AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of February 3,
1998 and amended and restated as of May 29, 1998, made by each of the
undersigned assignors (each an "Assignor" and, together with any other entity
that becomes an assignor hereunder pursuant to Section 10.13 hereof, the
"Assignors") in favor of Bankers Trust Company, as Collateral Agent (the
"Collateral Agent"), for the benefit of the Secured Creditors (as defined
below). Except as otherwise defined herein, capitalized terms used herein
and defined in the Credit Agreement (as defined below) shall be used herein
as so defined.
W I T N E S S E T H :
WHEREAS, Elgar Holdings, Inc. ("Holdings"), Elgar Electronics
Corporation (the "Borrower"), the lenders from time to time party thereto
(the "Banks"), and Bankers Trust Company, as Agent (together with any
successor agent, the "Agent"), have entered into a Credit Agreement, dated as
of February 3, 1998 and amended and restated May 29, 1998, providing for the
making of Loans to, and the issuance of Letters of Credit for the account of,
the Borrower as contemplated therein (as amended, modified or supplemented
from time to time, the "Credit Agreement") (the Banks, the Agent and the
Collateral Agent are herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging
Agreements with one or more Banks or any affiliate thereof (each such Bank or
affiliate, even if the respective Bank subsequently ceases to be a Bank under
the Credit Agreement for any reason, together with such Bank's or affiliate's
successors and assigns, if any, collectively, the "Other Creditors," and
together with the Bank Creditors, are herein called the "Secured Creditors");
WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed
to the Secured Creditors the payment when due of all of the Guaranteed
Obligations as described therein;
WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary
Guarantor has jointly and severally guarantied to the Secured Creditors the
payment when due of all Guaranteed Obligations as described therein;
WHEREAS, the Collateral Agent and the Assignors (other than Power
Ten) entered into the Security Agreement, dated as of February 3, 1998 (the
"Original Security Agreement"), in connection with the Existing Credit
Agreement;
WHEREAS, it is a condition precedent to the making of Loans to, and
the issuance of Letters of Credit for the account of, the Borrower under the
Credit Agreement that each Assignor shall have executed and delivered to the
Collateral Agent this Agreement; and
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WHEREAS, each Assignor will obtain benefits from the incurrence of
Loans to, and the issuance of Letters of Credit for the account of, the Borrower
under the Credit Agreement and the entering into by the Borrower of Interest
Rate Protection Agreements or Other Hedging Agreements and, accordingly, each
Assignor desires to enter into this Agreement in order to satisfy the condition
described in the preceding paragraph and to amend and restate the Original
Security Agreement in the form of this Agreement;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent for the benefit of the Secured Creditors and hereby
covenants and agrees with the Collateral Agent for the benefit of the Secured
Creditors as follows:
ARTICLE 1
SECURITY INTERESTS
1.1. GRANT OF SECURITY INTERESTS. (a) As security for the prompt
and complete payment and performance when due of all of its Obligations, each
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge and grant to the Collateral Agent for the benefit of the
Secured Creditors (and does hereby reconfirm its assignment, transfer, pledge
and grant to the Collateral Agent under the Original Security Agreement of),
a continuing security interest in, all of the right, title and interest of
such Assignor in, to and under all of the following, whether now existing or
hereafter from time to time acquired: (i) each and every Receivable, (ii)
all Contracts, together with all Contract Rights arising thereunder, (iii)
all Inventory, (iv) all Equipment, (v) all Marks, together with the
registrations and right to all renewals thereof, and the goodwill of the
business of such Assignor symbolized by the Marks, (vi) all Patents and
Copyrights, (vii) all computer programs of such Assignor and all intellectual
property rights therein and all other proprietary information of such
Assignor, including, but not limited to, Trade Secrets Rights, (viii) all
other Goods, General Intangibles, Permits, Chattel Paper, Documents,
Instruments, Investment Property (except to the extent pledged under the
Pledge Agreement) and other assets (including cash), (ix) the Cash Collateral
Account and all monies, securities, instruments and other investments
deposited or required to be deposited in such Cash Collateral Account, (x)
all other bank, demand, time savings, passbook, certificates of deposit and
similar accounts maintained by such Assignor and all monies, securities,
instruments and other investments deposited or required to be deposited in
any of the foregoing accounts, and (xi) all Proceeds and products of any and
all of the foregoing (all of the above, collectively, the "Collateral").
Notwithstanding anything to the contrary contained in this
Agreement (including Section 3.6 hereof or certain of the representations and
warranties contained herein), no Assignor shall be required to deliver any
Instrument hereunder with an outstanding principal amount of $50,000 or less,
provided that no more than $100,000 in the aggregate of all such $50,000 or
less Instruments (including, for this purpose, any Pledged Notes (as defined
in the Pledge Agreement) not required to be delivered pursuant to the Pledge
Agreement) shall be excluded from the
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delivery requirements under this Agreement.
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the term of this
Agreement.
1.2. POWER OF ATTORNEY. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such Assignor or otherwise) to act, require, demand,
receive, compound and give acquittance for any and all moneys and claims for
moneys due or to become due to such Assignor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in
connection therewith and to file any claims or take any action or institute
any proceedings which the Collateral Agent may deem to be necessary or
advisable to protect the interests of the Secured Creditors, which
appointment as attorney is coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and
delivery of this Agreement, as follows:
2.1. NECESSARY FILINGS. All filings, registrations and recordings
necessary or appropriate to create, preserve and perfect the security
interest granted by such Assignor to the Collateral Agent hereby in respect
of the Collateral have been executed by the appropriate Assignors and
delivered to the Collateral Agent for filing in the appropriate filing office
or filing offices in order to create a perfected security interest therein
prior to the rights of all other Persons therein and subject to no other
Liens (in each case other than Permitted Liens) and is entitled to all the
rights, priorities and benefits afforded by the Uniform Commercial Code or
other relevant law as enacted in any relevant jurisdiction to perfected
security interests, in each case to the extent that the Collateral consists
of the type of property in which a security interest may be perfected by
filing a financing statement under the Uniform Commercial Code as enacted in
any relevant jurisdiction or in the United States Patent and Trademark Office
or in the United States Copyright Office.
2.2. NO LIENS. Such Assignor is, and as to Collateral acquired by
it from time to time after the date hereof such Assignor will be, the owner
of all Collateral free from any Lien, security interest, encumbrance or other
right, title or interest of any Person (other than Permitted Liens), and such
Assignor shall defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein adverse to the
Collateral Agent.
2.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is
no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) covering or purporting to cover any
interest of any kind in the Collateral (other than financing statements filed
in respect of Permitted Liens), and so long as the Termination Date has not
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occurred, such Assignor will not execute or authorize to be filed in any
public office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of
and covering the security interests granted hereby by such Assignor or in
connection with Permitted Liens.
2.4. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office
of such Assignor is located at the address indicated on Annex A hereto for
such Assignor. Such Assignor will not move its chief executive office except
to such new location as such Assignor may establish in accordance with the
last sentence of this Section 2.4. The originals of all documents evidencing
all Receivables and Contract Rights of such Assignor and the only original
books of account and records of such Assignor relating thereto are, and will
continue to be, kept at such chief executive office, at one or more of the
other locations set forth on Annex A hereto or at such new locations as such
Assignor may establish in accordance with the last sentence of this Section
2.4. All Receivables and Contract Rights of such Assignor are, and will
continue to be, maintained at, and controlled and directed (including,
without limitation, for general accounting purposes) from, the office
locations described above or such new location established in accordance with
the last sentence of this Section 2.4. No Assignor shall establish new
locations for such offices until (i) it shall have given to the Collateral
Agent not less than 15 days' prior written notice of its intention to do so,
clearly describing such new location and providing such other information in
connection therewith as the Collateral Agent may reasonably request, or (ii)
with respect to such new location, it shall have taken all action reasonably
satisfactory to the Collateral Agent to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto for such Assignor. Each Assignor agrees
that all Inventory and Equipment now held or subsequently acquired by it
shall be kept at (or shall be in transport to) any one of the locations shown
on Annex B hereto, or such new location as such Assignor may establish in
accordance with the last sentence of this Section 2.5. Any Assignor may
establish a new location for Inventory and Equipment only if (i) it shall
have given to the Collateral Agent not less than 15 days' prior written
notice of its intention so to do, clearly describing such new location and
providing such other information in connection therewith as the Collateral
Agent may request, and (ii) with respect to such new location, it shall have
taken all action reasonably satisfactory to the Collateral Agent to maintain
the security interest of the Collateral Agent in the Collateral intended to
be granted hereby at all times fully perfected and in full force and effect.
2.6. RECOURSE. This Agreement is made with full recourse to each
Assignor (including, without limitation, with full recourse to all assets of
such Assignor) and pursuant to and upon all the warranties, representations,
covenants and agreements on the part of such Assignor contained herein, in
the other Secured Debt Agreements and otherwise in writing in connection
herewith or therewith.
2.7. TRADE NAMES; CHANGE OF NAME. No Assignor has or operates in
any
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jurisdiction under, or in the preceding five years has had or has operated in
any jurisdiction under, any trade names, fictitious names or other names
except its legal name and such other trade or fictitious names as are listed
on Annex C hereto for such Assignor. No Assignor shall change its legal name
or assume or operate in any jurisdiction under any trade, fictitious or other
name except those names listed on Annex C hereto for such Assignor and new
names established in accordance with the last sentence of this Section 2.7.
No Assignor shall assume or operate in any jurisdiction under any new trade,
fictitious or other name until (i) it shall have given to the Collateral
Agent not less than 15 days' prior written notice of its intention so to do,
clearly describing such new name and the jurisdictions in which such new name
shall be used and providing such other information in connection therewith as
the Collateral Agent may reasonably request, and (ii) with respect to such
new name, it shall have taken all action reasonably requested by the
Collateral Agent to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times fully perfected and
in full force and effect.
ARTICLE III
SPECIAL PROVISIONS CONCERNING RECEIVABLES;
CONTRACT RIGHTS; INSTRUMENTS; CHATTEL PAPER
3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time
when each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are what they purport to be, and such
Receivable will evidence true and valid obligations of the account debtor
named therein.
3.2. MAINTENANCE OF RECORDS. Each Assignor will keep and maintain
at its own cost and expense accurate records of its Receivables and
Contracts, including, but not limited to, originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and such Assignor will make the same available on such
Assignor's premises to the Collateral Agent for inspection, at such
Assignor's own cost and expense, at any and all reasonable times upon two
days prior notice to such Assignor. Upon the occurrence and during the
continuance of an Event of Default and at the request of the Collateral
Agent, such Assignor shall, at its own cost and expense, deliver all tangible
evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts) and
such books and records to the Collateral Agent or to its representatives
(copies of which evidence and books and records may be retained by such
Assignor). Upon the occurrence and during the continuance of an Event of
Default and if the Collateral Agent so directs, such Assignor shall legend,
in form and manner reasonably satisfactory to the Collateral Agent, the
Receivables and the Contracts, as well as books, records and documents (if
any) of such Assignor evidencing or pertaining to such Receivables and
Contracts with an appropriate reference to the fact that such Receivables and
Contracts have been assigned to the Collateral Agent and that the Collateral
Agent has a security interest therein.
3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES; ETC. Upon
the occurrence
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and during the continuance of an Event of Default, and if the Collateral
Agent so directs any Assignor, such Assignor agrees (x) to cause all payments
on account of the Receivables and Contracts to be made directly to the Cash
Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in the preceding
clause (x), and (z) that the Collateral Agent may enforce collection of any
such Receivables and Contracts and may adjust, settle or compromise the
amount of payment thereof, in the same manner and to the same extent as such
Assignor. Without notice to or assent by any Assignor, the Collateral Agent
may apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account which application shall be effected in the manner provided
in Section 7.4 of this Agreement. The costs and expenses (including
reasonable attorneys' fees) of collection, whether incurred by an Assignor or
the Collateral Agent, shall be borne by the relevant Assignor. The
Collateral Agent shall deliver a copy of each notice referred to in the
preceding clause (y) to the relevant Assignor, PROVIDED, that the failure by
the Collateral Agent to so notify such Assignor shall not affect the
effectiveness of such notice or the other rights of the Collateral Agent
created by this Section 3.3.
3.4. MODIFICATION OF TERMS; ETC. Except in accordance with such
Assignor's ordinary course of business and consistent with reasonable
business judgment, no Assignor shall rescind or cancel any indebtedness
evidenced by any Receivable or under any Contract, or modify any term thereof
or make any adjustment with respect thereto, or extend or renew the same, or
compromise or settle any material dispute, claim, suit or legal proceeding
relating thereto, or sell any Receivable or Contract, or interest therein,
without the prior written consent of the Collateral Agent (which consent
shall not be unreasonably withheld). Each Assignor will duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables and Contracts and will do nothing to impair the rights of the
Collateral Agent in the Receivables or Contracts.
3.5. COLLECTION. Each Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account
debtor named in each of its Receivables or obligor under any Contract, as and
when due (including, without limitation, amounts which are delinquent, such
amounts, if desirable in such Assignor's reasonable business judgment, to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected
to the outstanding balance of such Receivable or under such Contract, except
that, prior to the occurrence of an Event of Default, any Assignor may allow
in the ordinary course of business as adjustments to amounts owing under its
Receivables and Contracts (i) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment
and (ii) a refund or credit due as a result of returned or damaged
merchandise or improperly performed services or for other reasons which such
Assignor finds appropriate in accordance with reasonable business judgment.
The reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) of collection, whether incurred by an Assignor or the
Collateral Agent, shall be borne by the relevant Assignor.
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3.6. INSTRUMENTS. Subject to the final paragraph of Section
1.1(a) hereof, if any Assignor owns or acquires any Instrument constituting
Collateral, such Assignor will within 10 Business Days notify the Collateral
Agent thereof, and upon request by the Collateral Agent will promptly deliver
such Instrument to the Collateral Agent appropriately endorsed to the order
of the Collateral Agent as further security hereunder.
3.7. ASSIGNORS REMAIN LIABLE UNDER RECEIVABLES. Anything herein
to the contrary notwithstanding, the Assignors shall remain liable under each
of the Receivables to observe and perform all of the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to such Receivables. Neither the
Collateral Agent nor any other Secured Creditor shall have any obligation or
liability under any Receivable (or any agreement giving rise thereto) by
reason of or arising out of this Agreement or the receipt by the Collateral
Agent or any other Secured Creditor of any payment relating to such
Receivable pursuant hereto, nor shall the Collateral Agent or any other
Secured Creditor be obligated in any manner to perform any of the obligations
of any Assignor under or pursuant to any Receivable (or any agreement giving
rise thereto), to make any payment, to make any inquiry as to the nature or
the sufficiency of any payment received by them or as to the sufficiency of
any performance by any party under any Receivable (or any agreement giving
rise thereto), 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 them or to which they may be entitled at any time or times.
3.8. ASSIGNORS REMAIN LIABLE UNDER CONTRACTS. Anything herein to
the contrary notwithstanding, the Assignors shall remain liable under each of
the Contracts to observe and perform all of the conditions and obligations to
be observed and performed by them thereunder, all in accordance with and
pursuant to the terms and provisions of each Contract. Neither the
Collateral Agent nor any other Secured Creditor shall have any obligation or
liability under any Contract by reason of or arising out of this Agreement or
the receipt by the Collateral Agent or any other Secured Creditor of any
payment relating to such contract pursuant hereto, nor shall the Collateral
Agent or any other Secured Creditor be obligated in any manner to perform any
of the obligations of any Assignor under or pursuant to any Contract, to make
any payment, to make any inquiry as to the nature or the sufficiency of any
performance by any party under any Contract, 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 them or to which they may be entitled
at any time or times.
3.9. FURTHER ACTIONS. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral
Agent from time to time such vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements,
certificates, reports and other assurances or instruments and take such
further steps relating to its Receivables, Contracts, Instruments and other
property or rights covered by the security interest hereby granted, as the
Collateral Agent may reasonably require, provided that, so long as no Event
of Default then exists and is continuing, the foregoing shall be limited to
such steps as may be required to perfect such security interest (i) by the
filing of UCC financing statements, (ii) by the filing of appropriate
assignments in the United States Patent and
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Trademark Office or in the United States Copyright Office or (iii) by
possession by the Collateral Agent of such Collateral.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise
has the right to use the registered Marks listed in Annex D hereto for such
Assignor and that said listed Marks include all United States marks and
applications for United States marks registered in the United States Patent
and Trademark Office that such Assignor owns or uses in connection with its
business as of the date hereof. Each Assignor represents and warrants that
it owns, is licensed to use or otherwise has the right to use, all material
Marks that it uses. Each Assignor further warrants that it has no knowledge
of any third-party claim that any aspect of such Assignor's present or
contemplated business operations infringes or will infringe any trademark,
service mark or trade name except for any such infringements which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities or condition (financial or otherwise) of Holdings and its
Subsidiaries taken as a whole. Each Assignor represents and warrants that it
is the true and lawful owner of or otherwise has the right to use all U.S.
trademark registrations and applications listed in Annex D hereto and that
said registrations are valid, subsisting, have not been cancelled and that
such Assignor is not aware of any material third-party claim that any of said
registrations is invalid or unenforceable, or is not aware that there is any
reason that any of said registrations is invalid or unenforceable. Each
Assignor hereby grants to the Collateral Agent an absolute power of attorney
to sign, upon the occurrence and during the continuance of an Event of
Default, any document which may be required by the United States Patent and
Trademark Office in order to effect an absolute assignment of all right,
title and interest in each Mark, and record the same.
4.2. LICENSES AND ASSIGNMENTS. Except as otherwise permitted by
the Secured Debt Agreements, each Assignor hereby agrees not to divest itself
of any right under any Mark absent prior written approval of the Collateral
Agent.
4.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address
of, and to furnish such pertinent information that may be available with
respect to, any party who such Assignor believes is infringing or diluting or
otherwise violating in any material respect any of such Assignor's rights in
and to any material Mark, or with respect to any party claiming that such
Assignor's use of any material Mark violates in any material respect any
property right of that party. Each Assignor further agrees, unless otherwise
agreed by the Collateral Agent, to prosecute any Person infringing any
material Mark in accordance with reasonable business practices.
4.4. PRESERVATION OF MARKS. Each Assignor agrees to use its
material Marks in interstate commerce during the time in which this Agreement
is in effect and to take all such other actions as are necessary to preserve
such Marks as trademarks or service marks under the
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laws of the United States.
4.5. MAINTENANCE OF REGISTRATION. Each Assignor shall, at its own
expense, diligently process all documents required to maintain trademark
registrations, including but not limited to affidavits of use and
applications for renewals of registration in the United States Patent and
Trademark Office for all of its registered material Marks, and shall pay all
fees and disbursements in connection therewith and shall not abandon any such
filing of affidavit of use or any such application of renewal prior to the
exhaustion of all administrative and judicial remedies without prior written
consent of the Collateral Agent.
4.6. FUTURE REGISTERED MARKS. If any Mark registration is issued
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 30 days
of receipt of such certificate, such Assignor shall deliver to the Collateral
Agent a copy of such certificate, and an assignment for security in such
Mark, to the Collateral Agent and at the expense of such Assignor, confirming
the assignment for security in such Mark to the Collateral Agent hereunder,
the form of such security to be substantially the same as the form hereof or
in such other form as may be reasonably satisfactory to the Collateral Agent.
4.7. REMEDIES. If an Event of Default shall occur and be
continuing, the Collateral Agent may, by written notice to the relevant
Assignor, take any or all of the following actions: (i) declare the entire
right, title and interest of such Assignor in and to each of the Marks,
together with all trademark rights and rights of protection to the same,
vested in the Collateral Agent for the benefit of the Secured Creditors, in
which event such rights, title and interest shall immediately vest, in the
Collateral Agent for the benefit of the Secured Creditors, and the Collateral
Agent shall be entitled to exercise the power of attorney referred to in
Section 4.1 hereof to execute, cause to be acknowledged and notarized and
record said absolute assignment with the applicable agency; (ii) take and use
or sell the Marks and the goodwill of such Assignor's business symbolized by
the Marks and the right to carry on the business and use the assets of such
Assignor in connection with which the Marks have been used; and (iii) direct
such Assignor to refrain, in which event such Assignor shall refrain, from
using the Marks in any manner whatsoever, directly or indirectly, and such
Assignor shall execute such further documents that the Collateral Agent may
reasonably request to further confirm this and to transfer ownership of the
Marks and registrations and any pending trademark application in the United
States Patent and Trademark Office to the Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING PATENTS,COPYRIGHTS AND TRADE SECRETS
5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor
represents and warrants that it is the true and lawful owner of all rights in
(i) all United States trade secrets and proprietary information necessary to
operate the business of the Assignor (the "Trade Secret Rights"), (ii) the
Patents listed in Annex E hereto for such Assignor and that said Patents
include all the United States patents and applications for United States
patents that such Assignor owns
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as of the date hereof and (iii) the Copyrights listed in Annex F hereto for
such Assignor and that said Copyrights constitute all the United States
copyrights registered with the United States Copyright Office and
applications to United States copyrights that such Assignor owns as of the
date hereof. Each Assignor further warrants that it has no knowledge of any
third-party claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any patent or such Assignor
has misappropriated any trade secret or proprietary information except for
any such infringements which, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities or condition (financial or
otherwise) of Holdings and its Subsidiaries taken as a whole. Each Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of any Event of Default, any
document which may be required by the United States Patent and Trademark
Office in order to effect an absolute assignment of all right, title and
interest in each Patent, and to record the same.
5.2. LICENSES AND ASSIGNMENTS. Except as otherwise permitted by
the Secured Debt Agreements, each Assignor hereby agrees not to divest itself
of any right under any Patent or Copyright acquired after the date hereof
absent prior written approval of the Collateral Agent.
5.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe in any material
Patent or material Copyright or to any claim that the practice of any
material Patent or use of any material Copyright violates any property right
of a third party, or with respect to any misappropriation of any material
Trade Secret Right or any claim that practice of any material Trade Secret
Right violates any property right of a third party. Each Assignor further
agrees, absent direction of the Collateral Agent to the contrary, diligently
to prosecute any Person infringing any material Patent or material Copyright
or any Person misappropriating any material Trade Secret Right in accordance
with such Assignor's reasonable business judgment.
5.4. MAINTENANCE OF PATENTS OR COPYRIGHT. At its own expense,
each Assignor shall make timely payment of all post-issuance fees required
pursuant to 35 U.S.C. Section 41 to maintain in force its rights under each
material Patent or material Copyright, absent prior written consent of the
Collateral Agent.
5.5. PROSECUTION OF PATENT APPLICATIONS. At its own expense, each
Assignor shall diligently prosecute all applications for (i) material United
States Patents listed in Annex E hereto and (ii) material Copyrights listed
on Annex F hereto, in each case for such Assignor and shall not abandon any
such application prior to exhaustion of all administrative and judicial
remedies, absent written consent of the Collateral Agent.
5.6. OTHER PATENTS AND COPYRIGHTS. Within 30 days of the
acquisition or issuance of a United States Patent, registration of a
Copyright, or acquisition of a registered Copyright, or of filing of an
application for a United States Patent or Copyright, the relevant Assignor
shall deliver to the Collateral Agent a copy of said Copyright or certificate
or registration of, or application therefor, said Patents, as the case may
be, with an assignment for security as to such
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Patent or Copyright, as the case may be, to the Collateral Agent and at the
expense of such Assignor, confirming the assignment for security, the form of
such assignment for security to be substantially the same as the form hereof
or in such other form as may be reasonably satisfactory to the Collateral
Agent.
5.7. REMEDIES. If an Event of Default shall occur and be
continuing, the Collateral Agent may by written notice to the relevant
Assignor, take any or all of the following actions: (i) declare the entire
right, title, and interest of such Assignor in each of the Patents and
Copyrights vested in the Collateral Agent for the benefit of the Secured
Creditors, in which event such right, title, and interest shall immediately
vest in the Collateral Agent for the benefit of the Secured Creditors, in
which case the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 5.1 hereof to execute, cause to be
acknowledged and notarized and to record said absolute assignment with the
applicable agency; (ii) take and practice or sell the Patents and Copyrights;
and (iii) direct such Assignor to refrain, in which event such Assignor shall
refrain, from practicing the Patents and using the Copyrights directly or
indirectly, and such Assignor shall execute such further documents as the
Collateral Agent may reasonably request further to confirm this and to
transfer ownership of the Patents and Copyrights to the Collateral Agent for
the benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. Each Assignor
will do nothing to impair the rights of the Collateral Agent in the
Collateral except as expressly permitted in the Credit Agreement. Each
Assignor will at all times keep its Inventory and Equipment insured in favor
of the Collateral Agent, at such Assignor's own expense to the extent and in
the manner provided in the Credit Agreement. Except to the extent otherwise
permitted to be retained by such Assignor or applied by such Assignor
pursuant to the terms of the Credit Agreement, the Collateral Agent shall, at
the time any proceeds of such insurance are distributed to the Secured
Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each
Assignor assumes all liability and responsibility in connection with the
Collateral acquired by it and the liability of such Assignor to pay the
Obligations shall in no way be affected or diminished by reason of the fact
that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.
6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. Each Assignor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory, such Assignor shall request that
such warehouse receipt or receipt in the nature thereof shall not be
"negotiable" (as such term is used in Section 7-104 of the Uniform Commercial
Code as in effect in any relevant jurisdiction or under other relevant law).
6.3. FINANCING STATEMENTS. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form reasonably
acceptable to the Collateral Agent, as the Collateral Agent may from time to
time reasonably request or as are necessary or
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desirable in the opinion of the Collateral Agent to establish and maintain a
valid, enforceable, first-priority perfected security interest in the
Collateral as provided herein (subject to Permitted Liens) and the other
rights and security contemplated hereby all in accordance with the UCC as
enacted in any and all relevant jurisdictions or any other relevant law.
Each Assignor will pay any applicable filing fees, recordation taxes and
related expenses relating to its Collateral. Each Assignor hereby authorizes
the Collateral Agent to file any such financing statements without the
signature of such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. Each
Assignor agrees that, if any Event of Default shall have occurred and be
continuing, then and in every such case, the Collateral Agent, in addition to
any rights now or hereafter existing under applicable law, shall have all
rights as a secured creditor under any UCC, and such additional rights and
remedies to which a secured creditor is entitled under the laws in effect, in
all relevant jurisdictions and may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon such Assignor's
premises where any of the Collateral is located and remove the same and use
in connection with such removal any and all services, supplies, aids and
other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent and may exercise any and all remedies of such Assignor in
respect of such Collateral;
(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or
direct the relevant Assignor to sell, assign or otherwise liquidate any or
all of the Collateral or any part thereof, and, in each case, take possession
of the proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places reasonably designated by the
Collateral Agent, in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place or places so
reasonably designated by the Collateral Agent and there delivered to the
Collateral Agent;
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(y) store and keep any Collateral so delivered to the Collateral
Agent at such place or places pending further action by the Collateral Agent
as provided in Section 7.2 hereof; and
(z) while the Collateral shall be so stored and kept, provide such
guards and maintenance services as shall be necessary to protect the same and
to preserve and maintain them in good condition; and
(vi) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on such conditions and in such manner as the
Collateral Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Collateral Agent
shall be entitled to a decree requiring specific performance by such Assignor
of said obligation. By accepting the benefits of this Agreement, the Secured
Creditors agree that this Agreement may be enforced only by the action of the
Agent or the Collateral Agent acting upon the instructions of the Required
Secured Creditors and that no other Secured Creditor shall have any right
individually to seek to enforce this Agreement or to realize upon the
security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Collateral Agent for the benefit
of the Secured Creditors upon the terms of this Agreement and the Credit
Agreement.
7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. If any Event of
Default shall have occurred and be continuing, then any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof
and any other Collateral whether or not so repossessed by the Collateral
Agent, may be sold, assigned, leased or otherwise disposed of under one or
more contracts or as an entirety, and without the necessity of gathering at
the place of sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms as the
Collateral Agent may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable. Any of the
Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Collateral Agent or after any
overhaul or repair at the expense of the relevant Assignor which the
Collateral Agent shall determine to be commercially reasonable. Any such
disposition that shall be a private sale or other private proceedings
permitted by such requirements shall be made upon not less than 10 days'
prior written notice to the relevant Assignor specifying the time at which
such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the
giving of such notice, to the right of the relevant Assignor or any nominee
of such Assignor to acquire the Collateral involved at a price or for such
other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days'
prior written notice to the relevant Assignor specifying the time and place
of such sale and, in the absence of applicable requirements of law, shall be
by public auction (which may, at the Collateral Agent's option, be subject to
reserve), after publication of notice of such auction (where required by
applicable law) not less than 10 days
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prior thereto. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so adjourned. To the
extent permitted by any such requirement of law, the Collateral Agent may bid
for and become the purchaser of the Collateral or any item thereof, offered for
sale in accordance with this Section without accountability to the relevant
Assignor. If, under mandatory requirements of applicable law, the Collateral
Agent shall be required to make disposition of the Collateral within a period of
time which does not permit the giving of notice to the relevant Assignor as
hereinabove specified, the Collateral Agent need give such Assignor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law. Each Assignor agrees to do or cause
to be done all such other acts and things as may be reasonably necessary to make
such sale or sales of all or any portion of the Collateral valid and binding and
in compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Assignor's expense.
7.3. WAIVER OF CLAIMS. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES, and each Assignor hereby further waives,
to the extent permitted by law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross negligence
or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral Agent's
rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and each Assignor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
7.4. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement, any Mortgage or any
Additional Security Document
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require proceeds of collateral under such Security Document to be applied in
accordance with the provisions of this Agreement, the Pledgee or Mortgagee
under such other Security Document) upon any sale or other disposition of the
Collateral, together with all other moneys received by the Collateral Agent
hereunder, shall be applied as follows.
(i) first, to the payment of all amounts owing the Collateral Agent
of the type described in clauses (iii) and (iv) of the definition of
"Obligations";
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding Primary
Obligations shall be paid to the Secured Creditors as provided in Section 7.4(e)
hereof, with each Secured Creditor receiving an amount equal to such outstanding
Primary Obligations or, if the proceeds are insufficient to pay in full all such
Primary Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations shall be paid to the Secured Creditors as
provided in Section 7.4(e) hereof, with each Secured Creditor receiving an
amount equal to its outstanding Secondary Obligations or, if the proceeds are
insufficient to pay in full all such Secondary Obligations, its Pro Rata Share
of the amount remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) through (iii), inclusive, and following
the termination of this Agreement pursuant to Section 10.8(a) hereof, to the
relevant Assignor or to whomever may be lawfully entitled to receive such
surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the
Credit Document Obligations, all principal of, and interest on, all Loans, all
Unpaid Drawings and all Fees and (ii) in the case of the Other Obligations, all
amounts due under such Interest Rate Protection Agreements or Other Hedging
Agreements (other than indemnities, fees (including, without limitation,
attorneys' fees) and similar obligations and liabilities) and (z) "Secondary
Obligations" shall mean all Obligations other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured
Creditor, such excess amount shall instead be distributed in respect of the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of the
other Secured Creditors, with
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each Secured Creditor whose Primary Obligations or Secondary Obligations, as
the case may be, have not been paid in full to receive an amount equal to such
excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such
Secured Creditor and the denominator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors entitled to such distribution.
(d) Each of the Secured Creditors, by their acceptance of the
benefits hereof, agrees and acknowledges that if the Bank Creditors are to
receive a distribution on account of undrawn amounts with respect to Letters of
Credit issued under the Credit Agreement (which shall only occur after all
outstanding Loans and Unpaid Drawings with respect to such Letters of Credit
have been paid in full), such amounts shall be paid to the Agent under the
Credit Agreement and held by it, for the equal and ratable benefit of the Bank
Creditors, as cash security for the repayment of Obligations owing to the Bank
Creditors as such. If any amounts are held as cash security pursuant to the
immediately preceding sentence, then upon the termination of all outstanding
Letters of Credit, and after the application of all such cash security to the
repayment of all Obligations owing to the Bank Creditors after giving effect to
the termination of all such Letters of Credit, if there remains any excess cash,
such excess cash shall be returned by the Agent to the Collateral Agent for
distribution in accordance with Section 7.4(a) hereof.
(e) All payments required to be made hereunder shall be made (x) if
to the Bank Creditors, to the Agent under the Credit Agreement for the account
of the Bank Creditors, and (y) if to the Other Creditors, to the trustee, paying
agent or other similar representative (each a "Representative") for the Other
Creditors or, in the absence of such a Representative, directly to the Other
Creditors.
(f) For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Agent under the Credit Agreement and (ii) the Representative for the Other
Creditors or, in the absence of such a Representative, upon the Other Creditors
for a determination (which the Agent, each Representative for any Other
Creditors and the Secured Creditors agree (or shall agree) to provide upon
request of the Collateral Agent) of the outstanding Primary Obligations and
Secondary Obligations owed to the Bank Creditors or the Other Creditors, as the
case may be. Unless it has actual knowledge (including by way of written notice
from a Bank Creditor or an Other Creditor) to the contrary, the Agent and each
Representative, in furnishing information pursuant to the preceding sentence,
and the Collateral Agent, in acting hereunder, shall be entitled to assume that
no Secondary Obligations are outstanding. Unless it has actual knowledge
(including by way of written notice from an Other Creditor) to the contrary, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Other Hedging Agreements are in
existence.
(g) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the aggregate amount of the Obligations.
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7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, under the
other Secured Debt Agreements or now or hereafter existing at law, in equity or
by statute and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed expedient by the
Collateral Agent. All such rights, powers and remedies shall be cumulative and
the exercise or the beginning of the exercise of one shall not be deemed a
waiver of the right to exercise any other or others. No delay or omission of
the Collateral Agent in the exercise of any such right, power or remedy and no
renewal or extension of any of the Obligations shall impair any such right,
power or remedy or shall be construed to be a waiver of any Default or Event of
Default or an acquiescence therein. No notice to or demand on any Assignor in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances or constitute a waiver of any of the rights of the
Collateral Agent to any other or further action in any circumstances without
notice or demand. In the event that the Collateral Agent shall bring any suit
to enforce any of its rights hereunder and shall be entitled to judgment, then
in such suit the Collateral Agent may recover reasonable expenses, including
reasonable attorneys' fees, and the amounts thereof shall be included in such
judgment.
7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. INDEMNITY. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including reasonable attorneys' fees and expenses) (for the purposes of this
Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind
and nature imposed on, asserted against or incurred by any of the Indemnitees in
any way relating to or arising out of this Agreement, any other Secured Debt
Agreement or any other document executed in connection herewith or therewith or
in any other way connected with the administration of the transactions
contemplated hereby or thereby or the enforcement of any of the terms of, or the
preservation of any rights under any thereof, or in any way relating to or
arising out of the manufacture, ownership, ordering, purchase, delivery,
17
performance, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or wilful misconduct of such Indemnitee (as
finally determined by a court of competent jurisdiction). Each Assignor agrees
that upon written notice by any Indemnitee of the assertion of such a liability,
obligation, damage, injury, penalty, claim, demand, action, suit or judgment,
the relevant Assignor shall assume full responsibility for the defense thereof.
Each Indemnitee agrees to use its best efforts to promptly notify the relevant
Assignor of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, in any other Secured
Debt Agreement or in any writing contemplated by or made or delivered pursuant
to or in connection with this Agreement or any other Secured Debt Agreement.
(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations that is permissible under applicable law.
8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all of the
other Obligations and notwithstanding the full payment of all the Notes issued
under the Credit Agreement, the termination of all Interest Rate Protection
Agreements or Other Hedging
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Agreements and all Letters of Credit and the payment of all other Obligations
and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Agent" shall have the meaning provided in the recitals of this
Agreement.
"Agreement" shall mean this Amended and Restated Security Agreement as
the same may be modified, supplemented or amended from time to time in
accordance with its terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Creditors" shall have the meaning provided in the recitals of
this Agreement.
"Banks" shall have the meaning provided in the recitals of this
Agreement.
"Borrower" shall have the meaning provided in the recitals of this
Agreement.
"Cash Collateral Account" shall mean a cash collateral account
maintained with, and in the sole dominion and control of, the Collateral Agent
for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor under each
Contract, including, without limitation, (i) any and all rights to receive and
demand payments under any or all Contracts, (ii) any and all rights to receive
and compel performance under any or all Contracts and (iii) any and all other
rights, interests and claims now existing or in the future arising in connection
with any or all Contracts.
"Contracts" shall mean all contracts between any Assignor and one or
more
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additional parties (including, without limitation, any Interest Rate
Protection Agreements or Other Hedging Agreements and any partnership
agreements), but excluding any contract to the extent that the terms thereof
prohibit (after giving effect to any approvals or waivers) the assignment of,
or granting a security interest in, such contract (it being understood and
agreed, however, that notwithstanding the foregoing, all rights to payment for
money due or to become due pursuant to any such excluded contract shall be
subject to the security interests created by this Agreement).
"Copyrights" shall mean any copyright owned by any Assignor, including
any registrations of any copyrights, in the United States Copyright Office or
any foreign equivalent office, as well as any application for a copyright
registration now or hereafter made with the United States Copyright Office or
any foreign equivalent office by any Assignor.
"Credit Agreement" shall have the meaning provided in the recitals of
this Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, fixtures and
vehicles now or hereafter owned by any Assignor and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event include, without
limitation, any payment default on any of the Other Obligations after the
expiration of any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York,
provided that, in the case of General Intangibles which are Permits, the
assignment thereof shall be limited as specified in the definition of Permits.
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
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"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same, in all stages of production -- from raw materials through work-
in-process to finished goods -- and all products and proceeds of whatever sort
and wherever located and any portion thereof which may be returned, rejected,
reclaimed or repossessed by the Collateral Agent from any Assignor's customers,
and shall specifically include all "inventory" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor.
"Investment Property" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any
trademarks, service marks and trade names now held or hereafter acquired by any
Assignor, including any registration of any trademarks and service marks in the
United States Patent and Trademark Office or in any equivalent foreign office
and any trade dress including logos and/or designs used by any Assignor.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and indebtedness (including, without limitation, indemnities, Fees
and interest thereon) of each Assignor to the Bank Creditors, whether now
existing or hereafter incurred under, arising out of, or in connection with the
Credit Agreement and the other Credit Documents to which such Assignor is a
party (including, in the case of each Guarantor, all such obligations and
indebtedness of such Guarantor under its Guaranty) and the due performance and
compliance by such Assignor with all of the terms, conditions and agreements
contained in the Credit Agreement and such other Credit Documents (all such
obligations and liabilities under this clause (i), except to the extent
consisting of obligations or indebtedness with respect to Interest Rate
Protection Agreements or Other Hedging Agreements, being herein collectively
called the "Credit Document Obligations"); (ii) the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities owing by such Assignor to the Other Creditors under,
or with respect to (including by reason of any Guaranty to which such Assignor
is a party), any Interest Rate Protection Agreement or Other Hedging Agreement,
whether such Interest Rate Protection Agreement or Other Hedging Agreement is
now in existence or hereafter arising, and the due performance and compliance by
such Assignor with all of the terms, conditions and agreements contained therein
(all such obligations and liabilities described in this clause (ii) being herein
collectively called the "Other Obligations"); (iii) any and all sums
21
reasonably advanced by the Assignee in order to preserve the Collateral or
preserve its security interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations
or liabilities of such Assignor referred to in clauses (i) and (ii) above,
after an Event of Default shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, or of any exercise
by the Assignee of its rights hereunder, together with reasonable attorneys'
fees and court costs; and (v) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Section 8.1 of this
Agreement; all such obligations, liabilities, sums and expenses set forth in
clauses (i) through (v) of this Article IX being herein collectively called
the "Obligations," it being acknowledged and agreed that the "Obligations"
shall include extensions of credit of the types described above, whether
outstanding on the date of this Agreement or extended from time to time after
the date of this Agreement.
"Original Security Agreement" shall have the meaning provided in the
recitals of this Agreement.
"Other Creditors" shall have the meaning provided in the recitals of
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
"Patents" shall mean any patent to which any Assignor now or hereafter
has title and any divisions or continuations thereof, as well as any application
for a patent now or hereafter made by any Assignor.
"Permits" shall mean, to the extent permitted to be assigned by the
terms thereof or by applicable law, all licenses, permits, rights, orders,
variances, franchises or authorizations of or from any governmental authority or
agency.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
22
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Representative" shall have the meaning provided in Section 7.4(e) of
this Agreement.
"Required Secured Creditors" shall mean (i) the Required Banks (or, to
the extent required by Section 13.12 of the Credit Agreement, each of the Banks)
under the Credit Agreement so long as any Credit Document Obligations remain
outstanding and (ii) in any situation not covered by the preceding clause (i),
the holders of a majority of the outstanding principal amount of the Other
Obligations.
"Requisite Creditors" shall have the meaning provided in Section 10.2
of this Agreement.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals of
this Agreement.
"Secured Debt Agreements" shall mean and include this Agreement, the
other Credit Documents and the Interest Rate Protection Agreements and Other
Hedging Agreements.
"Termination Date" shall have the meaning provided in Section 10.8 of
this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time
23
in the relevant jurisdiction.
ARTICLE X
MISCELLANEOUS
10.1. NOTICES. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Assignor, at the address set forth opposite such
Assignor's signature below;
(b) if to the Collateral Agent, at:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Andrew Keith
Tel. No.: (212) 250-8617
Fax. No.: (212) 250-7218;
(c) if to any Bank Creditor, at such address as such Bank Creditor
shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly effected thereby and the
Collateral Agent (with the written consent of the Required Secured Creditors);
PROVIDED, HOWEVER, that any change, waiver, modification or variance affecting
the rights and benefits of a single Class of Secured Creditors (and not all
Secured Creditors in a like or similar manner) shall require the written consent
of the Requisite Creditors of such affected Class. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Creditors, I.E.,
whether (x) the Bank Creditors as holders of the Credit Document Obligations or
(y) the Other Creditors as the holders of the Other Obligations. For the
purpose of this Agreement, the term "Requisite Creditors" of any Class shall
mean each of (x) with respect to the Credit Document Obligations, the Required
Banks and (y) with respect to the Other Obligations, the holders of at least a
majority amount of all obligations outstanding
24
from time to time under the respective Interest Rate Protection Agreements or
Other Hedging Agreements.
10.3. OBLIGATIONS ABSOLUTE. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Secured Debt
Agreement; or (c) any amendment to or modification of any Secured Debt Agreement
or any security for any of the Obligations; whether or not such Assignor shall
have notice or knowledge of any of the foregoing.
10.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
each Assignor and its successors and assigns (although no Assignor may assign
its rights and obligations hereunder except in accordance with the provisions of
the Secured Debt Agreements) and shall inure to the benefit of the Collateral
Agent and the other Secured Creditors and their respective successors and
assigns. All agreements, statements, representations and warranties made by
each Assignor herein or in any certificate or other instrument delivered by such
Assignor or on its behalf under this Agreement shall be considered to have been
relied upon by the Secured Creditors and shall survive the execution and
delivery of this Agreement and the other Secured Debt Agreements regardless of
any investigation made by the Secured Creditors or on their behalf.
10.5. HEADINGS DESCRIPTIVE. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
10.6. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
10.7. ASSIGNOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of any Assignor under or with
respect to any Collateral.
10.8. TERMINATION; RELEASE. (a) After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or
25
warranty) such of the Collateral as may be in the possession of the Collateral
Agent and as has not theretofore been sold or otherwise applied or released
pursuant to this Agreement. As used in this Agreement, "Termination Date"
shall mean the date upon which the Total Commitment and all Interest Rate
Protection Agreements or Other Hedging Agreements have been terminated, all
Loans have been repaid in full, all Letters of Credit have been terminated and
all Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by Section 9.02 of the Credit Agreement (other
than a sale to any Assignor or a Subsidiary thereof) or otherwise released at
the direction of the Required Secured Creditors or any Equipment is financed as
permitted by Sections 9.01(vii) and (viii) of the Credit Agreement (to the
extent that the lender thereof does not permit the Collateral Agent to retain a
junior Lien on such Equipment), such Collateral will be sold or financed, as the
case may be, free and clear of the Liens created by this Agreement (and such
Collateral shall automatically be released from the Liens created by this
Agreement) and the Collateral Agent, at the request and expense of the relevant
Assignor, will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
is then being (or has been) so sold or released and as may be in the possession
of the Collateral Agent and has not theretofore been released pursuant to this
Agreement.
(c) At any time that an Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 10.8(a) or (b), such Assignor shall deliver to
the Collateral Agent a certificate signed by a principal executive officer of
such Assignor stating that the release of the respective Collateral is permitted
pursuant to Section 10.8(a) or (b).
10.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with each Assignor and the
Collateral Agent.
10.10. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.11. THE COLLATERAL AGENT. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement and in Section 12 of the Credit
Agreement. The Collateral Agent shall act hereunder and thereunder on the terms
and conditions set forth herein and in Section 12 of the Credit Agreement.
26
10.12. BENEFIT OF AGREEMENT. This Agreement shall be binding upon
the parties hereto and their respective successors and assigns and shall inure
to the benefit of and be enforceable by each of the parties hereto and its
successors and assigns.
10.13. ADDITIONAL ASSIGNORS. It is understood and agreed that any
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof and
delivering the same to the Collateral Agent, at which time the Annexes to this
Agreement will be appropriately modified to reflect the Collateral then owned by
such additional Assignor.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
ADDRESS:
c/o J.F. Lehman & Company, Inc. ELGAR HOLDINGS, INC.,
450 Park Avenue as an Assignor
New York, New York 10022
Attn: Donald Glickman
Telephone No.: (212) 634-0100 By:/s/ KEITH OSTER
Telecopier No.: (212) 634-1155 -------------------------
Title:
and
9250 Brown Deer Road
San Diego, California 92121
Attn: Chris Kelford
Telephone No.: (619) 458-0204
Telecopier No.: (619) 458-0257
9250 Brown Deer Road ELGAR ELECTRONICS CORPORATION,
San Diego, California 92121 as an Assignor
Attn: Chris Kelford
Telephone No.: (619) 458-0204
Telecopier No.: (619) 458-0257 By:/s/ KEITH OSTER
--------------------------
Title:
27
and
c/o J.F. Lehman & Company, Inc.
450 Park Avenue
New York, New York 10022
Attn: Donald Glickman
Telephone No.: (212) 634-0100
Telecopier No.: (212) 634-1155
120 Knowles Drive POWER TEN,
Los Gatos, California 95030 as an Assignor
Attn:
Telephone No.:
Telecopier No.: By: /s/ KEITH OSTER
-------------------------
Title:
and
c/o J.F. Lehman & Company, Inc.
450 Park Avenue
New York, New York 10022
Attn: Donald Glickman
Telephone No.: (212) 634-0100
Telecopier No.: (212) 634-1155
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Collateral Agent
By /s/ ANDREW KEITH
--------------------------
Title:
28