Exhibit 10.2
GUARANTEE AND COLLATERAL AGREEMENT
made by
ACTERNA LLC
and its parent
ACTERNA CORPORATION
and
certain of its Subsidiaries
in favor of
▇▇▇▇▇▇▇, Dubilier & Rice Fund VI Limited Partnership,
and the other Secured Parties named herein
Dated as of December 27, 2001
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS............................................................................... 2
1.1 Definitions................................................................................ 2
1.2 Other Definitional Provisions.............................................................. 8
SECTION 2. GUARANTEE................................................................................... 8
2.1 Guarantee.................................................................................. 8
2.2 Right of Contribution...................................................................... 9
2.3 No Subrogation............................................................................. 10
2.4 Amendments, etc. with respect to the Obligations........................................... 10
2.5 Guarantee Absolute and Unconditional....................................................... 11
2.6 Reinstatement.............................................................................. 12
2.7 Payments................................................................................... 12
SECTION 3. GRANT OF SECURITY INTEREST.................................................................. 12
3.1 Grant...................................................................................... 12
3.2 Pledged Collateral......................................................................... 13
3.3 Certain Exceptions......................................................................... 13
SECTION 4. REPRESENTATIONS AND WARRANTIES.............................................................. 14
4.1 Representations and Warranties of Each Guarantor........................................... 14
4.2 Representations and Warranties of Each Grantor............................................. 15
4.2.1 Title; No Other Liens............................................................. 15
4.2.2 Perfected Second Priority Liens................................................... 15
4.2.3 Jurisdiction of Organization...................................................... 17
4.2.4 Inventory and Equipment........................................................... 17
4.2.5 Farm Products..................................................................... 17
4.2.6 Accounts.......................................................................... 17
4.2.7 Patents and Trademarks............................................................ 18
4.3 Representations and Warranties of Each Pledgor............................................. 18
SECTION 5. COVENANTS................................................................................... 19
5.1 Covenants of Each Guarantor................................................................ 19
5.2 Covenants of Each Grantor.................................................................. 19
5.2.1 Delivery of Instruments and Chattel Paper......................................... 19
5.2.2 Maintenance of Insurance.......................................................... 20
5.2.3 Payment of Obligations............................................................ 20
5.2.4 Maintenance of Perfected Security Interest; Further Documentation................. 20
5.2.5 Deposit Accounts.................................................................. 21
5.2.6 Changes in Name, etc.............................................................. 21
5.2.7 Notices........................................................................... 22
5.2.8 Pledged Securities................................................................ 22
5.2.9 Accounts.......................................................................... 22
5.2.10 Maintenance of Records............................................................ 22
5.2.11 Acquisition of Intellectual Property.............................................. 23
5.2.12 Protection of Trade Secrets....................................................... 23
5.3 Covenants of Each Pledgor.................................................................. 23
5.4 Covenant of the Parent..................................................................... 25
SECTION 6. REMEDIAL PROVISIONS......................................................................... 26
6.1 Certain Matters Relating to Accounts....................................................... 26
6.2 Communications with Obligors; Grantors Remain Liable....................................... 28
6.3 Pledged Stock.............................................................................. 28
6.4 Proceeds to be Turned Over to Secured Parties.............................................. 29
6.5 Application of Proceeds.................................................................... 30
6.6 Code and Other Remedies.................................................................... 31
6.7 Registration Rights........................................................................ 32
6.8 Waiver; Deficiency......................................................................... 33
SECTION 7. THE SECURED PARTIES......................................................................... 33
7.1 Secured Parties' Appointment as Attorney-in-Fact, etc...................................... 33
7.2 Duty of Secured Parties.................................................................... 35
7.3 Execution of Financing Statements.......................................................... 35
7.4 Authority of Secured Parties............................................................... 36
7.5 Right Of Inspection........................................................................ 36
SECTION 8. MISCELLANEOUS............................................................................... 36
8.1 Amendments in Writing...................................................................... 36
8.2 Notices.................................................................................... 36
8.3 No Waiver by Course of Conduct; Cumulative Remedies........................................ 37
8.4 Enforcement Expenses; Indemnification...................................................... 37
8.5 Successors and Assigns..................................................................... 38
8.6 Set-Off.................................................................................... 38
8.7 Counterparts............................................................................... 38
8.8 Severability............................................................................... 38
8.9 Section Headings........................................................................... 39
8.10 Integration................................................................................ 39
8.11 GOVERNING LAW.............................................................................. 39
8.12 Submission To Jurisdiction; Waivers........................................................ 39
8.13 Acknowledgments............................................................................ 40
8.14 WAIVER OF JURY TRIAL....................................................................... 40
8.15 Additional Granting Parties................................................................ 40
8.16 Releases................................................................................... 40
ii
8.17 Senior Indebtedness........................................................................ 41
8.18 Schedules.................................................................................. 42
iii
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of December 27, 2001, made
by Acterna Corporation, a Delaware corporation (the "Parent"), Acterna LLC, a
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Delaware limited liability company wholly owned by the Parent (the "Company")
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and certain Subsidiaries of the Company party hereto, in favor of ▇▇▇▇▇▇▇,
Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited
partnership ("Fund VI"), and the other Secured Parties referred to herein.
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W I T N E S S E T H:
WHEREAS, the Parent and the Company desire to issue and sell to Fund
VI, and Fund VI desires to purchase from the Parent and the Company, $75,000,000
in aggregate principal amount of 12% Senior Convertible Notes due December 31,
2007 of the Company (the "Initial Notes"), pursuant to the Investment Agreement,
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dated as of December 27, 2001 (as amended, waived, supplemented or otherwise
modified from time to time, the "Investment Agreement"), among the Parent, the
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Company and Fund VI;
WHEREAS, the Company is a member of an affiliated group of companies
that includes the Parent, the Company's Active Subsidiaries which are Domestic
Subsidiaries and any Subsidiary of the Company that becomes a party hereto from
time to time after the date hereof (the Company, the Parent, the Company's
Active Subsidiaries which are Domestic Subsidiaries (other than WWG, Wandel &
Goltermann, Inc., a North Carolina corporation and Wavetek U.S., Inc., a
Delaware corporation) and each such other Subsidiary collectively, the "Granting
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Parties");
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WHEREAS, the net proceeds of the issuance and sale of the Initial Notes
under the Investment Agreement will be utilized in meeting the working capital
needs of such affiliated group, including through making valuable transfers to
one or more of the Granting Parties in connection with the operation of their
respective businesses,
WHEREAS, the Company and the other Granting Parties are engaged in
related businesses, and each such Granting Party will derive substantial direct
and indirect benefit from the issuance and sale of the Initial Notes under the
Investment Agreement; and
WHEREAS, it is a condition to the obligation of Fund VI to purchase the
Initial Notes under the Investment Agreement that the Granting Parties shall
execute and deliver this Agreement to Fund VI;
NOW, THEREFORE, in consideration of the premises and to induce Fund VI
to enter into the Investment Agreement and purchase the Initial Notes, each
Granting Party
hereby agrees with and for the benefit of the Investor and the other Secured
Parties, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
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Investment Agreement and used herein shall have the meanings given to them in
the Investment Agreement, and the following terms that are defined in the Code
(as defined below) are used herein as so defined: Chattel Paper, Documents,
Electronic Chattel Paper, Equipment, Farm Products and Fixtures.
(b) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of each Grantor.
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"Administrative Agent": JPMorgan Chase Bank (as successor by merger to
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▇▇▇▇▇▇ Guaranty Trust Company of New York), in its capacity as administrative
agent under the Credit Agreement Security Agreement.
"Agreement": this Guarantee and Collateral Agreement, as the same may be
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amended, supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code as from time to time in effect in the
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State of New York.
"Collateral": as defined in Section 3.
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"Collateral Account Bank": JPMorgan Chase Bank or another bank selected by
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the relevant Grantor and approved by the Secured Parties.
"Collateral Proceeds Account": the cash collateral account established by
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the relevant Grantor at an office of the Collateral Account Bank in the name of
the Secured Parties or their nominee.
"Company Obligations": the collective reference to the unpaid principal of
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and interest on the Notes and all other obligations and liabilities of the
Company (including, without limitation, interest accruing at the then applicable
rate provided in the Investment Agreement after the maturity of such Notes and
interest accruing at the then applicable rate provided in the Investment
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Company,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) to any of the Secured Parties, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the Investment
Agreement, this Agreement, the other
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Note Financing Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all reasonable fees and disbursements of counsel
to any of the Secured Parties that are required to be paid by the Company
pursuant to the terms of any of the foregoing agreements).
"Contracts": with respect to any Grantor, all contracts, agreements,
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instruments and indentures in any form, and portions thereof (except for the
contracts listed on Schedule 6), to which such Grantor is a party or under which
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such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation, (i)
all rights of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Grantor to
damages arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder.
"Controlled Affiliate": as to the Company, any other Person that, directly
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or indirectly, is controlled by the Company, the Parent, or any Person of which
the Company or the Parent is a Subsidiary. For the purposes of this definition,
"control" of a Person means the power, directly or indirectly, to (a) vote 10%
or more of the securities having ordinary voting power for the election of
directors of such Persons or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Copyright Licenses": with respect to any Grantor, all United States
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written license agreements of such Grantor providing for the grant by or to such
Grantor of any right to use any Copyright of such Grantor, other than agreements
with any Person who is an Affiliate or a Subsidiary of the Company, including,
without limitation, any license agreements listed on Schedule 4 hereto, subject,
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in each case, to the terms of such license agreements, and the right to prepare
for sale, sell and advertise for sale, all Inventory now or hereafter covered by
such licenses.
"Copyrights": with respect to any Grantor, all of such Grantor's right,
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title and interest in and to all United States copyrights, whether or not the
underlying works of authorship have been published or registered, United States
copyright registrations and copyright applications, including, without
limitation the copyright registrations, if any, listed on Schedule 4 and (a) all
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renewals thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, payments under all licenses entered into in connection therewith,
and damages and payments for past or future infringements thereof and (c) the
right to ▇▇▇ or otherwise recover for past, present and future infringements
thereof.
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"Credit Agreement": the Credit Agreement, dated as of May 23, 2001, among
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the Company, the German Borrowers named therein, the lenders from time to time
parties thereto, the Administrative Agent, JPMorgan Chase Bank (as successor by
merger to ▇▇▇▇▇▇ Guaranty Trust Company of New York) as agent for the German
Term Loan Lenders, and JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank) and
Bankers Trust Company, each in its capacity as documentation agent, as the same
may be amended, supplemented or otherwise modified from time to time.
"Credit Agreement Security Agreement": the Guarantee and Collateral
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Agreement, dated as of May 23, 2000, made by the Company, the Parent and certain
subsidiaries of the Company in favor of JPMorgan Chase Bank (as successor by
merger to ▇▇▇▇▇▇ Guaranty Trust Company of New York), as administrative agent,
as the same may be amended, waived, supplemented or otherwise modified from time
to time.
"Credit Documents": the collective reference to (x) the Credit Agreement
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and (y) the Notes, the German L/C, the Applications and the Security Documents,
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in each case as defined in the Credit Agreement as in effect on the date hereof.
"Deposit Accounts": with respect to any Grantor, all deposit accounts (as
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defined by the Code) of such Grantor.
"Excluded Agreements": as defined in Section 3.3(a).
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"General Intangibles": all "general intangibles" as such term is defined
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in Section 9-102(a)(42) of the Uniform Commercial Code in effect in the State of
New York on the date hereof.
"Granting Parties": as defined in the recitals hereto.
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"Grantor": the Company and each Domestic Subsidiary of the Company that
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from time to time becomes a party hereto.
"Guarantor Obligations": with respect to any Guarantor, the collective
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reference to (i) the Obligations guaranteed by such Guarantor pursuant to
Section 2 and (ii) all obligations and liabilities of such Guarantor that may
arise under or in connection with this Agreement or any other Note Financing
Document to which such Guarantor is a party, in each case whether on account of
guarantee obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to any Secured Party that are required to be paid by such Guarantor
pursuant to the terms of this Agreement or any other Note Financing Document).
"Guarantor": each Granting Party other than the Company.
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"Instruments": has the meaning specified in the Code, but excluding the
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Pledged Securities.
"Intellectual Property": with respect to any Grantor, the collective
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reference to such Grantor's Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trade Secrets, Trademarks and Trademark Licenses.
"Investment Property": the collective reference to (i) all investment
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property as such term is defined in Section 9-102(a)(49) of the New York UCC
(other than any Capital Stock of any Foreign Subsidiary excluded from the
definition of "Pledged Stock") and (ii) whether or not constituting "investment
property" as so defined, all Pledged Securities.
"Intercompany Note": with respect to any Grantor, any promissory note in a
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principal amount in excess of $1,000,000 evidencing loans made by such Grantor
to the Company or any of its Subsidiaries.
"Inventory": with respect to any Grantor, all inventory (as defined in the
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Code) of such Grantor.
"Investor": Fund VI and its successors and assigns, including any
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transferee of the aggregate outstanding amount of the Notes held thereby that is
a member of the CD&R Group.
"Issuers": the collective reference to the Persons identified on Schedule 2
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as the issuers of the Pledged Stock.
"Letter-of-Credit Rights": with respect to any Grantor, all
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letter-of-credit rights (as defined in the Code) of such Grantor.
"Management Subscription Agreements": as defined in the Credit Agreement as
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in effect on the date hereof.
"Notes": the collective reference to the "Notes" as defined in the
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Investment Agreement.
"Obligations": (i) in the case of the Company, the Company Obligations, and
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(ii) in the case of each Guarantor, the Guarantor Obligations of such Guarnator.
"Patent Licenses": with respect to any Grantor, all United States written
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license agreements of such Grantor with any Person who is not an Affiliate or a
Subsidiary of the Company or such Grantor, in connection with any of the Patents
of such Grantor or such other Person's patents, whether such Grantor is a
licensor or a licensee under any such agreement, including, without limitation,
the license agreements listed on Schedule 4,
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subject, in each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or hereafter
covered by such licenses.
"Patents": with respect to any Grantor, all of such Grantor's right,
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title and interest in and to all United States patents, patent applications and
patentable inventions, including, without limitation, all patents and patent
applications identified in Schedule 4, and including, without limitation, (a)
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all inventions and improvements described and claimed therein, (b) the right to
▇▇▇ or otherwise recover for any and all past, present and future infringement
thereof, (c) all income, royalties, damages and other payments now and hereafter
due and/or payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof), and (d) all other rights
corresponding thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind whatsoever
of such Grantor accruing thereunder or pertaining thereto.
"Permitted Liens": Permitted Liens (as defined in the Investment
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Agreement) permitted under Section 8.6(a) of the Investment Agreement.
"Pledged Collateral": with respect to any Pledgor, the Pledged
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Securities owned or at any time acquired by such Pledgor, and any Proceeds
thereof.
"Pledged Notes": with respect to any Pledgor, all Intercompany Notes
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at any time issued to such Pledgor.
"Pledged Securities": the collective reference to the Pledged Notes
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and the Pledged Stock.
"Pledged Stock": with respect to any Pledgor, the shares of Capital
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Stock listed on Schedule 2 as held by such Pledgor, together with any other
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shares, stock certificates, options or rights of any nature whatsoever in
respect of the Capital Stock of any Issuer that may be issued or granted to, or
held by, such Pledgor while this Agreement is in effect (provided that, in no
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event shall there be pledged, nor shall any Pledgor be required to pledge,
directly or indirectly, more than 65% of any series of the outstanding Capital
Stock of any Foreign Subsidiary pursuant to this Agreement).
"Pledgor": the Parent (with respect to the Pledged Stock of the
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Company), the Company (with respect to Pledged Stock of the entities listed on
Schedule 2 hereto under the name of the Company and any other Pledged Securities
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held by the Company) and any other Granting Party (with respect to Pledged
Securities held by such Granting Party).
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"Proceeds": all "proceeds" as such term is defined in Section
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9-102(a)(64) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, Proceeds of Pledged Securities shall
include, without limitation, all dividends or other income from the Pledged
Securities, collections thereon or distributions or payments with respect
thereto.
"Secured Parties": means the Investor and each other member of the
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CD&R Group that is a holder of any of the Notes.
"Securities Act": the Securities Act of 1933, as amended from time to
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time.
"Security Collateral": with respect to any Granting Party, means,
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collectively, the Collateral (if any) and the Pledged Collateral (if any) of
such Granting Party.
"Trade Secrets": with respect to any Grantor, all of such Grantor's
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right, title and interest in and to all United States trade secrets, including,
without limitation, know-how, processes, formulae, compositions, designs, and
confidential business and technical information, and all rights of any kind
whatsoever accruing thereunder or pertaining thereto, including, without
limitation, (a) all income, royalties, damages and payments now and hereafter
due and/or payable with respect thereto, including, without limitation, payments
under all licenses, non-disclosure agreements and memoranda of understanding
entered into in connection therewith, and damages and payments for past or
future misappropriations thereof, and (b) the right to ▇▇▇ or otherwise recover
for past, present or future misappropriations thereof.
"Trademark Licenses": with respect to any Grantor, all United States
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written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary of the Company or such Grantor in connection with any
of the Trademarks of such Grantor or such other Person's names or trademarks,
whether such Grantor is a licensor or a licensee under any such agreement,
including, without limitation, the license agreements listed on Schedule 4,
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subject, in each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or hereafter
covered by such licenses.
"Trademarks": with respect to any Grantor, all of such Grantor's right,
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title and interest in and to all United States trademarks, service marks, trade
names, trade dress or other indicia of trade origin or business identifiers,
trademark and service ▇▇▇▇ registrations, and applications for trademark or
service ▇▇▇▇ registrations (except for "intent to use" applications for
trademark or service ▇▇▇▇ registrations filed pursuant to Section 1(b) of the
▇▇▇▇▇▇ Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use or a
Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and
any renewals thereof, including, without limitation, each registration and
application identified in Schedule 4, and including, without limitation, (a) the
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right to ▇▇▇
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or otherwise recover for any and all past, present and future infringements or
dilutions thereof, (b) all income, royalties, damages and other payments now and
hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection therewith,
and damages and payments for past or future infringements thereof), and (c) all
other rights corresponding thereto in the United States and all other rights of
any kind whatsoever of such Grantor accruing thereunder or pertaining thereto in
the United States, together in each case with the goodwill of the business
connected with the use of, and symbolized by, each such trademark, service ▇▇▇▇,
trade name, trade dress or other indicia of trade origin or business
identifiers.
"Vehicles": all cars, trucks, trailers, construction and earth moving
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equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
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"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Annex references are to this Agreement
unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral,
Pledged Collateral or Security Collateral, or any part thereof, when used in
relation to a Granting Party shall refer to such Granting Party's Collateral,
Pledged Collateral or Security Collateral or the relevant part thereof.
(d) All references in this Agreement to any of the property described
in the definition of the term "Collateral" or "Pledged Collateral," or to any
Proceeds thereof, shall be deemed to be references thereto only to the extent
the same constitute Collateral or Pledged Collateral, respectively.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally,
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unconditionally and irrevocably, guarantees to (and for the ratable benefit of)
each of the Secured Parties, the prompt and complete payment and performance by
the Company when due and payable (whether at the stated maturity, by
acceleration or otherwise) of the Company Obligations.
(b) Anything herein or in any other Note Financing Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Note Financing Documents shall in no event exceed the amount
that can be
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guaranteed by such Guarantor under applicable law, including applicable federal
and state laws relating to the insolvency of debtors.
(c) Each Guarantor agrees that the Obligations guaranteed by it
hereunder may at any time and from time to time exceed the amount of the
liability of such Guarantor hereunder without impairing the guarantee contained
in this Section 2 or affecting the rights and remedies of any Secured Party
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until the earlier to occur of (i) the first date on which all
the Notes, all other Obligations then due and owing, and the obligations of each
Guarantor under the guarantee contained in this Section 2 then due and owing
shall have been satisfied by payment in full, or (ii) as to any Guarantor that
is a Subsidiary of the Company, the sale or other disposition of all of the
Capital Stock of such Guarantor (other than to a Controlled Affiliate of the
Company) as permitted under the Investment Agreement following which such
Guarantor is no longer a Subsidiary of the Company, provided that such guarantee
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of such Guarantor shall only so terminate if such sale or other disposition
complies with the provisions of the Intercreditor Agreement (including but not
limited to Section 7 thereof).
(e) No payment made by the Company, any of the Guarantors, any other
guarantor or any other Person or received or collected by any Secured Party from
the Company, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
any of the Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Obligations or any payment received or collected from such Guarantor in respect
of the Obligations), remain liable for the Obligations guaranteed by it
hereunder up to the maximum liability of such Guarantor hereunder until the
earlier to occur of (i) the first date on which the Notes and all other
Obligations then due and owing, are paid in full or (ii) as to any Guarantor
that is a Subsidiary of the Company, the sale or other disposition of all of the
Capital Stock of such Guarantor (other than to a Controlled Affiliate of the
Company) as permitted under the Investment Agreement following which such
Guarantor is no longer a Subsidiary of the Company, provided that such guarantee
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of such Guarantor shall only so terminate if such sale or other disposition
complies with the provisions of the Intercreditor Agreement (including but not
limited to Section 7 thereof).
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
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extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder that has not paid
its proportionate share of such
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payment. Each Guarantor's right of contribution shall be subject to the terms
and conditions of Section 2.3. The provisions of this Section 2.2 shall in no
respect limit the obligations and liabilities of any Guarantor to any of the
Secured Parties, and each Guarantor shall remain liable to each of the Secured
Parties for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any Guarantor
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hereunder or any set-off or application of funds of any Guarantor by any Secured
Party, no Guarantor shall be entitled to be subrogated to any of the rights of
any Secured Party against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Secured Parties for the
payment of the Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Company or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing to
each of the Secured Parties by the Company on account of the Obligations are
paid in full. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Guarantor in trust for the
Secured Parties, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Secured Parties
in the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Secured Parties, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as any Secured Party may determine.
2.4 Amendments, etc. with respect to the Obligations. To the maximum
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extent permitted by law, each Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against any Guarantor
and without notice to or further assent by any Guarantor, any demand for payment
of any of the Obligations made by any Secured Party may be rescinded by such
Secured Party and any of the Obligations continued, and the Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Secured Party,
and the Investment Agreement or any other Note Financing Document and any other
document executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Secured
Parties (or any of them) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by any
Secured Party for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. No Secured Party shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by any Secured Party as
security for the Obligations or for the guarantee contained in this Section 2 or
any property subject thereto, except to the extent required by applicable law.
10
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to the
------------------------------------
maximum extent permitted by applicable law, any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by any Secured Party upon the guarantee contained in this Section 2
or acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Company or
any of the Guarantors, on the one hand, and any of the Secured Parties, on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2. Each
Guarantor waives, to the maximum extent permitted by applicable law, diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Company or any of the other Guarantors with respect to the
Obligations. Each Guarantor understands and agrees, to the extent permitted by
law, that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment. Each Guarantor
hereby waives, to the maximum extent permitted by applicable law, any and all
defenses (other than any suit for breach of a contractual provision of any of
the Note Financing Documents) that it may have arising out of or in connection
with any and all of the following: (a) the validity or enforceability of the
Investment Agreement or any other Note Financing Document, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by any Secured
Party, (b) any defense, set-off or counterclaim (other than a defense of payment
or performance) that may at any time be available to or be asserted by the
Company against any Secured Party, (c) any change in the time, place, manner or
place of payment, amendment, or waiver or increase in the Obligations, (d) any
exchange, taking, or release of Security Collateral, (e) any change in the
structure or existence of the Company, (f) any application of Security
Collateral to Obligations or (g) any other circumstance whatsoever (other than
payment in full of the Obligations guaranteed by it hereunder) (with or without
notice to or knowledge of the Company or such Guarantor) that constitutes, or
might be construed to constitute, an equitable or legal discharge of the Company
for such Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, any Secured Party may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as it may have
against the Company, any other Guarantor or any other Person or against any
collateral security or guarantee for the Obligations guaranteed by such
Guarantor hereunder or any right of offset with respect thereto, and any failure
by any Secured Party to make any such demand, to pursue such other rights or
remedies or to collect any payments from the Company, any other Guarantor or any
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Company, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or
11
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of any Secured Party
against any Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee of any Guarantor contained in this Section
-------------
2 shall continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any of the Obligations guaranteed by
such Guarantor hereunder is rescinded or must otherwise be restored or returned
by any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will
--------
be paid to each Secured Party without set-off or counterclaim, in the currency
in which the relevant Obligations are outstanding pursuant to the Investment
Agreement, the relevant other Note Financing Document, or otherwise. Such
payments shall be made by wire transfer of immediately available funds to an
account designated by the Secured Party to whom such payment is due, or in such
other manner as may be designated in writing by such Secured Party to such
Guarantor from time to time.
SECTION 3. GRANT OF SECURITY INTEREST
3.1 Grant. Each Granting Party that is a Grantor hereby grants, subject to
-----
existing licenses to use the Copyrights, Patents, Trademarks and Trade Secrets
granted by such Grantor in the ordinary course of its business, to (and for the
ratable benefit of) each of the Secured Parties, a security interest in all of
the Collateral of such Grantor, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations of such Grantor, except as
provided in Section 3.3. The term "Collateral", as to any Grantor, means the
----------
following property now owned or at any time hereafter acquired by such Grantor
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest, except as provided in Section 3.3:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Deposit Accounts;
12
(e) all Documents;
(f) all Equipment (other than Vehicles);
(g) all General Intangibles;
(h) all Instruments;
(i) all Intellectual Property;
(j) all Inventory;
(k) all Investment Property;
(l) all Letter-of-Credit Rights;
(m) all books and records pertaining to any of the foregoing;
(n) the Collateral Proceeds Account; and
(o) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees given by
any Person with respect to any of the foregoing;
provided that Collateral shall not include any Pledged Collateral, or any
--------
property or assets specifically excluded from Pledged Collateral (including any
Capital Stock of any Foreign Subsidiary in excess of 65% of any series of such
stock).
3.2 Pledged Collateral. Each Granting Party that is a Pledgor hereby grants
------------------
to (and for the ratable benefit of) each of the Secured Parties, a security
interest in all of the Pledged Collateral of such Pledgor, as collateral
security for the prompt and complete performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations of such Pledgor,
except as provided in Section 3.3.
3.3 Certain Exceptions. No security interest is or will be granted pursuant
------------------
hereto in any right, title or interest of any Granting Party under or in:
(a) any Instruments, Contracts, Chattel Paper, General Intangibles,
Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or
agreements with or issued by Persons other than a Subsidiary of the Company
(collectively, "Excluded Agreements") that would otherwise be included in the
-------------------
Security Collateral (and such Excluded Agreements shall not be deemed to
constitute a part of the Security Collateral) for so long as, and to the extent
that, the granting of such a security
13
interest pursuant hereto would result in a breach, default or termination of
such Excluded Agreements; or
(b) any Equipment that would otherwise be included in the Security
Collateral (and such Equipment shall not be deemed to constitute a part of the
Security Collateral) if such Equipment is subject to Permitted Liens permitted
under clause (h)(ii) of the definition of "Permitted Liens" in the Investment
Agreement that secure Purchase Money Obligations or Capitalized Lease
Obligations not exceeding $25,000,000 at any one time outstanding;
(c) any Capital Stock of Holdings I GmbH held by the Primary Borrower
(so long as such Capital Stock is equal to or less than 1% of the Capital Stock
of Holdings I GmbH);
(d) Capital Stock of any Subsidiary listed in Schedule 8 (so long as
such Capital Stock is not required to be pledged hereunder pursuant to the
Investment Agreement); or
(e) any property or asset of such Granting Party to the extent (and
solely to the extent) that a security interest or other Lien shall not at
any time have been created in respect thereof securing Bank Indebtedness
or in favor of or for the benefit of any holder of Bank Indebtedness or
any agent or representative thereof (including without limitation the
Administrative Agent); provided that (i) any property or asset that shall
--------
at any time be or have been subject to any such security interest or other
Lien shall not be excluded from the Security Collateral by operation of
this clause (g), regardless of whether such security interest or other
Lien is subsequently released, extinguished or otherwise terminated, and
(ii) this clause (g) shall terminate and be of no further force or effect,
and any such property or asset shall thereupon and thereafter constitute a
part of the Security Collateral, from and after the occurrence of a
"Termination" (as defined in Section 11 of the Intercreditor Agreement).
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Each Guarantor. To induce the
------------------------------------------------
Investor to enter into the Investment Agreement and purchase the Initial Notes
thereunder, each Guarantor hereby represents and warrants to the Investor and
each other Secured Party that the representations and warranties set forth in
Article III of the Investment Agreement as they relate to such Guarantor or to
the Note Financing Documents to which such Guarantor is a party, each of which
representations and warranties is hereby incorporated herein by reference, are
true and correct in all material respects, and the Secured Parties shall be
entitled to rely on each of such representations and warranties as if fully set
forth herein; provided that each reference in each such
--------
14
representation and warranty to the Company's knowledge shall, for the purposes
of this Section 4.1, be deemed to be a reference to such Guarantor's knowledge.
4.2 Representations and Warranties of Each Grantor. To induce the Investor
----------------------------------------------
Party to enter into the Investment Agreement and purchase the Initial Notes
thereunder, each Grantor hereby represents and warrants to the Investor and each
other Secured Party that:
4.2.1 Title; No Other Liens. Except for the security interest granted
---------------------
to the Secured Parties pursuant to this Agreement and the other Permitted Liens
permitted to exist on such Grantor's Collateral by the Investment Agreement and
the Credit Agreement, such Grantor shall own each item of such Grantor's
Collateral free and clear of any and all Liens. Except as set forth on Schedule
5, no currently effective financing statement or other similar public notice
with respect to all or any part of such Grantor's Collateral is on file or of
record in any public office, except (a) such as have been filed in favor of (i)
the Secured Parties, pursuant to this Agreement or any other Note Financing
Document, or (ii) the Administrative Agent for the ratable benefit of the
secured parties under the Credit Agreement Security Agreement, pursuant to the
Credit Agreement Security Agreement or any other Credit Document or (b) for
which termination statements will be delivered on the Closing Date.
4.2.2 Perfected Second Priority Liens. (i) This Agreement is effective
-------------------------------
to create, as collateral security for the Obligations of such Grantor, valid and
enforceable Liens on such Grantor's Collateral in favor of the Secured Parties,
except as enforceability may be affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditor's rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(ii) Except with regard to Liens (if any) on Specified Assets, upon
the completion of the Filings, and the delivery to and continuing possession by
the Secured Parties or their agent (or the Administrative Agent as bailee for
the Secured Parties pursuant to the Intercreditor Agreement) of all Instruments,
Chattel Paper and Documents a security interest in which is perfected by
possession, and the obtaining and maintenance of "control" (as described in the
Code) by the Secured Parties of all Deposit Accounts, the Collateral Proceeds
Account and Electronic Chattel Paper a security interest in which is perfected
by "control", the Liens created pursuant to this Agreement will constitute valid
Liens on and (to the extent provided herein) perfected security interests in
such Grantor's Collateral in favor of the Secured Parties, and will be prior to
all other Liens of all other Persons other than Permitted Liens that are also
permitted by the Credit Agreement, and enforceable as such as against all other
Persons other than Ordinary Course Buyers, except to the extent that the
recording of an assignment or other transfer of title to any Secured Party or
the recording of other applicable documents in the United
15
States Patent and Trademark Office or United States Copyright Office may be
necessary for perfection or enforceability, and except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair dealing. As
used in this Section 4.2.2(ii), the following terms shall have the following
meanings:
"Filings": the filing or recording of (i) the Financing Statements as
-------
set forth in Schedule 7, (ii) this Agreement or a notice thereof with
----------
respect to Intellectual Property as set forth in Schedule 4, and (iii) any
----------
filings after the Closing Date in any other jurisdiction as may be
necessary under any Requirement of Law.
"Financing Statements": the financing statements delivered to the
--------------------
Investor by such Grantor on the Closing Date for filing in the
jurisdictions listed in Schedule 7.
----------
"Ordinary Course Buyers": (i) with respect to goods only, buyers in
----------------------
the ordinary course of business and lessees in the ordinary course of
business to the extent provided in Section 9-320(a) and 9-321 of the
Uniform Commercial Code as in effect from time to time in the relevant
jurisdiction, and (ii) with respect to general intangibles only, licensees
in the ordinary course of business to the extent provided in Section 9-321
of the Uniform Commercial Code as in effect from time to time in the
relevant jurisdiction.
"Specified Assets": the following property and assets of such
----------------
Grantor:
(1) Equipment constituting Fixtures;
(2) Patents, Patent Licenses, Trademarks and Trademark Licenses
to the extent that (a) Liens thereon cannot be perfected by the
filing of financing statements under the Uniform Commercial Code or
by the filing and acceptance thereof in the United States Patent and
Trademark Office or (b) such Patents, Patent Licenses, Trademarks and
Trademark Licenses are not, individually or in the aggregate,
material to the business of the Parent and its Subsidiaries taken as
a whole;
(3) Copyrights and Copyright Licenses and Accounts or
receivables arising therefrom to the extent that the Uniform
Commercial Code as in effect from time to time in the relevant
jurisdiction is not applicable to the creation or perfection of Liens
thereon;
(4) uncertificated securities;
16
(5) Collateral for which the perfection of Liens thereon
requires filings in or other actions under the laws of jurisdictions
outside the United States of America, any State, territory or
dependency thereof or the District of Columbia;
(6) contracts, Accounts or receivables subject to the
Assignment of Claims Act;
(7) goods included in Collateral received by any Person for
"sale or return" within the meaning of Section 2-326 of the Uniform
Commercial Code of the applicable jurisdiction, to the extent of
claims of creditors of such Person;
(8) Proceeds of Accounts, receivables or Inventory which do not
themselves constitute Collateral or which have not been transferred
to or deposited in the Collateral Proceeds Account (if any); and
(9) Equipment at various sales offices with a fair market value
of less than $10,000 per sales office and mobile goods.
4.2.3 Jurisdiction of Organization. On the Closing Date, such
----------------------------
Grantor's jurisdiction of organization and the location of such Grantor's chief
executive office or sole place of business are specified on Schedule 3.
----------
4.2.4 Inventory and Equipment. On the Closing Date, such Grantor's
-----------------------
Inventory (other than Inventory held by various Persons (other than a Grantor
and its Affiliates) that is being finished or modified by such Persons and
thereafter returned to the respective Grantor ("WIP Inventory")) and Equipment
-------------
(other than equipment at various sales offices with a fair market value of less
than $10,000 per sales office and mobile goods) are kept at the locations listed
on Schedule 9.
----------
4.2.5 Farm Products. None of such Grantor's Collateral shall
-------------
constitute, or be the Proceeds of, Farm Products.
4.2.6 Accounts. The amount represented by such Grantor to the Secured
--------
Parties from time to time as owing by each account debtor or by all account
debtors in respect of such Grantor's Accounts will at such time be the correct
amount, in all material respects, actually owing by such account debtor or
debtors thereunder, except to the extent that appropriate reserves therefor have
been established on the books of such Grantor in accordance with GAAP. The
places where such Grantor keeps its records concerning such Grantor's Accounts
as of the Closing Date are listed on Schedule 10. Unless otherwise indicated in
-----------
writing to the Secured Parties, each Account of such Grantor shall arise out of
a bona fide sale and delivery of goods or rendition of services by such Grantor.
Such Grantor has not given and shall not give any account debtor any
17
deduction in respect of the amount due under any such Account, except in the
ordinary course of business or as such Grantor may otherwise advise the Secured
Parties in writing.
4.2.7 Patents and Trademarks. Schedule 4 lists all material
---------------------- ----------
Trademarks and material Patents, in each case, registered in the United States
Patent and Trademark Office and owned by such Grantor in its own name as of the
Closing Date, and all material Trademark Licenses and all material Patent
Licenses (including, without limitation, material Trademark Licenses for
registered Trademarks and material Patent Licenses for registered Patents) owned
by such Grantor in its own name as of the date hereof.
4.3 Representations and Warranties of Each Pledgor. To induce the
----------------------------------------------
Investor to enter into the Investment Agreement and purchase the Initial Notes
thereunder, each Pledgor hereby represents and warrants to the Investor and each
other Secured Party that:
4.3.1 Except as provided in Section 3.3, the shares of Pledged Stock
pledged by such Pledgor hereunder shall constitute (i) in the case of shares of
an Active Subsidiary which is a Domestic Subsidiary, all the issued and
outstanding shares of all classes of the Capital Stock of such Active Subsidiary
owned by such Pledgor and (ii) in the case of shares of a Foreign Subsidiary
such percentage (not more than 65%) as is specified on Schedule 2 of all the
----------
issued and outstanding shares of each class of the Capital Stock of such Foreign
Subsidiary owned by such Pledgor.
4.3.2 All the shares of the Pledged Stock pledged by such Pledgor
hereunder shall have been duly and validly issued and fully paid and
nonassessable.
4.3.3 Such Pledgor shall be the record and beneficial owner of, and
shall have good title to, the Pledged Securities pledged by it hereunder, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement or the Credit Agreement
Security Agreement and Permitted Liens that are also permitted by the Credit
Agreement.
4.3.4 The security interest created by this Agreement in such Pledged
Securities evidenced by certificates, upon delivery (if any) thereof to, and
assuming the continuing possession (in the case of Pledged Notes) or control (in
the case of Pledged Stock) of such Pledged Securities by, the Secured Parties or
their agent (or the Administrative Agent as bailee for the Secured Parties
pursuant to the Intercreditor Agreement), will constitute a valid, perfected
second priority security interest in such Pledged Securities to the extent
provided in and governed by the Code (second in priority only to the security
interest therein held by the Administrative Agent for the benefit of the secured
parties under the Credit Agreement Security Agreement), enforceable in
accordance with its terms against all creditors of such Pledgor and any persons
purporting
18
to purchase such Pledged Securities from such Pledgor, except as enforceability
may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
4.3.5 Upon the filing of financing statements in the appropriate
jurisdictions under the Code, the security interest created by this Agreement in
the Pledged Securities will constitute a valid, perfected second priority
security interest in such Pledged Securities to the extent provided in and
governed by the Code (second in priority only to Permitted Liens that are also
permitted under the Credit Agreement), enforceable in accordance with its terms
against all creditors of such Pledgor and any persons purporting to purchase
such Pledged Securities from such Pledgor, except as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 5. COVENANTS
5.1 Covenants of Each Guarantor. Each Guarantor covenants and agrees with
---------------------------
the Secured Parties that, from and after the date of this Agreement until the
date on which the guarantee of such Guarantor contained in Section 2 shall
terminate pursuant to Section 2.1(d), such Guarantor shall take, or shall
refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, so that no Default or Event of Default
is caused by the failure to take such action or to refrain from taking such
action by such Guarantor or any of its Subsidiaries.
5.2 Covenants of Each Grantor. Each Grantor covenants and agrees with the
-------------------------
Secured Parties that, from and after the date of this Agreement until the
earlier to occur of (i) all the Notes, and all other Obligations then due and
owing, shall have been paid in full, or (ii) as to any such Grantor that is a
Subsidiary of the Company, the sale or other disposition of all of the Capital
Stock of such Grantor (other than to a Controlled Affiliate of the Company) as
permitted under the Investment Agreement following which such Grantor is no
longer a Subsidiary of the Company (and provided that such sale or other
disposition complies with the provisions of the Intercreditor Agreement,
including but not limited to Section 7 thereof):
5.2.1 Delivery of Instruments and Chattel Paper. If any amount
-----------------------------------------
payable under or in connection with any of such Grantor's Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Grantor shall (except
as provided in the following sentence) be entitled to retain possession of all
Collateral of such Grantor evidenced by any Instrument or Chattel Paper, and
shall hold all such Collateral in trust
19
for the Secured Parties. In the event that an Event of Default shall have
occurred and be continuing, upon the request of the Secured Parties, such
Instrument or Chattel Paper shall be promptly delivered to the Secured Parties
or their nominee, duly indorsed in a manner satisfactory to the Secured Parties,
to be held as Collateral pursuant to this Agreement. Such Grantor shall not
permit any other Person to possess any such Collateral at any time (other than
the Administrative Agent, to the extent provided in, and in accordance with, the
Intercreditor Agreement), other than in connection with any sale or other
disposition of such Collateral in a transaction permitted by the Investment
Agreement.
5.2.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
------------------------
financially sound and reputable companies, insurance policies (i) insuring such
Grantor's Inventory and Equipment against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Secured Parties
and (ii) insuring such Grantor and the Secured Parties against liability for
personal injury and property damage relating to such Inventory and Equipment,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Secured Parties.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 15 days after receipt by the Secured Parties of written
notice thereof, (ii) name the Secured Parties (or, if they so request, their
agent) as additional insured parties or loss payee, (iii) include deductibles
consistent with past practice or consistent with industry practice or otherwise
reasonably satisfactory to the Secured Parties.
5.2.3 Payment of Obligations. Such Grantor will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all material taxes, assessments and governmental charges or levies
imposed upon such Grantor's Collateral or in respect of income or profits
therefrom, as well as all material claims of any kind (including, without
limitation, material claims for labor, materials and supplies) against or with
respect to such Grantor's Collateral, except that no such tax, assessment,
charge or levy need be paid or satisfied if the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
such Grantor.
5.2.4 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Grantor shall maintain the security interest created by
-------------
this Agreement in such Grantor's Collateral as a perfected security interest
having at least the priority described in Section 4.2.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.
20
(b) Such Grantor will furnish to the Secured Parties from time to
time statements and schedules further identifying and describing such Grantor's
Collateral and such other reports in connection with such Grantor's Collateral
as any Secured Party may reasonably request in writing, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of
any Secured Party, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Secured Parties may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted by such Grantor, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code (or other similar laws) in effect in any jurisdiction
with respect to the security interests created hereby.
(d) Such Grantor shall not allow any Person (other than the
Administrative Agent to the extent required under the Credit Documents) to
obtain, or take any action or omit to take any action the result of which would
be to allow any Person (other than the Administrative Agent to the extent
required under the Credit Agreement Security Agreement) to obtain, "possession"
or "control" (each within the meaning of the UCC) of any Collateral.
5.2.5 Deposit Accounts. Such Grantor shall, as soon as reasonably
----------------
possible after the Closing Date but in any event no later that than 45 days
after the Closing Date, enter into control agreements in form and substance
reasonably satisfactory to the Secured Parties with respect to Security
Collateral consisting of Deposit Accounts, or in otherwise obtaining a valid,
perfected second priority security interest in Deposit Accounts in favor of the
Secured Parties (second in priority only to the security interest therein held
by the Administrative Agent for the benefit of the secured parties under the
Credit Agreement Security Agreement); provided that, until a "Termination" as
--------
defined in Section 11 of the Intercreditor Agreement has occurred, any such
control agreement or security interest shall only be required hereunder in
respect of any Deposit Account in the event and to the extent that a security
interest in such Deposit Account is granted to the Administrative Agent or
otherwise to any other secured party pursuant to the Credit Agreement Security
Agreement or any other Credit Document, or as otherwise granted to secure Bank
Indebtedness or in favor of or for the benefit of any holder of Bank
Indebtedness or any agent or representative thereof.
5.2.6 Changes in Name, etc. Such Grantor will not, except upon not
--------------------
less than 30 days' prior written notice to the Secured Parties, change its name,
identity or corporate structure to such an extent that any financing statement
filed by any Secured Party in connection with this Agreement would become
seriously misleading; provided that, prior to taking any such action, or
--------
promptly after receiving a written request therefor from any Secured Party, such
Grantor shall deliver to the Secured Parties all additional
21
executed financing statements and other documents reasonably requested by any
Secured Party to maintain the validity, perfection and priority of the security
interests provided for herein.
5.2.7 Notices. Such Grantor will advise the Secured Parties promptly,
-------
in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Permitted Liens that are also permitted under the Credit Agreement) on any
of such Grantor's Collateral which would adversely affect the ability of
any of the Secured Parties to exercise any of such Secured Party's remedies
hereunder; and
(b) of the occurrence of any other event which would
reasonably be expected to have a material adverse effect on the aggregate
value of such Grantor's Collateral or on the security interests created
hereby.
5.2.8 Pledged Securities. In the case of each Grantor that is an
------------------
Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Stock issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Secured Parties promptly in writing of the occurrence of any of the events
described in Section 5.3.1 with respect to the Pledged Stock issued by it and
(iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis,
------- --------
with respect to all actions that may be required of it pursuant to Section
6.3(c) or 6.7 with respect to the Pledged Stock issued by it.
5.2.9 Accounts. (a) Other than in the ordinary course of business or
--------
as permitted by the Note Financing Documents, such Grantor will not (i) grant
any extension of the time of payment of any of such Grantor's Accounts, (ii)
compromise or settle any such Account for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
Account, (iv) allow any credit or discount whatsoever on any such Account or (v)
amend, supplement or modify any Account unless such extensions, compromises,
settlements, releases, credits or discounts would not reasonably be expected to
materially adversely affect the value of the Accounts constituting Collateral
taken as a whole.
(b) Such Grantor will deliver to the Secured Parties a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 10% of the aggregate amount of
the then outstanding Accounts.
5.2.10 Maintenance of Records. Such Grantor will keep and maintain at
----------------------
its own cost and expense reasonably satisfactory and complete records of its
Collateral, including, without limitation, a record of all payments received and
all credits granted
22
with respect to such Collateral, and shall ▇▇▇▇ such records to evidence this
Agreement and the Liens and the security interests created hereby.
5.2.11 Acquisition of Intellectual Property. Within 90 days after the
------------------------------------
end of each calendar year, such Grantor will notify the Secured Parties of any
acquisition by such Grantor of (i) any registration of any material Copyright,
Patent or Trademark or (ii) any exclusive rights under a material Copyright
License, Patent License or Trademark License constituting Collateral, and shall
take such actions as may be reasonably requested by any Secured Party (but only
to the extent such actions are within such Grantor's control) to perfect the
security interest granted to the Secured Parties therein, to the extent provided
herein in respect of any Copyright, Patent or Trademark constituting Collateral
on the date hereof, by (x) the execution and delivery of a Patent and Trademark
Security Agreement (or amendments to any such agreement previously executed or
delivered by such Grantor) or other comparable agreements with respect to
Copyrights or Copyright Licenses constituting Collateral and/or (y) the making
of appropriate filings (I) of financing statements under the Uniform Commercial
Code of any applicable jurisdiction and/or (II) in the United States Patent and
Trademark Office, or with respect to Copyrights and Copyright Licenses, another
applicable office).
5.2.12 Protection of Trade Secrets. Such Grantor shall take all steps
---------------------------
which it deems commercially reasonable to preserve and protect the secrecy of
all material Trade Secrets of such Grantor.
5.3 Covenants of Each Pledgor. Each Pledgor covenants and agrees with each
-------------------------
of the Secured Parties that, from and after the date of this Agreement until the
earlier to occur of (i) the Notes and all other Obligations then due and owing
shall have been paid in full, or (ii) as to any Pledgor that is a Subsidiary of
the Company, all the Capital Stock of such Pledgor shall have been sold or
otherwise disposed of (other than to a Controlled Affiliate of the Company) as
permitted under the terms of the Investment Agreement (and provided that such
sale or other disposition complies with the terms of the Intercreditor
Agreement, including but not limited to Section 7 thereof):
5.3.1 If such Pledgor shall, as a result of its ownership of its
Pledged Securities, becomes entitled to receive or shall receive any stock
certificate (including, without limitation, any stock certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued in connection with
any reorganization), stock option or similar rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Pledgor shall accept the same as the agent of the Secured Parties,
hold the same in trust for the Secured Parties and deliver the same forthwith to
the Secured Parties in the exact form received, duly indorsed by such Pledgor to
such Secured Party or nominee of the Secured Parties as any Secured Party may
direct, if required, together with an undated
23
stock power covering such certificate duly executed in blank by such Grantor, to
be held by the Secured Parties, subject to the terms hereof, as additional
collateral security for the Obligations (subject to Section 3.3) and provided
--------
that:
(a) No such delivery to the Secured Parties shall be required to
the extent such certificate, option or similar rights are required to be
delivered to the Administrative Agent in accordance with the Credit
Agreement Security Agreement, it being understood that (x) the
Administrative Agent is acting as bailee for the Secured Parties pursuant
to the Intercreditor Agreement and (y) such delivery of such certificate,
option or similar right to the Administrative Agent shall not impair the
security interest created therein hereunder or any of the rights or
remedies of any Secured Party in respect thereof or hereof, and
(b) In no event shall there be pledged, nor shall any Pledgor be
required to pledge, more than 65% of any series of the outstanding Capital
Stock of any Foreign Subsidiary Holdco or other Foreign Subsidiary pursuant
to this Agreement.
Any sums paid upon or in respect of the Pledged Securities upon the liquidation
or dissolution of any Issuer or maker (except any liquidation or dissolution of
any Subsidiary of the Company in accordance with the Investment Agreement) shall
be paid over to the Secured Parties to be held by them hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Secured Parties, be
delivered to the Secured Parties to be held by them hereunder as additional
collateral security for the Obligations; provided that no such paying over or
--------
delivery shall be required to the extent such sums or property are required to
be paid over or delivered to the Administrative Agent in accordance with the
Credit Agreement Security Agreement, it being understood that (x) the
Administrative Agent is acting as bailee for the Secured Parties pursuant to the
Intercreditor Agreement and (y) such paying over of such sums or delivery of
such property to the Administrative Agent as a result of compliance with the
Credit Agreement Security Agreement shall not impair the security interest
created therein hereunder or any of the rights or remedies of any Secured Party
in respect thereof or hereof. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Pledgor, such Pledgor shall, until such money or property is paid or delivered
to the Secured Parties (or, if required pursuant to the terms of the Credit
Agreement Security Agreement, the Administrative Agent), hold such money or
property in trust for the Secured Parties, segregated from other funds of such
Pledgor, as additional collateral security for the Obligations.
24
5.3.2 Without the prior written consent of the Secured Parties, such
Pledgor will not (except as permitted by the Investment Agreement) (i) vote to
enable, or take any other action to permit, any Issuer to issue any stock or
other equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of any Issuer, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Pledged Securities or Proceeds thereof or (iii) create, incur or permit
to exist any Lien or option in favor of, or any material adverse claim of any
Person with respect to, any of the Pledged Securities or Proceeds thereof, or
any interest therein, except for the security interests created by this
Agreement or the Credit Agreement Security Agreement or Liens arising by
operation of law.
5.3.3 Such Pledgor shall maintain the security interest created by
this Agreement in such Pledgor's Pledged Collateral as a perfected security
interest having at least the priority described in Section 4.3.4 and shall
defend such security interest against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Secured Parties, and at the sole expense of such Pledgor, such Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as any Secured Party may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted by such Pledgor. Such Pledgor shall not
allow any Person (other than the Administrative Agent to the extent required
under the Credit Documents) to obtain, or take any action or omit to take any
action the result of which would be to allow any Person (other than the
Administrative Agent to the extent required under the Credit Documents) to
obtain, "possession" or "control" (each within the meaning of the UCC) of any
Pledged Collateral.
5.4 Covenant of the Parent. The Parent covenants and agrees with the
----------------------
Secured Parties that, from and after the date of this Agreement until the Notes
and all other Obligations then due and owing, shall have been paid in full that
the Parent shall not conduct or otherwise engage, in any business or operations
other than: (i) the transactions contemplated by the Transaction Agreements or
the provision of administrative, legal, accounting and management services to or
on behalf of any of its Subsidiaries, (ii) the ownership of the Capital Stock or
other interests of its Subsidiaries, the sale and transfer of such ownership
interests (to the extent not otherwise prohibited by the Note Financing
Documents), and the exercise of rights and performance of obligations in
connection therewith, (iii) the entry into, and exercise of rights and
performance of obligations in respect of, (A) the Transaction Agreements, this
Agreement and any other Note Financing Document to which the Parent is a party,
the Credit Documents, any other agreement to which the Parent is a party on the
date hereof, the Senior Subordinated Note Indenture and the Senior Subordinated
Notes or any guarantee thereof, and any guarantee of Indebtedness or other
obligations of any of its Subsidiaries permitted pursuant to the Note Financing
Documents, in each case as
25
amended, supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of the Parent or a Subsidiary
thereof relating to their employment or directorships, (C) insurance policies
and related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, including but
not limited to in respect of the Management Subscription Agreements, (iv) the
offering, issuance, sale and repurchase or redemption of, and dividends or
distributions on, its equity securities, (v) the filing of registration
statements, and compliance with applicable reporting and other obligations,
under federal, state or other securities laws, (vi) the listing of its equity
securities and compliance with applicable reporting and other obligations in
connection therewith, (vii) the retention of (and the entry into, and exercise
of rights and performance of obligations in respect of, contracts and agreements
with) transfer agents, private placement agents, underwriters, counsel,
accountants and other advisors and consultants, (viii) the performance of
obligations under and compliance with its certificate of incorporation and
by-laws, or any applicable law, ordinance, regulation, rule, order, judgment,
decree or permit, including, without limitation, as a result of or in connection
with the activities of its Subsidiaries, (ix) the incurrence and payment of its
operating and business expenses and any taxes for which it may be liable, (x)
making loans to or other Investments in, or incurrence of Indebtedness to, its
Subsidiaries, (xi) the ownership of, and exercise of rights and performance of
obligations in respect of, Intellectual Property (as defined in the Investment
Agreement for the purposes of this subsection only) and foreign patents,
trademarks, trade names, copyrights, technology, know-how and processes and
licensing such Intellectual Property and foreign patents, trademarks, trade
names, copyrights, technology, know-how and processes (other than such
Intellectual Property and foreign patents, trademarks, trade names, copyrights,
technology, know-how and processes which is material to the business of the
Company and its Subsidiaries, which Intellectual Property and foreign patents,
trademarks, trade names, copyrights, technology, know-how and processes shall be
owned by the Company and its Subsidiaries) and (xii) other activities incidental
or related to the foregoing.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) At any time and from time to
------------------------------------
time after the occurrence and during the continuance of an Event of Default, any
Secured Party shall have the right to make test verifications of the Accounts in
any reasonable manner and through any reasonable medium that such Secured Party
reasonably considers advisable, and the relevant Grantor shall furnish all such
assistance and information as any Secured Party may reasonably require in
connection with such test verifications. At any time and from time to time after
the occurrence and during the continuance of an Event of Default, upon any
Secured Party's reasonable request and at
26
the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others reasonably satisfactory to the Secured Parties to furnish
to the Secured Parties reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Secured Parties hereby authorize each Grantor to collect
such Grantor's Accounts, and any Secured Party may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by any Secured Party at any time after the
occurrence and during the continuance of an Event of Default, any Proceeds
constituting collections of such Accounts, when collected by such Grantor, (i)
shall be forthwith (and, in any event, within two Business Days of receipt by
such Grantor) be deposited in or otherwise transferred to the Collateral
Proceeds Account established by such Grantor maintained under the sole dominion
and control of the Secured Parties, subject to withdrawal by the Secured Parties
only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Secured Parties, segregated from other funds of
such Grantor. All Proceeds constituting collections of Accounts while held by
the Collateral Account Bank (or by any Guarantor in trust for the benefit of the
Secured Parties shall continue to be collateral security for all of the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. At any time when an Event of Default has occurred and is
continuing, at any Secured Party's election, any Secured Party may apply all or
any part of the funds on deposit in the Collateral Proceeds Account established
by the relevant Grantor to the payment of the Obligations of such Grantor then
due and owing, such application to be made as set forth in Section 6.5 hereof.
So long as no Event of Default has occurred and is continuing, the funds on
deposit in the Collateral Proceeds Account shall be remitted as provided in
Section 6.1(d) hereof.
(c) At any time and from time to time after the occurrence and
during the continuance of an Event of Default and if the Secured Parties have
terminated a Grantor's right to collect Accounts pursuant to clause (b) above,
at the Secured Parties' request, each Grantor shall deliver to the Secured
Parties all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to such Grantor's Accounts,
including, without limitation, all original orders, invoices and shipping
receipts.
(d) So long as no Event of Default has occurred and is continuing,
the Secured Parties shall instruct the Collateral Account Bank to promptly remit
any funds on deposit in each Grantor's Collateral Proceeds Account to such
Grantor. In the event that an Event of Default has occurred and is continuing,
the Secured Parties and the Grantors agree that any Secured Party, at such
Secured Party's option, may require that each Collateral Proceeds Account be
established at a bank or other financial institution designated by such Secured
Party (which designation shall be deemed to be made on behalf of all Secured
Parties for purposes of this section 6.1(d)).
27
6.2 Communications with Obligors; Grantors Remain Liable. (a) Each Secured
----------------------------------------------------
Party in such Secured Party's own name or in the name of others may, at any time
and from time to time after the occurrence and during the continuance of an
Event of Default specified in Section 10.1(a) or 10.1(b) of the Investment
Agreement, communicate with obligors under the Accounts and parties to the
Contracts (in each case, to the extent constituting Collateral) to verify with
them to the Secured Parties' satisfaction the existence, amount and terms of any
Accounts or Contracts.
(b) Upon the request of any Secured Party at any time after the
occurrence and during the continuance of an Event of Default specified in
Section 10.1(a) or 10.1(b) of the Investment Agreement, each Grantor shall
notify obligors on such Grantor's Accounts and parties to such Grantor's
Contracts (in each case, to the extent constituting Collateral) that such
Accounts and such Contracts have been assigned to the Secured Parties and that
payments in respect thereof shall be made directly to the Secured Parties.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of such Grantor's Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. No Secured Party shall have any obligation or liability under any
Account (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by any Secured Party of any payment relating
thereto, nor shall any Secured Party be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Account (or any
agreement giving rise thereto) to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts that may have been assigned to it or to which it may be entitled
at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and
-------------
be continuing and any Secured Party shall have given notice to the relevant
Pledgor of such Secured Party's intent to exercise such Secured Party's
corresponding rights pursuant to Section 6.3(b), each Pledgor shall be permitted
to receive all cash dividends and distributions paid in respect of the Pledged
Stock and all payments made in respect of the Pledged Notes, to the extent
permitted in the Investment Agreement, and to exercise all voting and corporate
rights with respect to the Pledged Stock; provided, however, that no vote shall
-------- -------
be cast or corporate right exercised or such other action taken (other than in
connection with a transaction expressly permitted by the Investment Agreement)
which, in any Secured Party's reasonable judgment, would materially impair the
Pledged Collateral or the related rights or remedies of any Secured Party or
which would be inconsistent with or result in any violation of any provision of
the Investment Agreement, this Agreement or any other Note Financing Document.
28
(b) If an Event of Default shall occur and be continuing and any
Secured Party shall give notice of such Secured Party's intent to exercise such
rights to the relevant Pledgor or Pledgors, (i) the Secured Parties shall have
the right to receive any and all cash dividends, payments or other Proceeds paid
in respect of the Pledged Stock and make application thereof to the Obligations
in such order as is provided in Section 6.5, and (ii) any or all of the Pledged
Stock shall be registered in the name of such Secured Party or nominee of the
Secured Parties as any Secured Party may direct, and such named Secured Party or
nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to such Pledged Stock at any meeting of shareholders of the relevant
Issuer or Issuers or otherwise and (y) any and all rights of conversion,
exchange, subscription and any other rights, privileges or options pertaining to
such Pledged Stock as if such Secured Party or nominee were the absolute owner
thereof (including, without limitation, the right to exchange at such Secured
Party's or nominee's discretion any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any Issuer, or upon the exercise by the
relevant Pledgor or such named Secured Party or nominee of any right, privilege
or option pertaining to such Pledged Stock, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Stock with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as such named Secured Party or nominee may reasonably
determine), all without liability (other than for such Secured Party's or
nominee's gross negligence or willful misconduct) except to account for property
actually received by such Secured Party or nominee, but no Secured Party or
nominee shall have any duty to any Pledgor to exercise any such right, privilege
or option and no Secured Party or nominee shall be responsible for any failure
to do so or delay in so doing, provided that the Secured Parties shall not
--------
exercise any voting or other consensual rights pertaining to the Pledged Stock
in any way that would constitute an exercise of the remedies described in
Section 6.6 other than in accordance with Section 6.6.
(c) Each Pledgor hereby authorizes and instructs each Issuer or maker
of any Pledged Securities pledged by such Pledgor hereunder to (i) comply with
any instruction received by it from any Secured Party in writing that (x) states
that an Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Pledgor, and each Pledgor agrees that each Issuer or
maker shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to any Secured Party.
6.4 Proceeds to be Turned Over to Secured Parties. In addition to the
---------------------------------------------
rights of the Secured Parties specified in Section 6.1 with respect to payments
of Accounts, if an Event of Default shall occur and be continuing, and any
Secured Party shall have instructed any Grantor to do so, all Proceeds received
by such Grantor consisting of cash, checks and other Cash Equivalent items shall
be held by such Grantor in trust for the
29
Secured Parties, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Secured Parties in
the exact form received by such Grantor (duly indorsed by such Grantor to such
Secured Party or nominee of the Secured Parties as any Secured Party may direct,
if required); provided that no such turn-over shall be required to the extent
--------
such Proceeds are required to be delivered to the Administrative Agent in
accordance with the Credit Agreement Security Agreement, it being understood
that (x) the Administrative Agent is acting as bailee for the Secured Parties
pursuant to the Intercreditor Agreement and (y) such turning over of such
Proceeds to the Administrative Agent as a result of compliance with the Credit
Agreement Security Agreement shall not impair the security interest created
therein hereunder or any of the rights or remedies of any Secured Party in
respect thereof or hereof. All Proceeds received by the Secured Parties
hereunder shall be held by the Secured Parties in the relevant Collateral
Proceeds Account maintained under its sole dominion and control. All Proceeds
while held by the Secured Parties in such Collateral Proceeds Account (or by
such Grantor in trust for the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. It is agreed that if an Event of Default
-----------------------
shall occur and be continuing, any and all Proceeds of the relevant Granting
Party's Security Collateral received by the Secured Parties (whether from the
relevant Granting Party or the Administrative Agent in accordance with the
Intercreditor Agreement, or otherwise) shall be held by the Secured Parties as
collateral security for the Obligations of the relevant Granting Party (whether
matured or unmatured), and/or then or at any time thereafter may, in the sole
discretion of any Secured Party, be applied by the Secured Parties against the
Obligations of the relevant Granting Party then due and owing in the following
order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred by
any Secured Party in connection with this Agreement, the Investment
Agreement, any other Note Financing Document or any of the Obligations of
the relevant Granting Party, including, without limitation, all court costs
and the reasonable fees and expenses of its agents and legal counsel, and
any other reasonable costs or expenses incurred in connection with the
exercise by any Secured Party of any right or remedy under this Agreement,
the Investment Agreement, or any other Note Financing Document;
SECOND, to the ratable satisfaction of all other Obligations of the
relevant Granting Party; and
THIRD, to the relevant Granting Party or its successors or assigns, or
to whomsoever may be lawfully entitled to receive the same.
30
6.6 Code and Other Remedies. If an Event of Default shall occur and be
-----------------------
continuing, each Secured Party may exercise, in addition to all other rights and
remedies granted to any of them in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations to the extent
permitted by applicable law, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, to the extent permitted by applicable law each Secured Party, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Granting Party or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Security Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Security Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of any Secured Party or elsewhere upon such
terms and conditions as such Secured Party may deem advisable and at such prices
as such Secured Party may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. Each Secured Party shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Security Collateral so sold, free of any right or equity of redemption in
any Granting Party, which right or equity is hereby waived or released. Each
Granting Party further agrees, at any Secured Party's request, to assemble the
Security Collateral and make it available to the Secured Parties at places which
any Secured Party shall reasonably select, whether at such Granting Party's
premises or elsewhere. Each Secured Party shall apply the net proceeds of any
action taken by such Secured Party pursuant to this Section 6.6, after deducting
all reasonable costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Security Collateral or in
any way relating to the Security Collateral or the rights of the Secured Parties
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations of the
relevant Granting Party then due and owing, in the order of priority specified
in Section 6.5 above, and only after such application and after the payment by
the Secured Parties of any other amount required by any provision of law,
including, without limitation, Section 9-615(a)(3) of the Code, need the Secured
Parties account for the surplus, if any, to any Granting Party. To the extent
permitted by applicable law, each Granting Party waives all claims, damages and
demands it may acquire against any Secured Party arising out of the
repossession, retention or sale of collateral, except to the extent arising as a
result of the gross negligence or willful misconduct of such Secured Party. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
31
6.7 Registration Rights. (a) If any Secured Party shall determine to
-------------------
exercise such Secured Party's right to sell any or all of the Pledged Stock
pursuant to Section 6.6, and if in the reasonable opinion of any Secured Party
it is necessary or reasonably advisable to have the Pledged Stock, or that
portion thereof to be sold, registered under the provisions of the Securities
Act, the relevant Pledgor will use its reasonable best efforts to cause the
Issuer thereof to (i) execute and deliver, and use its best efforts to cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the reasonable opinion of any Secured Party, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its reasonable best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of not more than one year from the date of the first
public offering of such Pledged Stock, or that portion thereof to be sold, and
(iii) make all amendments thereto and/or to the related prospectus which, in the
reasonable opinion of any Secured Party, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. Such
Pledgor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all states and the District of Columbia
that any Secured Party shall reasonably designate and to make available to its
security holders, as soon as practicable, an earnings statement (which need not
be audited) that will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) Such Pledgor recognizes that the Secured Parties may be unable to
effect a public sale of any or all such Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. No Secured Party
shall be under any obligation to delay a sale of any of the Pledged Stock for
the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor agrees to use its reasonable best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of such Pledged Stock pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable
Requirements of Law. Such Pledgor further agrees that a breach of any of the
covenants contained in this Section 6.7 will cause irreparable injury to the
Secured Parties, that the Secured Parties have no adequate
32
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Pledgor, and to the extent permitted by applicable law, such
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred or is continuing under the Investment Agreement.
6.8 Waiver; Deficiency. Each Granting Party shall remain liable for any
------------------
deficiency if the proceeds of any sale or other disposition of the Security
Collateral are insufficient to pay in full, the Notes and, to the extent then
due and owing, all other Obligations of such Granting Party and the reasonable
fees and disbursements of any attorneys employed by any Secured Party to collect
such deficiency.
SECTION 7. THE SECURED PARTIES
7.1 Secured Parties' Appointment as Attorney-in-Fact, etc. (a) Each
------------------------------------------------------
Granting Party hereby irrevocably constitutes and appoints each Secured Party
and any authorized officer or agent thereof, with full power of substitution, as
its true and lawful attorneys-in-fact with full irrevocable power and authority
in the place and stead of such Granting Party and in the name of such Granting
Party or in its own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments that may be reasonably necessary or desirable to
accomplish the purposes of this Agreement to the extent permitted by applicable
law, provided that each Secured Party agrees not to exercise such power except
upon the occurrence and during the continuance of an Event of Default. Without
limiting the generality of the foregoing, at any time when an Event of Default
has occurred and is continuing (in each case to the extent permitted by
applicable law), (x) each Pledgor hereby gives each Secured Party the power and
right, on behalf of such Pledgor, without notice or assent by such Pledgor, to
execute, in connection with any sale provided for in Section 6.6 or 6.7, any
indorsements, assessments or other instruments of conveyance or transfer with
respect to such Pledgor's Pledged Collateral, and (y) each Grantor hereby gives
each Secured Party the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Account of such
Grantor that constitutes Collateral or with respect to any other Collateral of
such Grantor and file any claim or take any other action or institute any
proceeding in any court of law or equity or otherwise deemed appropriate by any
Secured Party for the purpose of collecting any and all such moneys due under
any Account of such Grantor that constitutes Collateral or with respect to any
other Collateral of such Grantor whenever payable;
33
(ii) in the case of any Copyright, Patent or Trademark constituting
Collateral of such Grantor, execute and deliver any and all agreements,
instruments, documents and papers as any Secured Party may reasonably request to
such Grantor to evidence the Secured Parties' security interest in such
Copyright, Patent or Trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens, other than Permitted Liens
that are also permitted under the Credit Agreement, levied or placed on the
Collateral of such Grantor, effect any repairs or any insurance called for by
the terms of this Agreement and pay all or any part of the premiums therefor and
the costs thereof; and
(iv) (i) direct any party liable for any payment under any of the
Collateral of such Grantor to make payment of any and all moneys due or to
become due thereunder directly to any Secured Party or as any Secured Party
shall direct; (ii) ask or demand for, collect, receive payment of and receipt
for, any and all moneys, claims and other amounts due or to become due at any
time in respect of or arising out of any Collateral of such Grantor; (iii) sign
and indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral of such Grantor;
(iv) commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral of such
Grantor or any portion thereof and to enforce any other right in respect of any
Collateral of such Grantor; (v) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral of such Grantor; (vi)
settle, compromise or adjust any such suit, action or proceeding described in
clause (v) above and, in connection therewith, to give such discharges or
releases as any Secured Party may deem appropriate; (vii) subject to any
existing reserved rights or licenses, assign any Copyright, Patent or Trademark
constituting Collateral of such Grantor (along with the goodwill of the business
to which any such Copyright, Patent or Trademark pertains), for such term or
terms, on such conditions, and in such manner, as any Secured Party shall in
such Secured Party's sole discretion determine; and (viii) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise deal with
any of the Collateral of such Grantor as fully and completely as though any
Secured Party were the absolute owner thereof for all purposes, and do, at any
Secured Party's option and such Grantor's expense, at any time, or from time to
time, all acts and things which any Secured Party deems necessary to protect,
preserve or realize upon the Collateral of such Grantor and the Secured Parties'
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary
notwithstanding, each Secured Party agrees that such Secured Party will not
exercise any rights under the power
34
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) The reasonable expenses of each Secured Party incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest is payable on the Notes, from the date of payment by such Secured Party
to the date reimbursed by the relevant Granting Party, shall be payable by such
Granting Party to such Secured Party on demand.
(c) Each Granting Party hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable as to the relevant Granting Party until this Agreement is terminated
as to such Granting Party, and the security interests in the Security Collateral
of such Granting Party created hereby are released.
7.2 Duty of Secured Parties. Each Secured Party's sole duty with respect
-----------------------
to the custody, safekeeping and physical preservation of the Security Collateral
in such Secured Party's possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as such Secured Party
deals with similar property for such Secured Party's own account. Neither any of
the Secured Parties nor any of their respective officers, directors, employees
or agents shall be liable for failure to demand, collect or realize upon any of
the Security Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Security Collateral upon the
request of any Granting Party or any other Person or, except as otherwise
provided herein, to take any other action whatsoever with regard to the Security
Collateral or any part thereof. The powers conferred on the Secured Parties
hereunder are solely to protect the Secured Parties' interests in the Security
Collateral and shall not impose any duty upon any Secured Party to exercise any
such powers. The Secured Parties shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Granting Party for any act or failure to act hereunder, except as
otherwise provided herein or for their own gross negligence or willful
misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-509 of the
---------------------------------
Code and any other applicable law, each Granting Party authorizes each Secured
Party to file or record financing statements with respect to such Granting
Party's Security Collateral without the signature of such Granting Party in such
form and in such filing offices as any Secured Party reasonably determines
appropriate to perfect the security interests of the Secured Parties under this
Agreement. Each Secured Party agrees to (or to cause another Secured Party to)
notify the relevant Granting Party of any financing or continuation statement
filed by such Secured Party pursuant to this Section 7.3, provided
--------
35
that any failure to give such notice shall not affect the validity or
effectiveness of any such filing.
7.4 Authority of Secured Parties. Each Granting Party acknowledges that
----------------------------
the rights and responsibilities of any Secured Party under this Agreement with
respect to any action taken by such Secured Party or the exercise or
non-exercise by such Secured Party of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement or any amendment, supplement or other modification of this
Agreement shall, as between such Secured Party and the other Secured Parties, be
governed by such agreements with respect thereto as may exist from time to time
among them, but, as between such Secured Party and the Granting Parties such
Secured Party shall be conclusively presumed to be acting as agent for the
Secured Parties with full and valid authority so to act or refrain from acting,
and no Granting Party shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
7.5 Right Of Inspection. Upon reasonable written advance notice to any
-------------------
Grantor and as often as may reasonably be desired, each Secured Party shall have
reasonable access during normal business hours to all the books, correspondence
and records of such Grantor, and each of the Secured Parties and their
representatives may examine the same, and to the extent reasonable, take
extracts therefrom and make photocopies thereof, and such Grantor agrees to
render to each Secured Party, at such Grantor's reasonable cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto. Each of the Secured Parties and their representatives shall also have
the right, upon reasonable advance written notice to such Grantor subject to any
lease restrictions to enter during normal business hours into and upon any
premises owned, leased or operated by such Grantor where any of such Grantor's
Inventory or Equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting any Secured Party's interests therein.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Granting Party and the Secured
Parties, provided that any provision of this Agreement imposing obligations on
--------
any Granting Party may be waived by the Secured Parties in a written instrument
executed by the Secured Parties.
8.2 Notices. All notices, requests and demands to or upon any Secured
-------
Party or any Granting Party hereunder shall be effected in the manner provided
for in Section 13.1 of the Investment Agreement; provided that any such notice,
--------
request or demand to or upon any Guarantor shall be addressed to such Guarantor
at its address set forth on
36
Schedule 1, unless and until such Guarantor shall change such address in
----------
accordance with Section 13.1 of the Investment Agreement and any such notice,
request or demand to or upon any Secured Party other than the Investor shall be
addressed to such Secured Party at the address such Secured Party specifies to
the other parties hereto from time to time.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. No Secured Party
---------------------------------------------------
shall by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which any Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Granting Party agrees
-------------------------------------
to pay or reimburse each Secured Party for all such Secured Party's reasonable
costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any rights
under this Agreement against such Granting Party and the other Note Financing
Documents to which such Granting Party is a party, including, without
limitation, the reasonable fees and disbursements of one firm of counsel to the
Secured Parties.
(b) Each Granting Party agrees to pay, and to save each of the Secured
Parties harmless from, (x) any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Security Collateral or in connection with any of the transactions
contemplated by this Agreement and (y) any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement
(collectively, the "indemnified liabilities") and in any event excluding any
-----------------------
taxes or other indemnified liabilities arising from gross negligence or willful
misconduct of such Secured Party.
(c) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Investment Agreement and the
other Note Financing Documents.
37
8.5 Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the Granting Parties, the Secured Parties and their
respective successors and assigns; provided that no Granting Party may assign,
--------
transfer or delegate any of its rights or obligations under this Agreement or
any other Note Financing Document without the prior written consent of the
Secured Parties.
8.6 Set-Off. Each Granting Party hereby irrevocably authorizes each
-------
Secured Party at any time and from time to time without notice to such Granting
Party or any other Granting Party, any such notice being expressly waived by
each Granting Party, to the extent permitted by applicable law, upon the
occurrence and during the continuance of an Event of Default specified in
Section 10.1(a) or 10.1(b) of the Investment Agreement so long as any amount
remains unpaid after it becomes due and payable by such Granting Party
hereunder, to set-off and appropriate and apply against any such amount any and
all deposits (general or special, time or demand, provisional or final) (other
than the Collateral Proceeds Account), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Secured Party to or for the credit or the account of such Granting
Party, or any part thereof in such amounts as such Secured Party may elect. Each
Secured Party shall notify such Granting Party promptly of any such set-off and
the application made by such Secured Party of the proceeds thereof; provided
--------
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Secured Party under this Section 8.6
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Secured Party may have.
8.7 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
8.8 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction; provided that, with respect to any Pledged Stock issued by a
--------
Foreign Subsidiary, all rights, powers and remedies provided in this Agreement
may be exercised only to the extent that they do not violate any provision of
any law, rule or regulation of any Governmental Authority applicable to any such
Pledged Stock or affecting the legality, validity or enforceability of any of
the provisions of this Agreement against the Pledgor (such laws, rules or
regulations, "Applicable Law") and are intended to be limited to the extent
--------------
necessary so that they will not render this Agreement invalid, unenforceable or
not entitled to be recorded, registered or filed under the provisions of any
Applicable Law.
38
8.9 Section Headings. The Section headings used in this Agreement are for
----------------
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Note Financing Documents
-----------
represent the entire agreement of the Granting Parties and the Secured Parties
with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Granting Parties or any of
the Secured Parties relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Note Financing Documents.
8.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each party hereto hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Note Financing
Documents to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of
the courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such party
at its address referred to in Section 8.2 or at such other address of which
the Secured Parties (in the case of any other party hereto) or the Company
(in the case of the Secured Parties) shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to ▇▇▇ in any other jurisdiction; and
39
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any punitive damages.
8.13 Acknowledgments. Each Granting Party hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Note Financing Documents to which
it is a party;
(b) none of the Secured Parties has any fiduciary relationship with
or duty to any Granting Party arising out of or in connection with this
Agreement or any of the other Note Financing Documents, and the
relationship between the Granting Parties, on the one hand, and the Secured
Parties, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Note Financing
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Parties or among the Granting Parties and the
Secured Parties.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER NOTE FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
8.15 Additional Granting Parties. Each Subsidiary of the Company that is
---------------------------
required to become a party to this Agreement pursuant to the Investment
Agreement shall become a Granting Party for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto, or in such other form as is in form and substance reasonably
satisfactory to the Secured Parties. Each existing Granting Party that is
required to become a Pledgor with respect to Capital Stock of any Subsidiary of
the Company pursuant to the Investment Agreement shall become a Pledgor with
respect thereto upon execution and delivery by such Granting Party of a
Supplemental Agreement in the form of Annex 2 hereto, or in such other form as
is in form and substance reasonably satisfactory to the Secured Parties.
8.16 Releases. (a) At such time as the Notes and the other Obligations then
--------
due and owing shall have been paid in full, all Security Collateral shall be
released from the Liens created hereby, and this Agreement and all obligations
(other than those expressly stated to survive such termination) of the Secured
Parties and each Granting Party hereunder shall terminate, all without delivery
of any instrument or performance of any act by any party, and all rights to the
Security Collateral shall revert to the Granting
40
Parties. At the request and sole expense of any Granting Party following any
such termination, the Secured Parties or their agent shall deliver to such
Granting Party any Security Collateral held by the Secured Parties hereunder,
and execute and deliver to such Granting Party such documents (including without
limitation UCC termination statements) as such Granting Party shall reasonably
request to evidence such termination.
(b) In connection with any sale or other disposition of Security
Collateral permitted by the Investment Agreement (and provided that such sale or
other disposition complies with the provisions of the Intercreditor Agreement,
including but not limited to Section 7 thereof), the Lien pursuant to this
Agreement on such sold or disposed of Security Collateral shall be automatically
released. In connection with the sale or other disposition of all of the Capital
Stock of any Guarantor that is a Subsidiary of the Company (other than to a
Controlled Affiliate of the Company) or of Security Collateral permitted under
the Investment Agreement (and provided that such sale or other disposition
complies with the provisions of the Intercreditor agreement, including but not
limited to Section 7 thereof), the Secured Parties or their agent shall, upon
receipt from the Company of a written request for the release of such Guarantor
from its Guarantee or the release of the Security Collateral subject to such
sale or other disposition, identifying such Guarantor or the relevant Security
Collateral and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Company stating that such transaction is in
compliance with the Investment Agreement and the other Note Financing Documents,
execute and deliver to the relevant Granting Party (at the sole cost and expense
of such Granting Party) all releases or other documents (including without
limitation UCC termination statements) necessary or reasonably desirable for the
release of such Guarantee or the Liens created hereby on such Security
Collateral, as applicable, as such Granting Party may reasonably request.
8.17 Senior Indebtedness. Each Granting Party acknowledges and agrees that
-------------------
(a) the Company Obligations are "Senior Indebtedness" (as defined in the Senior
-
Subordinated Note Indenture), (b) the Guarantor Obligations of the Parent are
-
"Parent Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture) and (c) the Guarantor Obligations of each other Guarantor that is a
-
"Note Guarantor" (as defined in the Senior Subordinated Note Indenture) are
"Guarantor Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture). The Company hereby specifically designates the Company Obligations
as "Designated Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture) for purposes of the Senior Subordinated Note Indenture. Each of the
Parent and each such other Guarantor hereby specifically designates its
Guarantor Obligations as "Guarantor Designated Senior Indebtedness" (as defined
in the Senior Subordinated Note Indenture) for purposes of the Senior
Subordinated Note Indenture.
41
8.18 Schedules. As soon as practicable after the date of this Agreement,
---------
but in any event no later than five (5) Business Days prior to the Closing Date,
the Granting Parties shall deliver all Schedules to this Agreement to the
Investor, which Schedules shall be subject in all respects to review and
approval by the Investor. It is understood that it is a condition precedent to
the Closing that all such Schedules shall be in form and substance reasonably
satisfactory to the Investor. Unless the context otherwise requires, if the
Closing shall occur, all references to any "Schedule" herein shall be deemed to
be a reference to a Schedule hereto delivered pursuant this Section 8.18, as if
such Schedule had been delivered on the date hereof. Notwithstanding anything to
the contrary herein, from and after the Closing Date, this Agreement shall be
construed as if all such Schedules hereto delivered pursuant to this Section
8.18 had been delivered on the date hereof.
42
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
ACTERNA CORPORATION
By:____________________________________________
Name:
Title:
ACTERNA LLC
By:____________________________________________
Name:
Title:
ACTERNA BUSINESS TRUST
By:____________________________________________
Name:
Title:
AIRSHOW, INC.
By:____________________________________________
Name:
Title:
APPLIED DIGITAL ACCESS, INC.
By:____________________________________________
Name:
Title:
43
DA VINCI SYSTEMS, INC.
By:________________________________________________
Name:
Title:
ITRONIX CORPORATION
By:________________________________________________
Name:
Title:
SIERRA DESIGN LABS
By:________________________________________________
Name:
Title:
44
Acknowledged and Agreed to as
of the date hereof by:
▇▇▇▇▇▇▇, DUBILIER & RICE FUND VI
LIMITED PARTNERSHIP
By: CD&R Associates VI Limited
Partnership, its general
partner
By: CD&R Investment Associates VI, Inc.,
its managing general partner
By: ____________________________
Name:
Title:
45
Annex 1 to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of _________ __, ____, made by
______________________________, a ______________ corporation (the "Additional
----------
Granting Party"), in favor of [___________________], as Investor (the "Investor"
-------------- --------
and "Secured Party") under the Investment Agreement referred to below. All
-------------
capitalized terms not defined herein shall have the meaning ascribed to them in
such the Guarantee and Collateral Agreement referred to below, or if not defined
therein, in the Investment Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Acterna Corporation, a Delaware corporation (the "Parent"),
------
Acterna LLC, a Delaware limited liability company wholly owned by the Parent
(the "Company") and the Investor, are parties to an Investment Agreement, dated
-------
as of December 27, 2001 (as amended, supplemented or otherwise modified from
time to time, the "Investment Agreement");
---------- ---------
WHEREAS, in connection with the Investment Agreement, the Parent, the
Company and certain of its Subsidiaries are, or are to become, parties to the
Guarantee and Collateral Agreement, dated as of December 27, 2001 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee and
-------------
Collateral Agreement") in favor of the Investor and other Secured Parties;
--------------------
WHEREAS, the Additional Granting Party is a member of an affiliated
group of companies that includes the Company and each other Granting Party; the
Company and the other Granting Parties (including the Additional Granting Party)
are engaged in related businesses, and each such Granting Party (including the
Additional Granting Party) will derive substantial direct and indirect benefit
from the purchase of the Initial Notes under the Investment Agreement;
WHEREAS, the Investment Agreement requires the Additional Granting
Party to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Granting Party has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;
46
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this
----------------------------------
Assumption Agreement, the Additional Granting Party, as provided in Section 8.15
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Granting Party thereunder with the same
force and effect as if originally named therein as a Guarantor [, Grantor and
Pledgor] [and Grantor] [and Pledgor]/1/ and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor]/2/ thereunder. The
information set forth in Annex 1-A hereto is hereby added to the information set
forth in Schedules ____________ to the Guarantee and Collateral Agreement, and
such Schedules are hereby amended and modified to include such information. The
Additional Granting Party hereby represents and warrants that each of the
representations and warranties of such Additional Grantor, in its capacities as
a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor],/3/ contained in
Section 4 of the Guarantee and Collateral Agreement is true and correct in all
material respects on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTING PARTY]
By:________________________
Name:
Title:
____________________
/1/ Indicate the capacities in which the Additional Granting Party is becoming
a Grantor.
/2/ Indicate the capacities in which the Additional Granting Party is becoming
a Grantor.
/3/ Indicate the capacities in which the Additional Granting Party is becoming
a Grantor.
47
Acknowledged and Agreed to as
of the date hereof by:
[------------------------],
as Investor
By:
------------------------------------
Name:
Title:
48
Annex 2 to
Guarantee and Collateral Agreement
----------------------------------
SUPPLEMENTAL AGREEMENT, dated as of __________ __, ____, made
by _____________________, a ___________ corporation [(the "Additional
----------
Pledgor")][(the "Company")]/4/, in favor of [___________________], as Investor
------- -------
(the "Investor" and "Secured Party") under the Investment Agreement below. All
-------- -------------
capitalized terms not defined herein shall have the meaning ascribed to them in
the Guarantee and Collateral Agreement referred to below, or if not defined
therein, in the Investment Agreement.
W I T N E S S E T H:
WHEREAS, Acterna Corporation, a Delaware corporation (the "Parent"),
------
Acterna LLC, a Delaware limited liability company wholly owned by the Parent
(the "Company") and the Investor, are parties to an Investment Agreement, dated
-------
as of December 27, 2001 (as amended, supplemented or otherwise modified from
time to time, the "Investment Agreement") under the Investment Agreement
--------------------
referred to below;
WHEREAS, in connection with the Investment Agreement, the Parent, the
Company and certain of its Subsidiaries are parties to the Guarantee and
Collateral Agreement, dated as of December 27, 2001 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee and Collateral Agreement")
----------------------------------
in favor of the Investor and other Secured Parties;
WHEREAS, the Investment Agreement requires the [Additional Pledgor]
[Company] to become a Pledgor under the Guarantee and Collateral Agreement with
respect to Capital Stock of a new Subsidiary of the Company; and
WHEREAS, the [Additional Pledgor][Company] has agreed to execute and
deliver this Supplemental Agreement in order to [supplement/become such a
Pledgor to] the Guarantee and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this
----------------------------------
Supplemental Agreement, the [Additional Pledgor][Company], as provided in
Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a Pledgor
under the
__________________________
/4/ Use "Additional Pledgor" if other than the Company, and "Company" if
the Company.
49
Guarantee and Collateral Agreement with respect to the shares of Capital Stock
of the Subsidiary of the Company listed in Annex 2-A hereto, as a Granting Party
thereunder. The information set forth in Annex 2-A hereto is hereby added to the
information set forth in Schedule 2 to the Guarantee and Collateral Agreement,
and such Schedule 2 is hereby amended and modified to include such information.
The [Additional Pledgor][Company] hereby represents and warrants that each of
the representations and warranties of such Pledgor contained in Section 4 of the
Guarantee and Collateral Agreement is true and correct in all material respects
on and as the date hereof (after giving effect to this Supplemental Agreement)
as if made on and as of such date.
2. GOVERNING LAW. THIS SUPPLEMENTAL AGREEMENT AND RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL PLEDGOR]
By:____________________________
Name:
Title:
Acknowledged and Agreed to as
of the date hereof by:
[------------------------],
as Investor
By:
-----------------------------------
Name:
Title:
50