EXHIBIT 10(xcvi)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of December 17, 2002 by and among PROCTOR-SILEX CANADA INC., an Ontario
Corporation (the "Canadian Borrower"), such Canadian subsidiaries of the
Canadian Borrower which may from time to time become parties hereto
(collectively, the "Canadian Subsidiaries") (hereinafter, the Canadian Borrower
and the Canadian Subsidiaries are collectively referred to as the "Obligors" and
individually as a "Obligor"), 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"), and ABN
AMRO BANK N.V., CANADA BRANCH, in its capacity as the Canadian Agent under the
Credit Agreement referred to below (in such capacity, the "Canadian Agent" and
together with the Agent, the "Agents").
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 Hamilton Beach/Proctor-Silex, Inc., a Delaware
corporation (the "Company"), the Canadian Borrower, the other Borrowers
identified therein, the Lenders party thereto from time to time and the Agents,
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 Canadian Obligations,
howsoever evidenced, created, incurred or acquired, whether primary,
secondary, direct, contingent, or joint and
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several and (b) all reasonable expenses and charges, legal and
otherwise, incurred by the Agent, the Canadian Agent and/or the Lenders
in collecting or enforcing any Canadian Obligation or in realizing on
or protecting any security therefor, including without limitation the
security granted hereunder.
"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;
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(i) all Equipment;
(j) all Fixtures;
(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;
(q) all Letter-of-Credit Rights;
(r) the Canadian 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;
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(y) all Trademark Licenses;
(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 the ownership interest of any Intellectual
Property of the Obligors 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 of the
Agents 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 either of the Agents or any Lender of any payment relating to such
Account, contract or agreement pursuant hereto, nor shall either of the
Agents 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
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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.
(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 jurisdiction of formation is (and for the prior four
months has been) the jurisdiction 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 and Authority. Each Obligor is the legal
and beneficial owner of its Collateral and has the right, corporate
power and authority 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. Each Obligor hereby acknowledges and agrees that: (i)
value has been given to such Obligor; (ii) each Obligor has rights in
the Collateral (other than Collateral acquired after the date hereof)
in which such Obligor has granted a security interest hereunder; and
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(iii) the Obligors and the Agent have not agreed to postpone the time
for attachment of the security interest created by this Security
Agreement, which shall attach upon the execution of this Security
Agreement and, in the case of Collateral acquired after the date
hereof, when such Obligor has rights therein.
(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 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.
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(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 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.
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(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 effect or any Letter of Credit or any Bankers' Acceptances (or
equivalent loans under paragraph 2.5(i)(iii) of the Credit Agreement) 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 Canadian Agent and 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 Canadian Agent,
upon either the Agent's or the Canadian Agent's request, all control
agreements, assignments, instruments or other documents (including an
acknowledgment that the Canadian Agent holds such Collateral for the
benefit of the Agent) as reasonably requested by the Agent or the
Canadian Agent for the purposes of obtaining and maintaining Control of
such Collateral within the meaning of the UCC (or equivalent local
law).
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(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 (or comparable filings) 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 jurisdiction 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 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 (or equivalent local law), which may state that the security
interest attaches to all present and after acquired 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
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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 or Bankers' Acceptances (or equivalent loans under paragraph
2.5(i)(iii) of the Credit Agreement) shall remain outstanding and until
all of the Commitments shall have terminated. Each 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.
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(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.
(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 (or equivalent local law) 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 fall 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.
12
(iii) Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each
Obligor hereunder.
(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
13
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
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.
14
(n) Bank Accounts. At all times, maintain the Canadian
Account and any replacement or successor accounts relating thereto with
the Canadian Agent in accordance with the terms of the Credit Agreement
and cause all amounts received from the Accounts and other Collateral
to be deposited into the Canadian Account in accordance with the terms
of the Credit Agreement. All amounts on deposit in the Canadian Account
and any replacement or successor accounts relating thereto shall be
subject to the Lien of the Agent hereunder. All funds deposited into
the Canadian Account and any other account subject to a blocked account
agreement shall immediately become the property of the Canadian Agent
for the benefit of the Agent on behalf of the Canadian Lenders and the
Canadian Agent hereby waives any offset rights against the funds so
deposited. The Canadian Agent is hereby authorized to take direction
from the Administrative Agent with respect to funds in the Canadian
Account upon the occurrence of a Cash Management Event.
(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
15
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 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 or issuing any
Letter of Credit pursuant to the Credit Agreement 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
16
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 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 Agents 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
17
covenant or agreement by the Agent or the Canadian Agent (acting on behalf of
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 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 federal,
state or provincial 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, the Canadian Agent and the
Lenders with respect to the Secured Obligations, the Obligors shall pay
the Agent, the Canadian Agent and each of the Lenders all reasonable
costs and expenses incurred by the Agent, the Canadian Agent or any
such Lender, including, but not limited to, reasonable attorneys' fees
and court costs, in obtaining or liquidating the
18
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against the
Agent, the Canadian 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 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,
the Canadian 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.
(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 Canadian Agent or 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 final payment therefor has been deposited into the Canadian Account
or any other account covered by a blocked account agreement in favor of
the Agent. However, if the Agent does permit credit to be given for any
item prior to deposit of final payment into the Canadian Account or
such other account and such final payment is not made or an item is
charged back to the Agent or the Canadian Agent for any reason, the
Agent may at its election in either instance charge or cause to be
charged the amount of such item back against the Canadian Account or
such other account, 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, the
Canadian Agent and the Lenders from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges
and reasonable attorneys' fees
19
suffered or incurred by the Agents 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 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 Agents shall have no liability or
responsibility to any Obligor for any bank maintaining the Canadian
Account or any other account covered by a blocked account agreement in
favor of the Agent 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 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
Canadian Agent, 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, the Canadian 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, the
Canadian Agent or the Lenders shall only be granted as provided herein.
To the extent permitted by law, neither the Agent, the Canadian Agent,
the Lenders, nor any party acting as attorney for the Agent, the
Canadian 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, the Canadian Agent and the Lenders
under this Security Agreement shall be cumulative and not exclusive of
any other right or remedy which the Agent, the Canadian 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 and the Canadian 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, the Canadian 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:
21
(i) to demand, collect, settle, compromise,
adjust, give discharges and releases, all as the Agent may
reasonably determine;
(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 or Bankers' Acceptances (or equivalent
loans under paragraph 2.5(i)(iii) of the Credit Agreement)
22
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
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 and the Canadian 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 or the Canadian Agent
hereunder, the Agent and the Canadian 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 and the Canadian Agent
shall be relieved of all responsibility for the Collateral upon
surrendering it or tendering the surrender of it to the Obligors. Each
of the Agent and the Canadian 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 or the Canadian Agent, as applicable,
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 and the Canadian 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. Role of Canadian Agent; Authority of Agent. The Canadian Agent
shall maintain and administer the Canadian Account in accordance with the terms
of the Credit Agreement. Notwithstanding anything contained herein or in any of
the Credit Documents to the contrary, the Agent shall have absolute and sole
authority regarding any action to be taken or determination to be made pursuant
to this Security Agreement, other than in respect of any action to be taken or
determination to be made by the Required Lenders or the Lenders, as the case may
be.
13. Application of Proceeds. Any amounts on deposit in the
Canadian Account and any replacement or successor accounts relating thereto, as
applicable, shall be applied by the Agent and the Canadian Agent in accordance
with the terms of the Credit Agreement. 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, the
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Canadian 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 and the Canadian Agent shall have the continuing and exclusive right
to apply and reapply any and all such payments and proceeds in the Agents' sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.
14. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent or the Canadian Agent
(acting on behalf of 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 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 or
the Canadian Agent, all of which costs and expenses shall constitute Secured
Obligations hereunder.
15. 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 or Bankers' Acceptances (or equivalent loans under paragraph
2.5(i)(iii) of the Credit Agreement) 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 and the Canadian 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.
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16. 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.
17. 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, the Canadian Agent and the Lenders hereunder, to the
benefit of the Agent, the Canadian 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, the
Canadian 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, the Canadian Agent or such Lender or their respective officers,
employees and agents.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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.
23. 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
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commitment letters or correspondence relating to the Credit Documents, any such
Lender Hedging Agreement or the transactions contemplated herein and therein.
24. 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.
25. 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.
(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).
26. Rights of Required Lenders. All rights of the Agent hereunder,
if not exercised by the Agent, may be exercised by the Required Lenders.
27. 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
26
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.
BORROWER: PROCTOR-SILEX CANADA, INC.,
An Ontario Corporation
By: /s/ James H. Taylor
--------------------------------------
Name: James H. Taylor
Title: Treasurer
CANADIAN SUBSIDIARIES: [NONE]
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
ABN AMRO BANK N.V., CANADA BRANCH,
as Canadian Agent
By: /s/ Darcy Mack /s/ D. Keith Hughes
--------------------------------------------------
Name: Darcy Mack D. Keith Hughes
Title: V.P., Asset Based Lending S.V.P., Asset Based Lending
1