholders or creditors or an Indemnified Party or any
other Person or any other Indemnified Party is otherwise a party
thereto. The Agent shall have no liability or responsibility to any
Obligor for a Lockbox Bank accepting any check, draft or other order
for payment of money bearing the legend "payment in full" or words of
similar import or any other restrictive legend or endorsement
whatsoever or be responsible for determining the correctness of any
remittance (it being understood that this sentence shall in no way
affect the liability or responsibility of any such Lockbox Bank).
(c) Access. In addition to the rights and remedies
hereunder, upon the occurrence and during the continuance of an Event
of Default, the Agent shall have the right to enter and remain upon the
various premises of the Obligors without cost or charge to the Agent,
and use the same, together with materials, supplies, books and records
of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition,
the Agent may remove Collateral, or any part thereof, from such
premises and/or any records with respect thereto, in order to
effectively collect or liquidate such Collateral. If the Agent
exercises its right to take possession of the Collateral, each Obligor
shall also at its expense perform any and all other steps reasonably
requested by the Agent to preserve and protect the security interest
hereby granted in the Collateral, such as placing and maintaining signs
indicating the security interest of the Agent, appointing overseers for
the Collateral and maintaining inventory records.
(d) Nonexclusive Nature of Remedies. Failure by the Agent
or the Lenders to exercise any right, remedy or option under this
Security Agreement, any other Credit Document, any Lender Hedging
Agreement or as provided by law, or any delay by the Agent or the
Lenders in exercising the same, shall not operate as a waiver of any
such right, remedy or option. No waiver hereunder shall be effective
unless it is in writing, signed by the party against whom such waiver
is sought to be enforced and then only to the extent specifically
stated, which in the case of the Agent or the Lenders shall only be
granted as provided herein. To the extent permitted by law, neither the
Agent, the Lenders, nor any party acting as attorney for the Agent or
the Lenders, shall be liable hereunder for any acts or omissions or for
any error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct hereunder. The rights and remedies of
the Agent and the Lenders under this Security Agreement shall be
cumulative and not exclusive of any other right or remedy which the
Agent or the Lenders may have.
20
(e) Retention of Collateral. In addition to the rights
and remedies hereunder, upon the occurrence and during the continuance
of an Event of Default, the Agent may, after providing the notices and
obtaining the consents required by Section 9-620 of the UCC or
otherwise complying with the requirements of applicable law of the
relevant jurisdiction, accept or retain the Collateral in satisfaction
of the Secured Obligations. Unless and until the Agent shall have
provided such notices, however, the Agent shall not be deemed to have
retained any Collateral in satisfaction of any Secured Obligations for
any reason.
(f) Deficiency. In the event that the proceeds of any
sale, collection or realization are insufficient to pay all amounts to
which the Agent and the Lenders are legally entitled, the Obligors
shall be jointly and severally liable for the deficiency, together with
interest thereon at the default rate set forth in Section 4.2(b) of the
Credit Agreement, together with the costs of collection and the
reasonable fees of any attorneys employed by the Agent to collect such
deficiency. Any surplus remaining after the full payment and
satisfaction of the Secured Obligations shall be returned to the
Obligors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
(g) Other Security. To the extent that any of the Secured
Obligations are now or hereafter secured by property other than the
Collateral (including, without limitation, real and other personal
property owned by an Obligor), or by a guarantee, endorsement or
property of any other Person, then the Agent and the Lenders shall have
the right to proceed against such other property, guarantee or
endorsement upon the occurrence and during the continuance of any Event
of Default, and the Agent and the Lenders have the right, in their sole
discretion, to determine which rights, security, liens, security
interests or remedies the Agent and the Lenders shall at any time
pursue, relinquish, subordinate, modify or take with respect thereto,
without in any way modifying or affecting any of them or any of the
Agent's and the Lenders' rights or the Secured Obligations under this
Security Agreement, under any other of the Credit Documents or under
any Lender Hedging Agreement.
(h) PPSA. In addition to, and not in any way in
limitation of any of the foregoing rights and remedies, the Agent may
exercise any and all remedies available to the Agent under the PPSA.
11. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of
attorney contained herein, each Obligor hereby designates and appoints
the Agent, on behalf of the Lenders, and each of its designees or
agents, as attorney-in-fact of such Obligor, irrevocably and with power
of substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuation of an Event of
Default:
(i) to demand, collect, settle, compromise,
adjust, give discharges and releases, all as the Agent may
reasonably determine;
21
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle, adjust or compromise any
action, suit or proceeding brought and, in connection
therewith, give such discharge or release as the Agent may
deem reasonably appropriate;
(iv) to receive, open and dispose of mail
addressed to an Obligor and endorse checks, notes, drafts,
acceptances, money orders, bills of lading, warehouse receipts
or other instruments or documents evidencing payment, shipment
or storage of the goods giving rise to the Collateral of such
Obligor, or securing or relating to such Collateral, on behalf
of and in the name of such Obligor;
(v) to sell, assign, transfer, make any
agreement in respect of, or otherwise deal with or exercise
rights in respect of, any Collateral or the goods or services
which have given rise thereto, as fully and completely as
though the Agent were the absolute owner thereof for all
purposes;
(vi) to adjust and settle claims under any
insurance policy relating thereto;
(vii) to execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens granted in this Security
Agreement and in order to fully consummate all of the
transactions contemplated herein;
(viii) to institute any foreclosure proceedings
that the Agent may deem appropriate; and
(ix) to do and perform all such other acts and
things as the Agent may reasonably deem to be necessary,
proper or convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Lender Hedging Agreement is in
effect or any Letter of Credit shall remain outstanding and (ii) until
all of the Commitments shall have been terminated. The Agent shall be
under no duty to exercise or withhold the exercise of any of the
rights, powers, privileges and options expressly or implicitly granted
to the Agent in this Security
22
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in the Collateral.
(b) Assignment by the Administrative Agent. The
Administrative Agent may from time to time assign the Secured
Obligations and the Collateral to a successor Administrative Agent
appointed pursuant to Section 13.9 of the Credit Agreement, and such
successor shall be entitled to all of the rights and remedies of the
Administrative Agent under this Security Agreement in relation thereto.
(c) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for taking any necessary steps to preserve
rights against any parties with respect to any of the Collateral. In
the event of a public or private sale of Collateral pursuant to Section
10 hereof, the Agent shall have no obligation to clean-up, repair or
otherwise prepare the Collateral for sale.
12. Application of Proceeds. Any amounts on deposit in the U.S.
Lockbox Accounts, the Wachovia Clearing Accounts and the Wachovia Account and
any replacement or successor accounts relating thereto, as applicable, shall be
applied by the Agent in accordance with the terms of the Credit Agreement and
the Lockbox Agreement relating thereto. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 4.7 of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
13. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
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Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable costs and
expenses of the Agent, all of which costs and expenses shall constitute Secured
Obligations hereunder.
14. Continuing Agreement.
(a) This Security Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect so
long as any of the Secured Obligations remain outstanding or any Credit
Document or Lender Hedging Agreement is in effect or any Letter of
Credit shall remain outstanding and until all of the Commitments
thereunder shall have terminated. Upon such payment and termination,
this Security Agreement shall be automatically terminated and the
Agent, upon the request and at the expense of the Obligors, forthwith
release all of their liens and security interests hereunder and shall
execute, if necessary, and deliver all UCC termination statements
and/or other documents reasonably requested by the Obligors evidencing
such termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this
Security Agreement.
(b) This Security Agreement shall continue to be
effective or be automatically reinstated, as the case may be, if at any
time payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
15. Amendments; Waivers; Modifications. This Security Agreement
and the provisions hereof may not be amended, waived, modified, changed,
discharged or terminated except as set forth in Section 14.6 of the Credit
Agreement.
16. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; provided, however,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, each of their respective
officers, employees and agents and each of their respective successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent or such Lender or their respective
officers, employees and agents.
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17. Notices. All notices required or permitted to be given under
this Security Agreement shall be in conformance with Section 14.1 of the Credit
Agreement.
18. Counterparts. This Security Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
19. Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning,
construction or interpretation of any provision of this Security Agreement.
20. Governing Law; Submission to Jurisdiction and Service of
Process; Waiver of Jury Trial. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The terms of
Sections 14.12 and 14.14 of the Credit Agreement are incorporated herein by
reference, mutatis mutandis, and the parties hereto agree to such terms.
21. Severability. If any provision of any of the Security
Agreement is determined to be illegal, invalid or unenforceable, such provision
shall be fully severable and the remaining provisions shall remain in full force
and effect and shall be construed without giving effect to the illegal, invalid
or unenforceable provisions.
22. Entirety. This Security Agreement, the other Credit Documents
and any Lender Hedging Agreement represent the entire agreement of the parties
hereto and thereto, and supersede all prior agreements and understandings, oral
or written, if any, including any commitment letters or correspondence relating
to the Credit Documents, any such Lender Hedging Agreement or the transactions
contemplated herein and therein.
23. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the Lender Hedging Agreements, the delivery of
the Notes and the making of the Loans, the issuance of the Letters of Credit and
the creation of Bankers' Acceptances under the Credit Agreement.
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, direct and indirect, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
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(b) Each of the Obligors, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement, the other
Credit Documents and any Lender Hedging Agreement, it being the
intention of the parties hereto that all the Secured Obligations shall
be the joint and several obligations of each of the Obligors without
preferences or distinction among them.
(c) Notwithstanding any provision to the contrary
contained herein or in any other of the Credit Documents, to the extent
the obligations of an Obligor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state, provincial or federal law relating to fraudulent
conveyances or transfers) then the obligations of such Obligor
hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether state, provincial or federal or and
including, without limitation, the Bankruptcy Code).
25. Rights of Required Lenders. All rights of the Agent hereunder,
if not exercised by the Agent, may be exercised by the Required Lenders.
26. Judgment Currency.
(a) If for the purposes of obtaining judgment in any
court it is necessary to convert all or any part of the Secured
Obligations or any other amount due to the Lenders hereunder or under
other Credit Document in respect of the Obligors' obligations hereunder
in any currency (the "Original Currency") into another currency (the
"Other Currency") each Obligor to the fullest extent that it may
effectively do so, agrees that the rate of exchange used shall be that
at which, in accordance with normal banking procedures, the Agent could
purchase the Original Currency with the Other Currency at its principal
offices in Charlotte, North Carolina on the Business Day on which the
Agent is open for the transaction of its banking business at such
offices immediately preceding the day on which any such judgment, or
any relevant part thereof, is paid or otherwise satisfied.
(b) The obligation of each Obligor in respect of any sum
due in the Original Currency from it to the Agent or the Lenders
hereunder or under any other Credit Document in respect of the
Obligors' obligation hereunder shall, notwithstanding any judgment in
any Other Currency, be discharged only to the extent that on the
Business Day following receipt by the Agent of any sum adjudged to be
so due in such Other Currency or of any other sum in any Other Currency
the Agent may, in accordance with its normal banking procedures,
purchase the Original Currency with such Other Currency. If the amount
of the Original Currency so purchased is less than the sum originally
due to the Agent and the Lenders in the Original Currency, the Obligors
shall, as a separate obligation and notwithstanding any such judgment,
indemnify the Agent against such loss, and if the amount of the
Original Currency so purchased exceeds the sum originally due to the
Lenders, the Agent shall remit such excess to the Obligors.
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Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWERS: HAMILTON BEACH/PROCTOR-SILEX, INC., a
Delaware corporation
By: /s/ James H. Taylor
---------------------------------------
Name: James H. Taylor
Title: Vice President and Treasurer
U.S. SUBSIDIARY BORROWERS: [NONE]
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Accepted and agreed to as of the date first above written.
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Steven J. Haas
---------------------------------------
Name: Steven J. Haas
Title: Director
2