U.S. SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement"), dated as of March 30, 1998,
made by ▇▇▇▇▇▇ MATERIAL HANDLING, INC., a Delaware corporation having an office
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Borrower"), and EACH
OF THE GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME
PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (collectively, the
"Guarantors"; together with the Borrower, the "Pledgors", and each, a
"Pledgor"), as pledgors, assignors and debtors, in favor of CANADIAN IMPERIAL
BANK OF COMMERCE, having an office at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, as pledgee, assignee and secured party, in its capacity as collateral
agent (in such capacities and together with any successors in such capacity,
"Collateral Agent") for the lending institutions (the "Banks") from time to time
party to the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented, or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement), among
▇▇▇▇▇▇ Material Handling, Inc., a Delaware corporation ("Holdings"), MMH
Holdings, Inc., a Delaware corporation ("MMH") as a U.S. Borrower, Material
Handling, LLC, a Delaware limited liability company ("Material Handling"),
▇▇▇▇▇▇ Material Handling, Ltd., a company organized under the laws of England
and Wales ("MHE-U.K.") as a U.K. Borrower, Mondel ULC, an unlimited liability
company organized under the laws of Nova Scotia ("Mondel") as a Canadian
Borrower, Kaverit Steel and Crane ULC, an unlimited liability company organized
under the laws of Nova Scotia ("Kaverit") as Canadian Borrower, the Banks,
Credit Agricole Indosuez ("Indosuez"), as syndication agent for the Banks (in
such capacity, the "Syndication Agent"), BankBoston, N.A., as documentation
agent for the Banks (in such capacity, the "Documentation Agent"), and Canadian
Imperial Bank of Commerce, as administrative agent and as collateral agent for
the Banks (in such capacities, the
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"Administrative Agent" and, together with the Syndication Agent and the
Documentation Agent, the "Agents"), the Banks have agreed to make to or for the
account of Borrower (i) certain Term Loans up to an aggregate principal amount
of $55,000,000, certain Acquisition Term Loans up to an aggregate principal
amount of $30,000,000 and certain Revolving Loans up to an aggregate principal
amount of $70,000,000 and (ii) certain Swingline Loans and to issue certain
Letters of Credit.
B. It is contemplated that the Borrower may enter into one or more
agreements with one or more of the Banks (collectively, "Interest Rate
Agreements") fixing the interest rates with respect to Loans under the Credit
Agreement (all obligations of the Borrower now existing or hereafter arising
under such Interest Rate Agreements, collectively, the "Interest Rate
Obligations").
C. Each Pledgor has executed and delivered to Collateral Agent a
certain guarantee instrument (each, a "Guarantee") pursuant to which, among
other things, each Pledgor has guaranteed the obligations of the Borrower under
the Credit Agreement and the other Credit Documents, and each Pledgor desires
that its Guarantee be secured hereunder.
D. Each Pledgor is or will be the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined) to be pledged by it hereunder.
E. It is a condition to the obligations of the Banks to make the
Loans under the Credit Agreement and a condition to any Bank issuing Letters of
Credit under the Credit Agreement that each Pledgor execute and deliver the
applicable Credit Documents, including this Agreement.
F. This Agreement is given by each Pledgor in favor of Collateral
Agent for its benefit and the benefit of the Banks and the Agents (collectively,
the "Secured Parties") to secure the payment and performance of all of the
Secured Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgors and Collateral Agent hereby agree as follows:
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Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, each Pledgor hereby
pledges, assigns, transfers and grants to Collateral Agent for its benefit and
the benefit of the Secured Parties, a continuing first priority (except with
respect to Prior Liens) security interest in and to all of the right, title and
interest of such Pledgor in, to and under the following property, wherever
located, whether now existing or hereafter arising or acquired from time to time
(collectively, the "Pledged Collateral"):
(a) all "accounts", as such term is defined in the Uniform
Commercial Code as in effect from time to time in any applicable
jurisdiction (the "UCC"), and in any event including, without limitation,
all of such Pledgor's rights to payment for goods sold or leased or
services performed by such Pledgor or any other party, and all rights
evidenced by an account, contract, security agreement, chattel paper,
guarantee (including a letter of credit) or other evidence of indebtedness
or security together with (i) all security pledged, assigned, hypothecated
or granted to or held by such Pledgor to secure the foregoing, (ii)
general intangibles arising out of such Pledgor's rights in any goods, the
sale of which gave rise thereto, (iii) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (iv) all powers of
attorney for the execution of any evidence of indebtedness or security or
other writing in connection therewith and (v) 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 offices (collectively, the "Receivables");
(b) all "inventory", as such term is defined in the UCC, and, in any
event including, without limitation, all raw materials, work in process,
returned goods, finished goods, samples and consigned goods to the extent
of the consignee's interest therein, materials and supplies of any kind or
nature which are or might be used in connection with the manufacture,
printing, publication, packing, shipping, advertising, selling or
finishing of any such goods and all other products, goods, materials and
supplies (collectively, the "Inventory");
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(c) all books, records, ledgers, print-outs, file materials and
other papers containing information relating to Receivables and any
account debtors in respect thereof;
(d) any and all sale, service, performance and equipment lease
contracts, agreements and grants (whether written or oral), and any other
contract (whether written or oral) between such Pledgor and third parties,
but excluding any contract (i) which would be terminable by the
counterparty thereto if such Pledgor's interest therein were subject to
the security interest created hereby and (ii) for which such Pledgor has
not received a consent from such counterparty to the grant of a security
interest therein (collectively, the "Contracts");
(e) all "equipment", as such term is defined in the UCC, and, in any
event including, without limitation, all machinery, equipment, office
machinery, furniture, conveyors, tools, materials, storage and handling
equipment, automotive equipment, motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership, and all other equipment of every kind
and nature owned by such Pledgor or in which such Pledgor may have any
interest (to the extent of such interest), all modifications, alterations,
repairs, substitutions, additions and accessions thereto, all replacements
and all parts therefor and together with all substitutes for any of the
foregoing (collectively, the "Equipment");
(f) all "general intangibles", as such term is defined in the UCC,
and, in any event including, without limitation, all manuals, blueprints,
know-how, warranties and records in connection with the Equipment; all
documents of title or documents representing the Inventory and all
records, files and writings with respect thereto; any and all other
rights, claims and causes of action of such Pledgor against any other
Person and the benefits of any and all collateral or other security given
by any other Person in connection therewith, including, without
limitation, all rights under any Contracts; all information, customer
lists, identification of suppliers, data, plans, blueprints, specification
designs, drawings, recorded knowledge, surveys, engineering reports, test
reports, manuals, materials, standards, processing standards, performance
standards, catalogs, research data, computer and automatic machinery
software and programs and the like pertaining to operations by such
Pledgor; all field repair
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data, sales data and other information relating to sales of products now
or hereafter manufactured, distributed or franchised by such Pledgor; all
accounting information pertaining to such Pledgor's operations or any of
the Equipment, Inventory, Receivables or Intangibles and all media in
which or on which any of the information or knowledge or data or records
relating to such operations or any of the Equipment, Inventory,
Receivables, Contracts or Intangibles may be recorded or stored and all
computer programs used for the compilation or printout of such
information, knowledge, records or data; all rights and goodwill of such
Pledgor; all licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by such Pledgor
pertaining to operations now or hereafter conducted by such Pledgor or
assets now or hereafter held by such Pledgor; all causes of action, claims
and warranties now or hereafter owned or acquired by such Pledgor; and any
other property consisting of a general intangible under the UCC applicable
in such other location where such Pledgor maintains its records relating
to such property excluding any contract (i) which would be terminable by
the counterparty thereto if such Pledgor's interest were subject to the
security interest created hereby and (ii) for which such Pledgor has not
received a consent from such counterparty to the grant of a security
interest therein (collectively, the "Intangibles");
(g) all insurance policies held by such Pledgor or naming such
Pledgor as insured, additional insured or loss payee (including, without
limitation, casualty insurance, liability insurance, property insurance
and business interruption insurance), all such insurance policies entered
into after the date hereof other than insurance policies (or certificates
of insurance evidencing such insurance policies) relating to health and
welfare insurance and life insurance policies in which such Pledgor is not
named as beneficiary (i.e., insurance policies that are not "Key Man"
insurance policies) and all rights, claims and recoveries relating thereto
(including all dividends, returned premiums and other rights to receive
money in respect of any of the foregoing) (collectively, the "Insurance
Policies");
(h) such Pledgor's right to receive the surplus funds, if any, which
are payable to such Pledgor following the termination of any employee
pension plan and the satisfaction of all liabilities of participants and
benefici-
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aries under such plan in accordance with applicable law (collectively, the
"Pension Plan Reversions");
(i) the issued and outstanding shares of capital stock of each
Person described in Schedule I-A held by such Pledgor hereto and each
other corporation hereafter acquired or formed by such Pledgor (the
"Pledged Shares") (which are and shall remain at all times until this
Agreement terminates, certificated shares), including the certificates
representing the Pledged Shares and any interest of such Pledgor in the
entries on the books of any financial intermediary pertaining to the
Pledged Shares; provided that such Pledgor shall not be required to pledge
shares possessing more than 65% of the voting power of all classes of
capital stock entitled to vote of any Subsidiary which is a controlled
foreign corporation (as defined in Section 957(a) of the Internal Revenue
Code of 1986, as amended from time to time (the "Tax Code")) and, in any
event, shall not be required to pledge the shares of stock of any
Subsidiary otherwise required to be pledged pursuant to this Section 1(i)
to the extent that such pledge would constitute an investment of earnings
in United States property under Section 956 (or a successor provision) of
the Code, which investment would trigger an increase in the gross income
of a United States shareholder of such Pledgor pursuant to Section 951 (or
a successor provision) of the Tax Code;
(j) subject to the proviso set forth in clause (i) above, all
additional shares of capital stock of whatever class of any issuer of the
Pledged Shares from time to time acquired by such Pledgor in any manner
(which are and shall remain at all times until this Agreement terminates,
certificated shares) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
shares and any interest of such Pledgor in the entries on the books of any
financial intermediary pertaining to such additional shares;
(k) all membership interests and/or partnership interests, as
applicable, of each Person described in Schedule I-B hereto and each other
limited liability company or partnership hereafter acquired or formed by
such Pledgor, together with all rights, privileges, authority and powers
of such Pledgor in and to each such Person or under the membership or
partnership agreement of each such Person (the "Operative Agreements")
(collectively, the "Initial Pledged Interests"), and the certificates,
instruments and
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agreements, if any, representing the Initial Pledged Interests;
(l) all options, warrants, rights, agreements, additional membership
or partnership interests or other interests relating to each such Person
described in clause (k) above or any interest in any such Person,
including, without limitation, any right relating to the equity or
membership or partnership interests in any such Person or under the
Operative Agreement of any such Person (collectively, the "Additional
Interests"; together with the Initial Pledged Interests, the "Pledged
Interests"; the Pledged Interests and the Pledged Shares, collectively,
the "Pledged Securities") from time to time acquired by such Pledgor in
any manner and the certificates, instruments and agreements, if any,
representing the Additional Interests;
(m) all intercompany notes described on Schedule II hereto (the
"Intercompany Notes") and all certificates or instruments evidencing such
Intercompany Notes and all proceeds thereof, all accessions thereto and
substitutions therefor;
(n) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests (debt or equity) or proceeds, including as a result of a split,
revision, reclassification or other like change of the Pledged Securities,
from time to time received, receivable or otherwise distributed to such
Pledgor in respect of or in exchange for any or all of the Pledged
Securities or Intercompany Notes (collectively, "Distributions");
(o) without affecting the obligations of such Pledgor under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which any Person listed on
Schedule I-A or Schedule I-B hereto is not the surviving entity, all
shares of each class of the capital stock of the successor corporation or
interests or certificates of the successor limited liability company or
partnership owned by such Pledgor (unless such successor is such Pledgor
itself) formed by or resulting from such consolidation or merger;
(p) patents issued or assigned to and all patent applications made
by such Pledgor, including, without limi-
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tation, the patents and patent applications listed on Schedule III hereto,
along with any and all (i) inventions and improvements described and
claimed therein, (ii) reissues, divisions, continuations, extensions and
continuations-in-part thereof, (iii) income, royalties, damages, claims
and payments now and hereafter due and/or payable thereunder and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, and (iv) rights to ▇▇▇ for past,
present and future infringements thereof (collectively, the "Patents");
(q) trademarks (including service marks), logos, federal and state
trademark registrations and applications made by such Pledgor, common law
trademarks and trade names owned by or assigned to such Pledgor and all
registrations and applications for the foregoing, including, without
limitation, the registrations and applications listed on Schedule IV
hereto, along with any and all (i) renewals thereof, (ii) income,
royalties, damages and payments now and hereafter due and/or payable
thereunder and with respect thereto, including, without limitation,
damages, claims and payments for past or future infringements thereof, and
(iii) rights to ▇▇▇ for past, present and future infringements thereof
(collectively, the "Trademarks");
(r) copyrights owned by or assigned to such Pledgor, including,
without limitation, the registrations and applications listed on Schedule
V hereto, along with any and all (i) renewals and extensions thereof, (ii)
income, royalties, damages, claims and payments now and hereafter due
and/or payable thereunder and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, and (iii) rights to ▇▇▇ for past, present and future
infringements thereof (collectively, the "Copyrights");
(s) license agreements and covenants not to ▇▇▇ with any other party
with respect to any Patent, Trademark, or Copyright listed on Schedule VI
hereto, along with any and all (i) renewals, extensions, supplements and
continuations thereof, (ii) income, royalties, damages, claims and
payments now and hereafter due and/or payable thereunder and with respect
thereto, including, without limitation, damages and payments for past,
present or future breaches thereof, (iii) rights to ▇▇▇ for past, present
and future breaches thereof and (iv) any other rights to use, exploit
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or practice any or all of the Patents, Trademarks or Copyrights
(collectively, the "Licenses");
(t) the entire goodwill and all product lines of such Pledgor's
business and other general intangibles, including, without limitation,
know-how, trade secrets, customer lists, proprietary information,
inventions, methods, procedures and formulae connected with the use of and
symbolized by the Trademarks of such Pledgor (collectively, the "Good
Will");
(u) any and all other property of such Pledgor;
(v) all "documents", as such term is defined in the UCC, including,
without limitation, all receipts of such Pledgor covering, evidencing or
representing Inventory or Equipment (collectively, the "Documents");
(w) all "instruments", as such term is defined in the UCC,
including, without limitation, all promissory notes, drafts, bills of
exchange or acceptances (collectively, the "Instruments"); and
(x) all "proceeds", as such term is defined in the UCC or under
other relevant law, and in any event including, without limitation, any
and all (i) proceeds of any insurance (except payments made to a Person
which is not a party to this Agreement), indemnity, warranty or guaranty
payable to Collateral Agent or to such Pledgor from time to time with
respect to any of the Pledged Collateral, (ii) payments (in any form
whatsoever) made or due and payable to such Pledgor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Pledged Collateral by any federal,
state, local, foreign or other governmental or administrative (including
self-regulatory) body, instrumentality, department or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission or
other similar dispute-resolving body including, without limitation, those
governing the regulation and protection of the environment (each, a
"Governmental Authority") (or any person acting on behalf of a
Governmental Authority), (iii) instruments representing obligations to pay
amounts in respect of the Pledged Collateral, (iv) products of the Pledged
Collateral and (v) other amounts from time to time paid or payable under
or in connection with any of the Pledged Collateral (collectively, the
"Proceeds").
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The Pledged Securities, the Intercompany Notes, the Distributions
and the Proceeds relating thereto are collectively referred to as the
"Securities Collateral". The Patents, Trademarks, Copyrights, Licenses, Good
Will and the Proceeds relating thereto are collectively referred to as the
"Intellectual Property Collateral". The Pledged Collateral other than the
Securities Collateral and the Intellectual Property is collectively referred to
as the "General Collateral".
Notwithstanding the foregoing, the Intellectual Property Collateral
shall exclude (i) any intellectual property rights, contracts and agreements to
the extent, and only to the extent, that (A) the granting of a Lien or an
assignment thereof could be illegal or render such intellectual property right
unenforceable under any applicable law or governmental regulation or (B) such
intellectual property right, contract or agreement contains a provision
enforceable at law and in equity that would be breached by (or would result in
the termination of such intellectual property right, contract or agreement upon)
the grant of the security interest created herein pursuant to the terms of this
Agreement and (ii) "intent to use" applications for trademarks; provided,
however, that if and when any prohibition on the assignment, pledge or grant of
a security interest in such intellectual property right, contract or agreement
is removed, the Secured Party will be deemed to have been granted a security
interest in such intellectual property right, contract or agreement as of the
date hereof, and the Collateral will be deemed to include such intellectual
property right, contract or agreement if otherwise permitted hereunder.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all Obligations of the Borrower now existing or
hereafter arising under or in respect of the Credit Agreement and all Interest
Rate Obligations of the Borrower now existing or hereafter arising under or in
respect of any Interest Rate Agreement (including, without limitation, the
obligations of the Borrower to pay principal, interest and all other charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the Obligations contained in the Credit
Agreement) and the obligations contained in any Interest Rate Agreement, (ii)
all obligations of the
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Guarantors now existing or hereafter arising under or in respect of the
Guarantees (including, without limitation, the obligations of each Guarantor to
pay principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the obligations contained in the Guarantees) and (iii) without
duplication of the amounts described in clauses (i) and (ii), all obligations of
the Pledgors now existing or hereafter arising under or in respect of this
Agreement or any other Security Document, including, without limitation, all
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
other payments related to or in respect of the obligations contained in this
Agreement or in any other Security Document, in each case whether in the regular
course of business or otherwise (the obligations described in clauses (i), (ii)
and (iii), collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
relieve any Pledgor from the performance of any term, covenant, condition or
agreement on such Pledgor's part to be performed or observed under or in respect
of any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on
Collateral Agent or any Secured Party to perform or observe any such term,
covenant, condition or agreement on such Pledgor's part to be so performed or
observed or shall impose any liability on Collateral Agent or any Secured Party
for any act or omission on the part of such Pledgor relating thereto or for any
breach of any representation or warranty on the part of such Pledgor contained
in this Agreement, any Interest Rate Agreement or any other Credit Document, or
under or in respect of the Pledged Collateral or made in connection herewith or
therewith. The obligations of each Pledgor contained in this Section 3 shall
survive the termination of this Agreement and the discharge of such Pledgor's
other obligations under this Agreement, any Interest Rate Agreement and the
other Credit Documents.
Section 4. Perfection; Supplements; Further Assurances; Use
of Pledged Collateral.
(a) Delivery of Certificated Securities Collateral. All
certificates, agreements or instruments representing or evidencing the
Securities Collateral, to the extent not previously delivered to Collateral
Agent, shall immediately upon receipt thereof by any Pledgor be delivered to and
held by or on behalf of Collateral Agent pursuant hereto. All certificated
Pledged Securities and Intercompany Notes shall be in suitable
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form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Collateral Agent. Collateral Agent shall have the right, at any
time upon the occurrence and during the continuance of any Event of Default and
without notice to any Pledgor, to endorse, assign or otherwise transfer to or to
register in the name of Collateral Agent or any of its nominees any or all of
the Securities Collateral. In addition, Collateral Agent shall have the right at
any time to exchange certificates representing or evidencing Pledged Securities
for certificates of smaller or larger denominations.
(b) Perfection of Uncertificated Securities Collateral. If any
issuer of Pledged Securities is organized in a jurisdiction which does not
permit the use of certificates to evidence equity ownership, or if any of the
Pledged Securities are at any time not evidenced by certificates of ownership,
then each applicable Pledgor shall, to the extent permitted by applicable law,
record such pledge on the equityholder register or the books of the issuer,
cause the issuer to execute and deliver to Collateral Agent an acknowledgment of
the pledge of such Pledged Securities substantially in the form of Exhibit 1
hereto, execute any customary pledge forms or other documents necessary or
appropriate to complete the pledge and give Collateral Agent the right to
transfer such Pledged Securities under the terms hereof and, if requested
subsequent to the date hereof, provide to Collateral Agent an opinion of
counsel, in form and substance satisfactory to Collateral Agent, confirming such
pledge.
(c) Financing Statements and Other Filings. Each Pledgor agrees that
at any time and from time to time, it will execute and, at the sole cost and
expense of the Pledgors file and refile, or permit Collateral Agent to file and
refile, such financing statements, continuation statements and other documents
(including, without limitation, this Agreement), in form acceptable to
Collateral Agent, in such offices (including, without limitation, the United
States Patent and Trademark Office and the United States Copyright Office) as
Collateral Agent may deem reasonably necessary or appropriate, wherever required
or permitted by law in order to perfect, continue and maintain a valid,
enforceable, first priority (except with respect to Prior Liens) security
interest in the Pledged Collateral as provided herein and to preserve the other
rights and interests granted to Collateral Agent hereunder, as against third
parties, with respect to any Pledged Collateral. Each Pledgor authorizes
Collateral Agent to file any such financing or continuation statement or other
document without the signa-
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ture of such Pledgor where permitted by law except upon the occurrence and
during the continuance of any Event of Default. Nothing in this paragraph or
Agreement shall require the assignment of any Trademarks themselves to
Collateral Agent as distinguished from the assignment of a security interest
therein.
(d) Supplements; Further Assurances. Each Pledgor agrees to do such
further acts and things, and to execute and deliver to Collateral Agent such
additional assignments, agreements, supplements, powers and instruments, as
Collateral Agent may deem reasonably necessary or appropriate, wherever required
or permitted by law, in order to perfect, preserve and protect the security
interest in the Pledged Collateral as provided herein and the rights and
interests granted to Collateral Agent hereunder, to carry into effect the
purposes of this Agreement or better to assure and confirm unto Collateral Agent
or permit Collateral Agent to exercise and enforce its respective rights, powers
and remedies hereunder with respect to any Pledged Collateral. Without limiting
the foregoing, each Pledgor shall make, execute, endorse, acknowledge, file or
refile and/or deliver to Collateral Agent from time to time such reasonable
lists, descriptions and designations of the Pledged Collateral, copies of
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, supplements, additional security agreements, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments. All of the foregoing shall be at the sole cost
and expense of Pledgors.
(e) Use and Pledge of Pledged Collateral. Unless an Event of Default
shall have occurred and be continuing, (i) each Pledgor can except in the
ordinary and prudent course of business with due regard for the security
afforded Collateral Agent hereby and (ii) Collateral Agent shall from time to
time execute and deliver, upon written request of any Pledgor and at the sole
cost and expense of the Pledgors, any and all instruments, certificates or other
documents, in a form reasonably requested by such Pledgor, necessary or
appropriate in the reasonable judgment of such Pledgor to enable such Pledgor to
continue to exploit, license, use, enjoy and protect the Pledged Collateral in
accordance with the terms of this Agreement. The Pledgors and Collateral Agent
acknowledge that this Agreement is intended to grant to Collateral Agent for the
benefit of the Secured Parties a security interest in and Lien upon the Pledged
Collateral and shall not constitute or create a present assignment of the
Pledged Collateral.
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Section 5. Representations, Warranties and Covenants. Each Pledgor
represents, warrants and covenants as follows:
(a) Perfection Actions; Prior Liens. Upon the completion of the
deliveries, filings and other actions contemplated in Sections 4(a)
through 4(d) hereof, the security interest granted to Collateral Agent for
the benefit of the Secured Parties pursuant to this Agreement in and to
the Pledged Collateral will constitute a perfected security interest
therein, superior and prior to the rights of all other Persons therein
other than with respect to (i) the Liens identified on Annex A relating to
the items of Pledged Collateral identified on such annex and (ii) Liens
otherwise permitted hereunder which are created or authorized under any
law or regulation of any applicable Governmental Authority and which are
required under such law or regulation to be superior to the Lien and
security interest created and evidenced hereby (the Liens described in
this clause (ii), collectively, "the "Governmental Prior Liens"; together
with the Liens described in clause (i) above, "Prior Liens").
(b) No Liens. Such Pledgor is as of the date hereof, and, as to
Pledged Collateral acquired by it from time to time after the date hereof,
such Pledgor will be, the sole direct and beneficial owner of all Pledged
Collateral pledged by it hereunder free from any Lien or other right,
title or interest of any Person other than (i) Prior Liens, (ii) the Lien
and security interest created by this Agreement and the other Security
Documents and (iii) Permitted Liens (as hereinafter defined), and such
Pledgor shall defend the Pledged Collateral pledged by it hereunder
against all claims and demands of all Persons at any time claiming any
interest therein adverse to Collateral Agent or any Secured Party. No
Pledgor shall enter into any agreement or take any other action that would
result in the imposition of any other Lien or impair or conflict with such
Pledgors' obligations or the rights of Collateral Agent hereunder.
"Permitted Liens" shall mean (A) with respect to the General
Collateral, Liens of the type described in clauses (a), (b), (c), (d),
(e), (g) (h), (i), (j), (l) and (p) of the definition of Permitted
Encumbrances and (B) with respect to all other Pledged Collateral, Liens
of the type described in clause (a) and (p) of the definition of Permitted
Encumbrances.
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(c) Other Financing Statements. 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 Pledged Collateral other than financing statements relating to (i)
Prior Liens that do not constitute Governmental Prior Liens, (ii) this
Agreement and the other Security Documents (iii) Permitted Liens that do
not constitute Governmental Prior Liens and (iv) Liens being released in
connection with the Transaction, and so long as any of the Secured
Obligations remain unpaid or the Commitments of the Banks to make any Loan
or to issue any Letter of Credit shall not have expired or been sooner
terminated, no Pledgor shall execute, authorize or permit 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 any Pledged Collateral, except, in each case,
financing statements filed or to be filed in respect of and covering the
security interests granted by such Pledgor pursuant to this Agreement and
financing statements relating to Prior Liens or Permitted Liens that in
each such case do not constitute Governmental Prior Liens.
(d) Chief Executive Office; Inventory, Equipment and Records. The
chief executive office and all Inventory and Equipment of such Pledgor are
located at the addresses indicated next to its name on Annex B hereto.
Such Pledgor shall not move its chief executive office, any Inventory or
Equipment to any location except with respect to (i) motor vehicles,
rolling stock and other mobile goods and (ii) Pledged Collateral in
transit between locations other than those listed on Annex B except to
such new location as such Pledgor may establish in ac-
-16-
cordance with the last sentence of this Section 5(d). All tangible
evidence of all Receivables, Pension Plan Reversions, Contracts,
Intangibles and Insurance Policies of such Pledgor and the only original
books of account and records of such Pledgor relating thereto are, and
will continue to be, kept at such chief executive office, or at such new
location for such chief executive office as such Pledgor may establish in
accordance with the last sentence of this Section 5(d). All Receivables,
Pension Plan Reversions, Contracts, Intangibles and Insurance Policies of
such Pledgor are, and will continue to be, controlled and monitored
(including, without limitation, for general accounting purposes) from such
chief executive office location, or such new location as such Pledgor may
establish in accordance with the last sentence of this Section 5(d). Such
Pledgor shall not establish a new location for its chief executive office,
move any Inventory or Equipment except with respect to (i) motor vehicles,
rolling stock and other mobile goods and (ii) Pledged Collateral in
transit between locations to any location other than those listed on Annex
B or change its name until (i) it shall have given Collateral Agent not
less than 30 days' prior written notice of its intention so to do, clearly
describing such new location or name and providing such other information
in connection therewith as Collateral Agent may request, and (ii) with
respect to such new location or name, such Pledgor shall have taken all
reasonable action requested by Collateral Agent from time to time to
maintain the perfection and priority of the security interest of
Collateral Agent for the benefit of the Secured Parties in the Pledged
Collateral intended to be granted hereby, including, without limitation,
obtaining waivers of landlord's or warehouseman's liens with respect to
such new location, if applicable.
(e) Due Authorization and Issuance. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized, validly issued and fully paid and nonassessable. All of the
Initial Pledged Interests have been fully paid for, and there is no amount
or other obligation owing by any Pledgor to any issuer of the Initial
Pledged Interests in exchange for or in connection with the issuance of
the Initial Pledged Interests or any Pledgor's status as a partner or a
member of any issuer of the Initial Pledged Interests.
(f) No Violations, etc. The pledge of the Pledged Securities
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
(g) No Options, Warrants, etc. There are no options, warrants,
calls, rights, commitments or agreements of any character to which such
Pledgor is a party or by which it is bound obligating such Pledgor to
issue, deliver or sell or cause to be issued, delivered or sold,
additional Pledged Securities or obligating such Pledgor to grant, extend
or enter into any such option, warrant, call, right, commitment or
agreement. There are no voting trusts or other agreements or
understandings to which such Pledgor is a party with respect to the voting
of the capital stock of any issuer of the Pledged Securities.
-17-
(h) No Claims. Except as set forth in Section 4(l)(ii) Schedule to
Recapitalization Agreement, such Pledgor owns or has rights to use all the
Pledged Collateral pledged by it hereunder and all rights with respect to
any of the foregoing used in, necessary for or material to such Pledgor's
business as currently conducted and as contemplated to be conducted
pursuant to the Credit Documents. The use by such Pledgor of such Pledged
Collateral and all such rights with respect to the foregoing do not
infringe on the rights of any Person except as would not result in a
Material Adverse Effect or may violate the rights of any third person
except as set forth on Schedule (4)(l)(ii) to the Recapitalization
Agreement.
(i) Authorization, Enforceability. Such Pledgor has the requisite
corporate or other organizational power, authority and legal right to
pledge and grant a security interest in all the Pledged Collateral pledged
by it pursuant to this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of such Pledgor, enforceable against
such Pledgor in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(j) No Consents, etc. Other than any consents of which the failure
to obtain would not have a Material Adverse Effect, no consent of any
party (including, without limitation, equityholders or creditors of such
Pledgor or any account debtor under a Receivable) and no consent,
authorization, approval, license or other action by, and no notice to or
filing other than filings required to perfect or maintain the perfection
of the Liens with, any Governmental Authority or regulatory body or other
Person is required for (x) the pledge by such Pledgor of the Pledged
Collateral pledged by it pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by such Pledgor, (y) the
exercise by Collateral Agent of the rights provided for in this Agreement
or (z) the exercise by Collateral Agent of the remedies in respect of the
Pledged Collateral pursuant to this Agreement, except filings under
applicable securities and antitrust laws and any filings required in
foreign countries.
-18-
(k) Pledged Collateral. All information set forth herein, including
the schedules and annexes attached hereto, and all information contained
in any documents, schedules and lists heretofore delivered to any Secured
Party in connection with this Agreement, in each case, relating to the
Pledged Collateral, is accurate and complete in all material respects.
(l) Insurance. Other than Liens allowed by Section 5(b) hereof, no
Pledgor shall take any action that impairs the rights of Collateral Agent
or any Secured Party in the Pledged Collateral. Each Pledgor shall at all
times keep the Inventory and Equipment insured, at such Pledgor's own
expense, to Collateral Agent's satisfaction against fire, theft and all
other risks to which the Pledged Collateral may be subject, in such
amounts and with such deductibles as would be maintained by operators of
businesses similar to the business of such Pledgor or as Collateral Agent
may otherwise require. Each policy or certificate with respect to such
insurance shall be endorsed to Collateral Agent's satisfaction for the
benefit of Collateral Agent (including, without limitation, by naming
Collateral Agent as an additional named insured and loss payee as
Collateral Agent may request) and such policy or certificate shall be
delivered to Collateral Agent. Each such policy shall state that it cannot
be cancelled without 30 days' prior written notice to Collateral Agent. At
least 30 days prior to the expiration of any such policy of insurance,
each Pledgor shall deliver to Collateral Agent an extension or renewal
policy or an insurance certificate evidencing renewal or extension of such
policy. If any Pledgor shall fail to insure such Pledged Collateral to
Collateral Agent's satisfaction, Collateral Agent shall have the right
(but shall be under no obligation) to advance funds to procure or renew or
extend such insurance, and such Pledgor agrees to reimburse Collateral
Agent for all costs and expenses thereof, with interest on all such funds
from the date advanced until paid in full at the highest rate then in
effect under the Credit Agreement.
(m) Insurance Proceeds. Any proceeds of insurance received by any
Pledgor shall be applied by it as provided in Section 3.02(A)(i) of the
Credit Agreement. In the event that any Pledgor is permitted to and elects
to apply such proceeds to the repair or replacement of any item of Pledged
Collateral, such Pledgor shall upon its receipt of such proceeds from
Collateral Agent promptly commence and diligently continue to perform such
repair or promptly ef-
-19-
fect such replacement. Upon the occurrence and during the continuance of
any Event of Default, Collateral Agent shall have the option to apply any
proceeds of insurance received by any Pledgor in respect of the Pledged
Collateral toward the payment of the Secured Obligations in accordance
with Section 13 hereof or to continue to hold such proceeds as additional
collateral to secure the performance by the Pledgors of the Secured
Obligations.
(n) Payment of Taxes; Compliance with Laws; Claims. Each Pledgor
shall pay prior to the date on which material penalties would attach
thereto all property and other taxes, assessments and governmental charges
or levies imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Pledged Collateral. Each Pledgor
shall comply with all laws, rules and regulations applicable to the
Pledged Collateral the failure to comply with which would have an adverse
effect on the value or use of such Pledged Collateral or the Lien on such
Pledged Collateral granted to Collateral Agent hereunder. Notwithstanding
the foregoing, each Pledgor may at its own expense contest the amount or
applicability of any of the obligations described in the preceding
sentences by appropriate legal or administrative proceedings, prosecution
of which operates to prevent the collection thereof and the sale or
forfeiture of the Pledged Collateral or any part thereof to satisfy the
same; provided, however, that in connection with such contest, such
Pledgor shall (a) have made provision for the payment of such contested
amount on such Pledgor's books if and to the extent required by generally
accepted accounting principles or (b) bonded such obligation in form and
amount reasonably satisfactory to Collateral Agent.
(o) Consents. To the extent that any property of any Pledgor would
constitute Collateral hereunder but for the exclusions contained in the
applicable clauses of Section 1 hereunder, such Pledgor shall use its best
efforts to obtain the consent necessary to make such exclusion
inapplicable.
Section 6. Special Provisions Concerning General Collateral.
(a) Special Representations and Warranties. As of the time when each
of its Receivables arises, each Pledgor shall be deemed to have represented and
warranted that such Receivable and all records, papers and documents relating
thereto
-20-
(i) are genuine and correct and in all material respects what they
purport to be, (ii) represent the legal, valid and binding obligation of the
account debtor, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability, evidencing indebtedness unpaid and owed by such
account debtor, arising out of the performance of labor or services or the sale
or lease and delivery of the merchandise listed therein or out of an advance or
a loan, not subject to the fulfillment of any contract or condition whatsoever
or to any defenses, set-offs or counterclaims except with respect to refunds,
returns, warranty claims and allowances in the ordinary course of business, or
stamp or other taxes, (iii) will, in the case of chattel paper on negotiable
instruments, be the only original writings evidencing and embodying such
obligation of the account debtor named therein, and (iv) are in compliance and
conform in all material respects with all applicable federal, state and local
laws and applicable laws of any relevant foreign jurisdiction.
(b) Maintenance of Records. Each Pledgor shall keep and maintain at
its own cost and expense complete records of each Receivable, in a manner
consistent with prudent business practice, including, without limitation,
records of all payments received, all credits granted thereon, all merchandise
returned and all other documentation relating thereto, and each Pledgor shall
make the same available to Collateral Agent or any Secured Party for inspection
upon reasonable prior notice to such Pledgor, at such times as Collateral Agent
may request. Each Pledgor shall, at such Pledgor's sole cost and expense, upon
Collateral Agent's demand made at any time after the occurrence and during the
continuance of any Event of Default, deliver all tangible evidence of
Receivables, including, without limitation, all documents evidencing Receivables
and any books and records relating thereto to Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by such Pledgor). Upon the occurrence and during the continuance of any Event of
Default, Collateral Agent may transfer a full and complete copy of any Pledgor's
books, records, credit information, reports, memoranda and all other writings
relating to the Receivables to and for the use by any Person that has acquired
or is contemplating acquisition of an interest in the Receivables or Collateral
Agent's security interest therein without the consent of any Pledgor.
(c) Legend. Each Pledgor shall legend, at the request of Collateral
Agent made at any time after the occurrence
-21-
and during the continuance of any Event of Default and in form and manner
satisfactory to Collateral Agent, the Receivables and the other books, records
and documents of such Pledgor evidencing or pertaining to the Receivables with
an appropriate reference to the fact that Collateral Agent has a security
interest therein.
(d) Modification of Terms, etc. No Pledgor shall rescind or cancel
any indebtedness evidenced by any Receivable or modify any term thereof or make
any adjustment with respect thereto except in the ordinary course of business
consistent with prudent business practice, or extend or renew any such
indebtedness except in the ordinary and prudent course of business with due
regard for the security afforded Collateral Agent hereby or compromise or settle
any dispute, claim, suit or legal proceeding relating thereto or sell any
Receivable or interest therein without the prior written consent of Collateral
Agent. Each Pledgor shall use best efforts to timely fulfill all obligations on
its part to be fulfilled under or in connection with the Receivables.
(e) Collection. Each Pledgor shall cause to be collected from the
account debtor of each of the Receivables, as and when due (including, without
limitation, Receivables that are delinquent, such Receivables to be collected in
accordance with generally accepted commercial collection procedures), any and
all amounts owing under or on account of such Receivable, and apply forthwith
upon receipt thereof all such amounts as are so collected to the outstanding
balance of such Receivable, except that any Pledgor may, with respect to a
Receivable, allow in the ordinary course of business (i) a refund or credit due
as a result of returned or damaged or defective merchandise and (ii) such
extensions of time to pay amounts due in respect of Receivables and such other
modifications of payment terms or settlements in respect of Receivables as shall
be commercially reasonable in the circumstances, all in accordance with such
Pledgor's ordinary course of business consistent with its collection practices
as in effect from time to time or as otherwise consented by Collateral Agent.
The costs and expenses (including, without limitation, reasonable attorneys'
fees) of collection, in any case, whether incurred by any Pledgor, Collateral
Agent or any Secured Party, shall be paid by the Pledgors.
(f) Instruments. Each Pledgor shall deliver to Collateral Agent,
within five days after receipt thereof by such Pledgor, any Instrument
evidencing Receivables which is in the principal amount of [$100,000] or more.
Any Instrument deliv-
-22-
ered to Collateral Agent pursuant to this Section 6(f) shall be appropriately
endorsed (if applicable) to the order of Collateral Agent, as agent for the
Secured Parties, and shall be held by Collateral Agent as further security
hereunder, provided, however, so long as no Event of Default shall have occurred
and be continuing, each Pledgor may request Collateral Agent to redeliver the
Instrument if necessary to collect on it.
(g) Cash Collateral. Upon the occurrence and during the continuance
of any Event of Default, if Collateral Agent so directs, each Pledgor shall
cause all payments on account of the Receivables to be held by Collateral Agent
as cash collateral, upon acceleration or otherwise. Without notice to or assent
by any Pledgor, Collateral Agent may apply any or all amounts then or thereafter
held as cash collateral in the manner provided in Section 11. The costs and
expenses (including, without limitation, reasonable attorneys' fees) of
collection, whether incurred by Collateral Agent or any Secured Party, shall be
paid by the Pledgors.
(h) Maintenance of Equipment. Each Pledgor shall cause the Equipment
to be maintained and preserved in good repair and working order as when new,
ordinary wear and tear excepted, and to the extent consistent with current
business practice in accordance with any manufacturer's manual, and shall
forthwith, or in the case of any loss or damage which (individually or in the
aggregate) exceeds $100,000 to any of the Equipment (other than worn out,
obsolete or otherwise unsuitable Equipment) (of which prompt notice shall be
given to Collateral Agent) as quickly as commercially practicable after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary or desirable in the
conduct of such Pledgor's business.
(i) Warehouse Receipts Non-Negotiable. If any warehouse receipt or
receipt in the nature of a warehouse receipt is issued with respect to any of
the Inventory, the applicable Pledgor shall not permit such warehouse receipt or
receipt in the nature thereof to be "negotiable" (as such term is used in
Section 7-104 of the UCC or under other relevant law) other than Inventory which
is in transit from the supplier to Pledgor between locations specified on
Exhibit B or covered by the last sentence of Section 5(d) hereof, or to
customers of Pledgor.
-23-
Section 7. Special Provisions Concerning Securities Collateral.
(a) Pledge of Additional Securities. Each Pledgor shall, upon
obtaining any Pledged Securities or Intercompany Notes of any Person, promptly
(and in any event within ten (10) Business Days) deliver to Collateral Agent a
pledge amendment, duly executed by such Pledgor, in substantially the form of
Exhibit 2 hereto (each, a "Pledge Amendment"), in respect of the additional
Pledged Securities or Intercompany Notes which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien hereby created on and
in respect of such additional property. Each Pledgor hereby authorizes
Collateral Agent to attach each Pledge Amendment to this Agreement and agrees
that all Pledged Securities or Intercompany Notes listed on any Pledge Amendment
delivered to Collateral Agent shall for all purposes hereunder be considered
Pledged Collateral.
(b) Voting Rights; Distributions; etc.
(i) So long as no Event of Default shall have occurred and be
continuing:
(A) Each Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Securities or any
part thereof for any purpose not inconsistent with the terms or purposes
of this Agreement or any other Credit Document; provided, however, that no
Pledgor shall in any event exercise such rights in any manner which could
reasonably be expected to have a material effect on the value of the
Pledged Collateral or an adverse effect on the security intended to be
provided by this Agreement.
(B) Subject to the terms of the Credit Agreement, each Pledgor shall
be entitled to receive and retain, and to utilize free and clear of the
Lien of this Agreement, any and all Distributions, but only if and to the
extent made in accordance with the provisions of the Credit Agreement;
provided, however, that any and all such Distributions consisting of
rights or interests in the form of securities shall be forthwith delivered
to Collateral Agent to hold as Pledged Collateral and shall, if received
by any Pledgor, be received in trust for the benefit of Collateral Agent,
be segregated from the other property or funds of such Pledgor and be
forthwith delivered to Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsement).
-24-
(C) Collateral Agent shall be deemed without further action or
formality to have granted to each Pledgor all necessary consents relating
to voting rights and shall, if necessary, upon written request of any
Pledgor and at the sole cost and expense of the Pledgors, from time to
time execute and deliver (or cause to be executed and delivered) to such
Pledgor all such instruments as such Pledgor may reasonably request in
order to permit such Pledgor to exercise the voting and other rights which
it is entitled to exercise pursuant to Section 7(b)(i)(A) hereof and to
receive the Distributions which it is authorized to receive and retain
pursuant to Section 7(b)(i)(B) hereof.
(ii) Upon the occurrence of and during the continuance of any Event
of Default:
(A) All rights of each Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to
Section 7(b)(i)(A) hereof without any action or the giving of any notice
shall cease, and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to exercise
such voting and other consensual rights.
(B) All rights of each Pledgor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to Section
7(b)(i)(B) hereof shall cease and all such rights shall thereupon become
vested in Collateral Agent, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such Distributions; provided that
if the Loans have not been accelerated as provided in the Credit
Agreement, such Pledgor may receive such Distributions for application
solely to the payment of taxes in accordance with Section 5(n) hereof or
to payment of the Secured Obligations.
(iii) Each Pledgor shall, at its sole cost and expense, from time to
time execute and deliver to Collateral Agent appropriate instruments as
Collateral Agent may reasonably request in order to permit Collateral
Agent to exercise the voting and other rights which it may be entitled to
exercise pursuant to Section 7(b)(ii)(A) hereof and to receive all
Distributions which it may be entitled to receive under Section
7(b)(ii)(B) hereof.
(iv) All Distributions which are received by any Pledgor contrary to
the provisions of Section 7(b)(ii)(B)
-25-
hereof shall be received in trust for the benefit of Collateral Agent,
shall be segregated from other funds of such Pledgor and shall immediately
be paid over to Collateral Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement).
(c) No New Securities. Each Pledgor shall cause each issuer of the
Pledged Securities not to issue any stock or other securities or equity
interests in addition to or in substitution for the Pledged Securities issued by
such issuer, except to Pledgor, or except as otherwise not prohibited by the
Credit Agreement.
(d) Operative Agreements. Each Pledgor has delivered to Collateral
Agent true, correct and complete copies of the Operative Agreements. The
Operative Agreements are in full force and effect, have not as of the date
hereof been amended or modified, and there is no existing default by any party
thereunder or any event which, with the giving of notice of passage of time or
both, would constitute a default by any party thereunder. Each Pledgor shall
deliver to Collateral Agent a copy of any notice of default given or received by
it under any Operative Agreement within ten (10) days after such Pledgor gives
or receives such notice. No Pledgor will terminate or agree to terminate any
Operative Agreement or make any amendment or modification to any Operative
Agreement which may have an adverse effect on the value of the Pledged Interests
or could reasonably be expected to have a material effect on the value of the
Pledged Collateral or an adverse effect on the security intended to be provided
by this Agreement.
Section 8. Special Provisions Concerning Intellectual
Property Collateral.
(a) Protection of Collateral Agent's Security. On a continuing
basis, each Pledgor shall, at its sole cost and expense, (i) promptly following
its becoming aware thereof, notify Collateral Agent of (A) any adverse
determination in any proceeding in the United States Patent and Trademark Office
or the United States Copyright Office with respect to any Patent, Trademark or
Copyright or (B) the institution of any proceeding or any adverse determination
in any federal, state or local court or administrative body regarding such
Pledgor's claim of ownership in or right to use any of the Intellectual Property
Collateral, its right to register the Intellectual Property Collateral or its
right to keep and maintain such registration in full force and effect, (ii)
maintain and protect the Intellectual Property Collateral necessary for the
operation of such
-26-
Pledgor's business, (iii) not permit to lapse or become abandoned any
Intellectual Property Collateral necessary for the operation of such Pledgor's
business, and not settle or compromise any pending or future litigation or
administrative proceeding with respect to the Intellectual Property Collateral
necessary for the operation of such Pledgor's business, in each case, without
the consent of Collateral Agent, (iv) upon such Pledgor obtaining knowledge
thereof, promptly notify Collateral Agent in writing of any event which may
reasonably be expected to adversely affect the value or utility of the
Intellectual Property Collateral or any portion thereof necessary for the
operation of such Pledgor's business, the ability of such Pledgor or Collateral
Agent to dispose of the Intellectual Property Collateral or any portion thereof
or the rights and remedies of Collateral Agent in relation thereto, including,
without limitation, a levy or threat of levy or any legal process against the
Intellectual Property Collateral or any portion thereof, (v) not license the
Intellectual Property Collateral other than licenses entered into by such
Pledgor in, or incidental to, the ordinary course of business or any
transactions permitted by Section 7.17 of the Credit Agreement, or amend or
permit the amendment of any of the licenses in a manner that adversely affects
the right to receive payments thereunder, or in any manner that would impair the
value of the Intellectual Property Collateral or the Lien on the Intellectual
Property Collateral intended to be granted to Collateral Agent for the benefit
of the Secured Parties, without the consent of Collateral Agent, (vi) until
Collateral Agent exercises its rights to make collection, diligently keep
adequate records respecting the Intellectual Property Collateral and (vii)
furnish to Collateral Agent from time to time statements and amended schedules
further identifying and describing the Intellectual Property Collateral and such
other materials evidencing or reports pertaining to the Intellectual Property
Collateral as Collateral Agent may from time to time reasonably request, all in
reasonable detail. Provided Collateral Agent is advised in writing, nothing
herein shall require Pledgor to renew the registration of any Trademark which is
not intended to be continued or used or is not used by Pledgor in its business
or to pay any maintenance fee with respect to any Patent which Pledgor
reasonably deems to be of little or no value.
(b) After-Acquired Property. If any Pledgor shall, at any time
before the Secured Obligations have been paid or the Commitments of the Banks to
make any Loan or to issue any Letter of Credit have expired or been sooner
terminated (i) obtain any rights to any additional Intellectual Property
Collateral or (ii) become entitled to the benefit of any additional
-27-
Intellectual Property Collateral or any renewal or extension thereof, including
any reissue, division, continuation, or continuation-in-part of any Patent, or
any improvement on any Patent, the provisions of this Agreement shall
automatically apply thereto and any such item enumerated in clause (i) or (ii)
with respect to such Pledgor shall automatically constitute Intellectual
Property Collateral if such would have constituted Intellectual Property
Collateral at the time of execution of this Agreement and be subject to the Lien
created by this Agreement without further action by any party other than actions
required to perfect such Lien. Each Pledgor shall promptly provide to Collateral
Agent written notice of any of the foregoing. Each Pledgor agrees, promptly
following a request by Collateral Agent, to confirm the attachment of the Lien
created by this Agreement to any rights described in clauses (i) and (ii) above
if such would have constituted Intellectual Property Collateral at the time of
execution of this Agreement by execution of an instrument in form reasonably
acceptable to Collateral Agent.
(c) Modifications. Each Pledgor authorizes Collateral Agent to
modify this Agreement by amending Schedules III, IV, V and VI hereto to include
any future Intellectual Property Collateral of such Pledgor, including, without
limitation, any of the items listed in Section 8(b).
(d) Applications. Each Pledgor shall file and prosecute diligently
all applications for the Patents, the Trademarks or the Copyrights now or
hereafter pending that would be necessary to the business of such Pledgor to
which any such applications pertain, and shall do all acts necessary to preserve
and maintain all rights in the Intellectual Property Collateral necessary for
the operation of such Pledgor's business. Any and all costs and expenses
incurred in connection with any such actions shall be borne by the Pledgors. No
Pledgor shall abandon any right to file a Patent, Trademark or Copyright
application, or any pending Patent, Trademark or Copyright application or any
Patent, Trademark or Copyright necessary for the operation of such Pledgor's
business without the consent of Collateral Agent.
(e) Litigation.
(i) Unless there shall occur and be continuing any Event of Default,
each Pledgor shall have the right to commence and prosecute in its own
name, as the party in interest, for its own benefit and at the sole cost
and expense of the Pledgors, such applications for protection of the
Intellectual Property Collateral and suits, proceed-
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ings or other actions for infringement, counterfeiting, unfair
competition, dilution or other damage as are in its reasonable business
judgment necessary to protect the Intellectual Property Collateral
necessary for the operations of such Pledgor's business. Each Pledgor
shall promptly notify Collateral Agent in writing as to the commencement
and prosecution of any such actions, or threat thereof relating to such
Intellectual Property Collateral, and shall provide to Collateral Agent
such information with respect thereto as may be reasonably requested by
Collateral Agent. Each Pledgor shall indemnify and hold harmless each
Secured Party for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, expenses or disbursements (including
attorneys' fees and expenses) of any kind whatsoever which may be imposed
on, incurred by or asserted against such Secured Party in connection with
or in any way arising out of such suits, proceedings or other actions.
(ii) Upon the occurrence and during the continuance of any Event of
Default, Collateral Agent shall have the right but shall in no way be
obligated to file applications for protection of the Intellectual Property
Collateral and/or bring suit in the name of any Pledgor, Collateral Agent
or the Secured Parties to enforce the Intellectual Property Collateral and
any license thereunder. In the event of such suit, each Pledgor shall, at
the request of Collateral Agent, do any and all lawful acts and execute
any and all documents requested by Collateral Agent in aid of such
enforcement and the Pledgors shall promptly, upon demand, reimburse and
indemnify Collateral Agent, as the case may be, for all costs and expenses
(including reasonable fees and expenses of counsel) incurred by Collateral
Agent in the exercise of its rights under this Section 8(e). In the event
that Collateral Agent shall elect not to bring suit to enforce the
Intellectual Property Collateral, each Pledgor agrees, at the request of
Collateral Agent, to use all reasonable measures, whether by action, suit,
proceeding or otherwise, to prevent the infringement, counterfeiting or
other diminution in value of any of the Intellectual Property Collateral
by others and for that purpose agrees to diligently maintain any action,
suit or proceeding against any person so infringing necessary to prevent
such infringement unless such Pledgor has determined that such
Intellectual Property Collateral that is the subject of any pending or
contemplated infringement or enforcement action or proceeding does not
contain or represent any value or utility
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(other than of an immaterial nature), consistent with prudent business
practice.
Section 9. [RESERVED]
Section 10. Transfers and Other Liens. Except as otherwise permitted
by the Credit Agreement, no Pledgor shall (a) sell, convey, assign or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral
pledged by it hereunder except as permitted by the Credit Agreement, (b) create
or permit to exist any Lien upon or with respect to any of the Pledged
Collateral pledged by it hereunder other than (i) Prior Liens, (ii) the Lien and
security interest granted to Collateral Agent under this Agreement and the other
Security Documents and (iii) Permitted Liens or (c) permit any issuer of the
Pledged Securities to merge, consolidate or change its legal form, unless all of
the outstanding equity interests of the surviving or resulting entity are, upon
such merger or consolidation, pledged hereunder and no cash, securities or other
property is distributed in respect of the outstanding equity interests of any
other constituent entity except as permitted by the Credit Agreement.
Section 11. Reasonable Care. Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of similar instruments or
interests, it being understood that neither Collateral Agent nor any of the
Secured Parties shall have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Securities Collateral, whether or not Collateral Agent
or any other Secured Party has or is deemed to have knowledge of such matters,
or (ii) taking any necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 12. Remedies upon Default; Obtaining the Pledged Collateral
upon Event of Default. (a) If any Event of Default shall have occurred and be
continuing, then and in every such case, Collateral Agent may:
(i) Personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from any Pledgor
or any other Person who then has possession of any part thereof with or
without
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notice or process of law, and for that purpose may enter upon any
Pledgor's premises where any of the Pledged Collateral is located and
remove such Pledged Collateral and use in connection with such removal any
and all services, supplies, aids and other facilities of any Pledgor;
(ii) Instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and
Contracts) constituting part of the Pledged Collateral to make any payment
required by the terms of such instrument or agreement directly to
Collateral Agent; provided, however, that in the event that any such
payments are made directly to any Pledgor, prior to receipt by any such
obligor of such instruction, such Pledgor shall segregate all amounts
received pursuant thereto in a separate account and pay the same promptly
to Collateral Agent;
(iii) Sell, assign or otherwise liquidate, or direct any Pledgor to
sell, assign or otherwise liquidate, any or all investments made in whole
or in part with the Pledged Collateral or any part thereof, and take
possession of the proceeds of any such sale, assignment or liquidation;
(iv) Take possession of the Pledged Collateral or any part thereof,
by directing any Pledgor in writing to deliver the same to Collateral
Agent at any place or places so designated by Collateral Agent, in which
event such Pledgor shall at its own expense: (A) forthwith cause the same
to be moved to the place or places designated by Collateral Agent and
there delivered to Collateral Agent, (B) store and keep any Pledged
Collateral so delivered to Collateral Agent at such place or places
pending further action by Collateral Agent; and (C) while the Pledged
Collateral shall be so stored and kept, provide such security and
maintenance services as shall be necessary to protect the same and to
preserve and maintain them in good condition. Each Pledgor's obligation to
deliver the Pledged Collateral is of the essence of this Agreement;
(v) Retain and apply the Distributions to the Secured Obligations
as provided in Section 13 hereof; and
(vi) Exercise any and all rights as beneficial and legal owner of
the Pledged Collateral, including, without limitation, perfecting
assignment of any and all consensual rights and powers with respect to any
Pledged Collateral.
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Upon application to a court of equity having jurisdiction,
Collateral Agent shall be entitled to a decree requiring specific performance by
any Pledgor of such obligation.
(b) Remedies; Disposition of the Pledged Collateral.
(i) Upon the occurrence and during the continuance of any Event of
Default, Collateral Agent may from time to time exercise in respect of the
Pledged Collateral, in addition to the other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party on default under the UCC, and Collateral Agent may also in its sole
discretion, without notice except as specified below, sell, assign or grant a
license to use the Pledged Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as Collateral
Agent may deem commercially reasonable. Collateral Agent or any other Secured
Party or any of their respective Affiliates may be the purchaser of any or all
of the Pledged Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Pledged Collateral sold at such sale, to use and apply
any of the Secured Obligations owed to such Person as a credit on account of the
purchase price of any Pledged Collateral payable by such Person at such sale.
Each purchaser at any such sale shall acquire the property sold absolutely free
from any claim or right on the part of any Pledgor, and each Pledgor hereby
waives, to the fullest extent permitted by law, all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. Collateral Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Pledgor hereby waives, to the fullest
extent permitted by law, any claims against Collateral Agent arising by reason
of the fact that the price at which any Pledged Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Collateral Agent accepts the first offer received and does
not offer such Pledged Collateral to more than one offeree.
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(ii) Each Pledgor acknowledges and agrees that, to the extent notice
of sale shall be required by law, ten days' notice to such Pledgor of the time
and place of any public sale or of the time after which any private sale or
other intended disposition is to take place shall be commercially reasonable
notification of such matters. No notification need be given to any Pledgor if it
has signed, after the occurrence of an Event of Default, a statement renouncing
or modifying any right to notification of sale or other intended disposition.
(c) Waiver of Notice and Claims. Each Pledgor hereby waives, to the
fullest extent permitted by applicable law, notice or judicial hearing in
connection with Collateral Agent's taking possession or Collateral Agent's
disposition of any of the Pledged Collateral, including, without limitation, any
and all prior notice and hearing for any prejudgment remedy or remedies and any
such right which such Pledgor would otherwise have under law, and each Pledgor
hereby further waives, to the fullest extent permitted by applicable law: (i)
all damages occasioned by such taking of possession, (ii) all other requirements
as to the time, place and terms of sale or other requirements with respect to
the enforcement of Collateral Agent's rights hereunder, and (iii) all rights of
redemption, appraisal, valuation, stay, extension or moratorium now or hereafter
in force under any applicable law. Collateral Agent shall not be liable for any
incorrect or improper payment made pursuant to this Section 12 in the absence of
gross negligence or willful misconduct. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of the applicable Pledgor therein and thereto, and shall be a perpetual bar both
at law and in equity against such Pledgor and against any and all Persons
claiming or attempting to claim the Pledged Collateral so sold, optioned or
realized upon, or any part thereof, from, through or under such Pledgor.
(d) Certain Sales of Pledged Collateral. Each Pledgor recognizes
that, by reason of certain prohibitions contained in law, rules, regulations or
orders of any foreign Governmental Authority, Collateral Agent may be compelled,
with respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to those who meet the requirements of such foreign Governmental
Authority. Each Pledgor acknowledges that any such sales may be at prices and on
terms less favorable to Collateral Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agrees
that any such restricted sale shall be
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deemed to have been made in a commercially reasonable manner and that, except as
may be required by applicable law, Collateral Agent shall have no obligation to
engage in public sales.
(e) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Securities Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire such
Securities Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Each Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Collateral Agent
than those obtainable through a public sale without such restrictions
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that Collateral Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Securities Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would agree to do so.
(f) Notwithstanding the foregoing, each Pledgor shall, upon the
occurrence and during the continuance of any Event of Default, at the request of
Collateral Agent, for the benefit of Collateral Agent, cause any registration,
qualification under or compliance with any federal or state securities law or
laws to be effected with respect to all or any part of the Securities Collateral
as soon as practicable and at the sole cost and expense of the Pledgors. Each
Pledgor will use its best efforts to cause such registration to be effected (and
be kept effective) and will use its best efforts to cause such qualification and
compliance to be effected (and be kept effective) as may be so requested and as
would permit or facilitate the sale and distribution of such Securities
Collateral, including, without limitation, registration under the Securities Act
(or any similar statute then in effect), appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliance
with any other government requirements. Each Pledgor shall cause Collateral
Agent to be kept advised in writing as to the progress of each such
registration, qualification or compliance and as to the completion thereof,
shall furnish to Collateral Agent such number of pro-
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spectuses, offering circulars or other documents incident thereto as Collateral
Agent from time to time may request, and shall indemnify and shall cause the
issuer of the Securities Collateral to indemnify Collateral Agent and all others
participating in the distribution of such Securities Collateral against all
claims, losses, damages and liabilities caused by any untrue statement (or
alleged untrue statement) of a material fact contained therein made or deemed
made by such issuer (or in any related registration statement, notification or
the like) or by any omission (or alleged omission) to state therein made or
deemed made by such issuer (or in any related registration statement,
notification or the like) a material fact required to be stated therein by such
issuer or necessary to make the statements therein made by or deemed made by
such issuer not misleading.
(g) If Collateral Agent determines to exercise its right to sell any
or all of the Securities Collateral, upon written request, the applicable
Pledgor shall from time to time furnish to Collateral Agent all such information
as Collateral Agent may request in order to determine the number of securities
included in the Securities Collateral which may be sold by Collateral Agent as
exempt transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
Section 13. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 12
hereof shall be applied, together with any other sums then held by Collateral
Agent pursuant to this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses, fees, commissions
and taxes of such sale, collection or other realization, including,
without limitation, reasonable compensation to Collateral Agent and its
agents and counsel, and all expenses, liabilities and advances made or
incurred by Collateral Agent in connection therewith, together with
interest on each such amount at the highest rate then in effect under the
Credit Agreement from and after the date such amount is due, owing or
unpaid until paid in full;
Second, to the payment of all other costs and expenses of such sale,
collection or other realization, in-
-35-
cluding, without limitation, reasonable compensation to the Banks and
their agents and counsel and all costs, liabilities and advances made or
incurred by the Banks in connection therewith, together with interest on
each such amount at the highest rate then in effect under the Credit
Agreement from and after the date such amount is due, owing or unpaid
until paid in full;
Third, without duplication of amounts applied pursuant to clauses
First and Second above, to the indefeasible payment in full in cash of
interest, principal and other amounts constituting Secured Obligations
(other than Interest Rate Obligations) in accordance with the terms of the
Credit Agreement;
Fourth, to the indefeasible payment of full in cash pro rata of the
Interest Rate Obligations in accordance with the terms of the Interest
Rate Agreements; and
Fifth, the balance, if any, to the Person lawfully entitled thereto
(including the Pledgors or their respective successors or assigns).
Section 14. Expenses. Each Pledgor will upon demand pay to
Collateral Agent the amount of any and all expenses, including the reasonable
fees and expenses of its counsel and the fees and expenses of any experts and
agents which Collateral Agent may incur in connection with (a) the collection of
the Secured Obligations, (b) the enforcement and administration of this
Agreement, (c) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Collateral, (d) the exercise or
enforcement of any of the rights of Collateral Agent or any Secured Party
hereunder or (e) the failure by any Pledgor to perform or observe any of the
provisions hereof. All amounts payable by any Pledgor under this Section 14
shall be due upon demand and shall be part of the Secured Obligations. Each
Pledgor's obligations under this Section 14 shall survive the termination of
this Agreement and the discharge of such Pledgor's other obligations hereunder.
Section 15. No Waiver; Cumulative Remedies. (a) No failure on the
part of Collateral Agent to exercise, no course of dealing with respect to, and
no delay on the part of Collateral Agent in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy hereunder pre-
-36-
clude any other or further exercise thereof or the exercise of any other right,
power or remedy. The remedies herein provided are cumulative and are not
exclusive of any remedies provided by law.
(b) In the event that 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 Collateral Agent, then and in every such case, the Pledgors, Collateral Agent
and each Secured Party shall be restored to their respective former positions
and rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of Collateral Agent and the Secured Parties shall continue
as if no such proceeding had been instituted.
Section 16. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to the Credit Agreement. The actions of Collateral
Agent hereunder are subject to the provisions of the Credit Agreement.
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Pledged Collateral), in accordance with this Agreement and the
Credit Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
Section 17. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If any Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or if any warranty on the part of any Pledgor
contained herein shall be breached, Collateral Agent may (but shall not be
obligated to) do the same or cause it to be done or remedy any such breach, and
may expend funds for such purpose. Any and all amounts so expended by Collateral
Agent shall be paid by the Pledgors promptly upon demand therefor, with interest
at the
-37-
highest rate then in effect under the Credit Agreement during the period
from and including the date on which such funds were so expended to the date of
repayment. Each Pledgor's obligations under this Section 17 shall survive the
termination of this Agreement and the discharge of such Pledgor's other
obligations under this Agreement, the Credit Agreement, any Interest Rate
Agreement and the other Credit Documents. Each Pledgor hereby appoints
Collateral Agent its attorney-in-fact, with full authority in the place and
stead of such Pledgor and in the name of such Pledgor, or otherwise, from time
to time in Collateral Agent's discretion to take any action and to execute any
instrument consistent with the terms of this Agreement and the other Credit
Documents which Collateral Agent may deem necessary or advisable to accomplish
the purposes of this Agreement. The foregoing grant of authority is a power of
attorney coupled with an interest and such appointment shall be irrevocable for
the term of this Agreement. Each Pledgor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof.
Section 18. Indemnity.
(a) Indemnity. Each Pledgor agrees to indemnify, pay and hold
harmless Collateral Agent and each of the other Secured Parties and the
officers, directors, employees, agents and Affiliates of Collateral Agent and
each of the other Secured Parties (collectively, the "Indemnitees") from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including, without limitation,
settlement costs), expenses or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) which may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement, any Interest Rate Agreement or any other Credit Document (including,
without limitation, any misrepresentation by any Pledgor in this Agreement, any
Interest Rate Agreement or any other Credit Document) (the "indemnified
liabilities"); provided that no Pledgor shall have any obligation to an
Indemnitee hereunder with respect to indemnified liabilities if it has been
determined by a final decision (after all appeals and the expiration of time to
appeal) of a court of competent jurisdiction that such indemnified liability
arose from the gross negligence or willful misconduct of that Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless
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set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, each Pledgor shall contribute the maximum portion
which it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them.
(b) Survival. The obligations of the Pledgors contained in this
Section 18 shall survive the termination of this Agreement and the discharge of
the Pledgors' other obligations under this Agreement, any Interest Rate
Agreement and under the other Credit Documents.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
Section 19. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by any Pledgor therefrom, shall be effective unless the
same shall be made in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any amendment, modification or
supplement of or to any provision of this Agreement, any waiver of any provision
of this Agreement and any consent to any departure by any Pledgor from the terms
of any provision of this Agreement shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement or any other Credit Document,
no notice to or demand on any Pledgor in any case shall entitle any Pledgor to
any other or further notice or demand in similar or other circumstances.
Section 20. Termination; Release. When all the Secured Obligations
have been paid in full and the Commitments of the Banks to make any Loan or to
issue any Letter of Credit under the Credit Agreement shall have expired or been
sooner terminated, this Agreement shall terminate. Upon termination of this
Agreement or any release of Pledged Collateral in accordance with the provisions
of the Credit Agreement, Collateral Agent shall, upon the request and at the
sole cost and expense of the Pledgors, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by Collateral
Agent, such of the Pledged Collateral to be released (in the case of a release)
as may be in possession of Collateral Agent and as shall not have been sold or
otherwise applied
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pursuant to the terms hereof, and, with respect to any other Pledged Collateral,
proper instruments (including UCC termination statements on Form UCC-3)
acknowledging the termination of this Agreement or the release of such Pledged
Collateral, as the case may be.
Section 21. Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or permitted
to be given shall be given in the manner set forth in the Credit Agreement, as
to any Pledgor, addressed to it at the address of the Borrower set forth in the
Credit Agreement and as to Collateral Agent, addressed to it at the address set
forth in the Credit Agreement, or in each case at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 21; provided that notices to Collateral
Agent shall not be effective until received by Collateral Agent.
Section 22. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon the Pledgors, their respective successors and assigns and
(ii) inure, together with the rights and remedies of Collateral Agent hereunder,
to the benefit of Collateral Agent and the other Secured Parties and each of
their respective successors, transferees and assigns; no other Persons
(including, without limitation, any other creditor of any Pledgor) shall have
any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause (ii), any Bank may assign or
otherwise transfer any indebtedness held by it secured by this Agreement to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Bank, herein or otherwise, subject
however, to the provisions of the Credit Agreement and any applicable Interest
Rate Agreement. Each Affiliate of the Borrower which from time to time after the
initial date of this Agreement is required under the Credit Agreement to pledge
any assets to Collateral Agent for the benefit of the Secured Parties may become
a party hereto upon execution and delivery to Collateral Agent of a joinder
agreement substantially in the form attached hereto as Exhibit 3, and upon such
execution and delivery shall be deemed to be a "Guarantor" and a "Pledgor" for
all purposes hereunder.
Section 23. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, EXCLUDING
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(TO THE GREATEST EXTENT PERMITTED BY LAW) ANY RULE OF LAW THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PLEDGOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. EACH PLEDGOR DESIGNATES AND APPOINTS LEXIS DOCUMENT
SERVICES INC. WITH AN ADDRESS AT ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH PLEDGOR
IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS
BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY SUCH PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
EACH PLEDGOR AT THE ADDRESS OF THE BORROWER PROVIDED FOR IN THE CREDIT AGREEMENT
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT
APPOINTED BY ANY PLEDGOR REFUSES TO ACCEPT SERVICE, SUCH PLEDGOR HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST ANY
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
Section 25. Severability of Provisions. 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 26. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by
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different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same agreement.
Section 27. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
Section 28. Obligations Absolute. All obligations of each Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Pledgor or any
other Credit Party;
(ii) any lack of validity or enforceability of the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit or any other Credit
Document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit or any other
Credit Document, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise, non-exercise or waiver of any right, remedy, power
or privilege under or in respect of this Agreement, any Interest Rate
Agreement or any other Credit Document except as specifically set forth in
a waiver granted pursuant to the provisions of Section 19 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any Pledgor.
Section 29. Collateral Agent's Right to Sever Indebtedness. (a) Each
Pledgor acknowledges that (i) the
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Pledged Collateral does not constitute the sole source of security for the
payment and performance of the Secured Obligations and that the Secured
Obligations are also secured by other types of property of the Pledgors in other
jurisdictions (all such property, collectively, the "Collateral"), (ii) the
number of such jurisdictions and the nature of the transaction of which this
instrument is a part are such that it would have been impracticable for the
parties to allocate to each item of Collateral a specific loan amount and to
execute in respect of such item a separate credit agreement and (iii) each
Pledgor intends that Collateral Agent have the same rights with respect to the
Pledged Collateral, in any judicial proceeding relating to the exercise of any
right or remedy hereunder or otherwise, that Collateral Agent would have had if
each item of Collateral had been pledged or encumbered pursuant to a separate
credit agreement and security instrument. In furtherance of such intent, each
Pledgor agrees to the greatest extent permitted by law that Collateral Agent may
at any time by notice (an "Allocation Notice") to such Pledgor allocate a
portion of the Secured Obligations (the "Allocated Indebtedness") to all or a
specified portion of the Pledged Collateral and sever from the remaining Secured
Obligations the Allocated Indebtedness. From and after the giving of an
Allocation Notice with respect to any of the Pledged Collateral, the Secured
Obligations hereunder shall be limited to the extent set forth in the Allocation
Notice and (as so limited) shall, for all purposes, be construed as a separate
credit obligation of such Pledgor unrelated to the other transactions
contemplated by the Credit Agreement, any Interest Rate Agreement, any other
Credit Document or any document related to any thereof. To the extent that the
proceeds of any judicial proceeding relating to the exercise of any right or
remedy hereunder of the Pledged Collateral shall exceed the Allocated
Indebtedness, such proceeds shall belong to such Pledgor and shall not be
available hereunder to satisfy any Secured Obligations of such Pledgor other
than the Allocated Indebtedness. In any action or proceeding to exercise any
right or remedy under this Agreement which is commenced after the giving by
Collateral Agent of an Allocation Notice, the Allocation Notice shall be
conclusive proof of the limits of the Secured Obligations hereby secured, and
such Pledgor may introduce, by way of defense or counterclaim, evidence thereof
in any such action or proceeding. Notwithstanding any provision of this Section
29, the proceeds received by Collateral Agent pursuant to this Agreement shall
be applied by Collateral Agent in accordance with the provisions of Section 13
hereof.
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(b) Each Pledgor hereby waives to the greatest extent permitted
under law the right to a discharge of any of the Secured Obligations under any
statute or rule of law now or hereafter in effect which provides that the
exercise of any particular right or remedy as provided for herein (by judicial
proceedings or otherwise) constitutes the exclusive means for satisfaction of
the Secured Obligations or which makes unavailable any further judgment or any
other right or remedy provided for herein because Collateral Agent elected to
proceed with the exercise of such initial right or remedy or because of any
failure by Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, no Pledgor shall (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against such
Pledgor of any remedy in the Credit Agreement, any Interest Rate Agreement or
any other Credit Document or (ii) seek to have such judgment recognized or
entered in any other jurisdiction, and any such judgment shall in all events be
limited in application only to the state or jurisdiction where rendered and only
with respect to the collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 29, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of any Pledgor. Such power of attorney
is coupled with an interest and is irrevocable.
(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 29 shall be effective only to the maximum extent
permitted by law.
Section 30. Future Advances. This Agreement shall secure the
payment of any amounts advanced from time to time pursuant to the Credit
Agreement.
Section 31. Intercreditor Agreement. Notwithstanding any provision
of this Agreement to the contrary, this Agreement shall be subject to the
provisions of that certain intercreditor agreement, dated as of the date hereof
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Intercreditor Agreement"), among
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Collateral Agent and Reliance Surety Company, United Pacific Insurance Company,
Reliance National Indemnity Company and Reliance Insurance Company.
IN WITNESS WHEREOF, the Pledgors and Collateral Agent have caused
this Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.
▇▇▇▇▇▇ MATERIAL HANDLING, INC.,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
CMH MATERIAL HANDLING, LLC,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
EPH MATERIAL HANDLING, LLC,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
HARNISCHFEGER DISTRIBUTION & SERVICE,
LLC,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
HPH MATERIAL HANDLING, LLC,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
MATERIAL HANDLING EQUIPMENT NEVADA
CORPORATION,
as Pledgor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Secretary
MATERIAL HANDLING, LLC,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
MHE TECHNOLOGIES, INC.,
as Pledgor
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
MMH HOLDINGS, INC.,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
▇▇▇▇▇▇ MATERIAL HANDLING, LLC,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
▇▇▇▇▇▇ MECHANICAL HANDLING, INC., as
Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
MPH CRANE, INC.,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
NPH MATERIAL HANDLING, INC.,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
PHMH HOLDING COMPANY,
as Pledgor
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
PMHE SERVICE, INC.,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
SPH CRANE & HOIST, INC.,
as Pledgor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
CANADIAN IMPERIAL BANK OF
COMMERCE, as Collateral Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
EXHIBIT 1
Form of Issuer Acknowledgment
The undersigned hereby (i) acknowledges receipt of a copy of the
Security Agreement (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Agreement"), dated as of March __, 1998, among
▇▇▇▇▇▇ Material Handling, Inc. (the "Borrower"), the Guarantors from time to
time party thereto and Canadian Imperial Bank of Commerce, as collateral agent
("Collateral Agent"), (ii) agrees promptly to note on its books the security
interests granted and confirmed under the Agreement and (iii) waives any right
or requirement at any time hereafter to receive a copy of the Agreement in
connection with the registration of any Securities Collateral thereunder in the
name of Collateral Agent or its nominee or the exercise of voting rights by
Collateral Agent or its nominee.
[NAME OF ISSUER]
By: ____________________________
Name:
Title:
ANNEX A
Prior Liens
Secured Party Jurisdiction Location Date Number Comment