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EXHIBIT 10.16
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT, dated as of November 27, 1996,
made by FRICTION PRODUCTS CO., an Ohio corporation ("FRICTION PRODUCTS"), HAWK
BRAKE, INC., an Ohio corporation ("HAWK BRAKE"), XXXXXX, INC., a Delaware
corporation ("XXXXXX"), XXXXXXXXXX PRODUCTS CORPORATION, a Delaware corporation
("XXXXXXXXXX"), XXXXX METAL STAMPINGS, INC., an Ohio corporation ("XXXXX"), X.X.
XXXXXXX HOLDINGS, INC., a Delaware corporation ("XXXXXXX HOLDINGS"), X.X.
XXXXXXX CORP., a Delaware corporation ("XXXXXXX CORP.") and XXXXXXX FRICTION
PRODUCTS U.K. CORP., a Delaware corporation ("XXXXXXX FRICTION") (Friction
Products, Hawk Brake, Helsel, Hutchinson, Logan, Wellman Holdings, Xxxxxxx Corp.
and Xxxxxxx Friction each sometimes hereinafter referred to individually as a
"GRANTOR" and collectively as "GRANTORS") in favor of BT COMMERCIAL CORPORATION,
a Delaware corporation ("BTCC"), acting in its capacity as agent (in such
capacity, "AGENT") for itself and each of the other "LENDERS" (as such term is
defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
November 27, 1996 (such Credit Agreement, as it may be amended, restated,
supplemented or otherwise modified from time to time, being hereinafter referred
to as the "CREDIT AGREEMENT"), among Grantors, Agent, Lenders and Hawk
Corporation, a Delaware corporation, as borrowing agent for Grantors, Lenders
have severally agreed to make certain loans and other extensions of credit to or
for the account of Grantors upon the terms and subject to the conditions set
forth therein; and
WHEREAS, Lenders have required, as a condition, among others,
to the making of any such loans or other extensions of credit, that Grantors
execute and deliver this Security Agreement to Agent for its benefit and for the
ratable benefit of Lenders;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
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1. DEFINED TERMS. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined);
"ACCOUNT DEBTOR" means the Person who is obligated on or
under an Account of any Grantor.
"ACCOUNT" means, with respect to each Grantor, any "account"
as such term is defined in section 9-106 of the UCC, now owned or
hereafter acquired by such Grantor and shall include, without
limitation, all present and future rights of such Grantor to payment
for goods sold or leased or for services rendered which are not
evidenced by instruments or chattel paper, and whether or not they have
been earned by performance.
"CHATTEL PAPER" means, with respect to each Grantor, any
"chattel paper," as such term is defined in section 9-105(1)(b) of the
UCC, now owned or hereafter acquired by such Grantor and constituting
Proceeds of, related to, or arising in connection with, Accounts,
Inventory or General Intangibles of such Grantor.
"COLLATERAL" has the meaning set forth in SECTION 2 of
this Security Agreement.
"CONTRACTS" means, with respect to each Grantor, all
contracts, undertakings, or other agreements (other than rights
evidenced by chattel paper, documents or instruments) in or under which
such Grantor may now or hereafter have any right, title or interest.
"DOCUMENTS" means, with respect to each Grantor, any
"documents," as such term is defined in section 9-105(l)(f) of the UCC,
now owned or hereafter acquired by such Grantor and constituting
Proceeds of, related to, or arising in connection with, Accounts,
Inventory or General Intangibles of such Grantor.
"GENERAL INTANGIBLES" means, with respect to each Grantor, any
"general intangibles," as such term is defined in section 9-106 of the
UCC, now owned or hereafter acquired by
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such Grantor and, in any event, shall include, without limitation, all
right, title and interest which such Grantor may now or hereafter have
in, under or to any Contracts, leasehold interests in real and personal
property, interests in partnerships and joint ventures, tax refunds,
deposit accounts (general or special) with and credits and other claims
against any financial institution, all customer lists, trademarks,
patents, rights in intellectual property, licenses, permits,
copyrights, trade secrets, proprietary or confidential information,
inventions (whether patented or patentable or not) and technical
information, procedures, designs), knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records now owned or hereafter acquired by such Grantor,
goodwill and rights of indemnification.
"HEREBY," "HEREIN," "HEREOF," "HEREUNDER" and words of similar
import refer to this Security Agreement as a whole (including, without
limitation, all exhibits and schedules hereto) and not merely to the
specific section, paragraph or clause in which the respective word
appears.
"INSTRUMENT" means, with respect to each Grantor, any
"instrument," as such term is defined in section 9-105(1)(i) of the
UCC, now owned or hereafter acquired by such Grantor and constituting
Proceeds of, related to, or arising in connection with, Accounts,
Inventory or General Intangibles of such Grantor, other than
instruments that constitute, or are a part of a group of writings that
constitute, chattel paper.
"INVENTORY" means, with respect to each Grantor, any
"inventory," as such term is defined in section 9-109(4) of the UCC,
now owned or hereafter acquired by such Grantor and, in any event,
shall include, without limitation, all inventory, merchandise, goods
and other personal property now owned or hereafter acquired by such
Grantor which are held for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw
materials, work in process or materials used or consumed or to be used
or consumed in such Grantor's business, or the processing, packaging,
delivery or shipping of the same, and all finished goods.
"LICENSE" means any license as to which Agent has been granted
a security interest hereunder.
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"PROCEEDS" means "proceeds," as such term is defined in
section 9-306(1) of the UCC and, in any event, shall include with
respect to each Grantor, without limitation, (I) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to such
Grantor from time to time with respect to any of the Collateral, (Ii)
any and all payments (in any form whatsoever) made or due and payable
to such Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any Governmental Authority, and (III) any and all
other amounts from time to time paid or payable to such Grantor under
or in connection with any of the Collateral.
"SECURED OBLIGATIONS" means, collectively, the Obligations,
including, without limitation, all Indebtedness, liabilities and
obligations of each of the Grantors to Agent and Lenders arising out of
or in connection with this Security Agreement.
"SECURITY AGREEMENT" means this General Security Agreement, as
it may be amended, restated, supplemented or otherwise modified from
time to time, and shall refer to this Security Agreement as in effect
on the date such reference becomes operative.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois, PROVIDED, THAT if,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Agent's lien on or Agent's security interest
in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of Illinois, the term
"UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions
related to such provisions.
2. GRANT OF SECURITY INTERESTS. To secure the prompt and
complete payment, performance and observance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Secured Obligations and to
induce Agent and each of the Lenders to enter into the Credit Agreement and to
make the Loans and other extensions of credit provided for therein in accordance
with the respective terms thereof, each of the Grantors hereby grants to Agent
for its benefit and the ratable benefit of the Lenders a
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continuing security interest in and to (and, if available, a right or setoff
against) all of the following property and interests in property of such
Grantor, whether now owned or existing or hereafter acquired or arising and
wheresoever located (all of such property and interests in property of all
Grantors being hereinafter, collectively, referred to as the "COLLATERAL"):
(a) Accounts;
(b) Chattel Paper;
(c) Contracts;
(d) Documents;
(e) General Intangibles;
(f) Instruments;
(g) Inventory;
(h) all monies and any and all other property and interests in
property of such Grantor now or hereafter coming into the actual
possession, custody or control of any of the Lenders or any agent or
affiliate of any of the Lenders in any way or for any purpose (whether
for safekeeping, deposit, custody, pledge, transmission, collection or
otherwise), and all rights and interests of such Grantor in respect of
any and all (i) drafts, letters of credit, stocks, bonds, and debt and
equity securities, whether or not certificated, and warrants, options,
puts and calls and other rights to acquire or otherwise relating to the
same, (ii) interest rate and currency exchange agreements, including,
without limitation, cap, collar, floor, forward and similar agreements
and interest rate protection agreements, (iii) cash and cash
equivalents, and (iv) proceeds of loans, advances and other financial
accommodations, including, without limitation, Loans, advances and
other financial accommodations made or extended under the Credit
Agreement; and
(i) to the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions and additions to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
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3. LIMITATIONS ON LENDER'S OBLIGATIONS. It is expressly agreed by each
of the Grantors that, anything herein to the contrary notwithstanding, such
Grantor shall remain liable under each of its Contracts and each of its Licenses
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder and such Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract or License. Neither Agent nor any of the
Lenders shall have any obligation or liability under any Contract or License of
any of the Grantors by reason of or arising out of this Security Agreement or
the granting to Agent of a security interest therein or the receipt by Agent or
any of the Lenders of any payment relating to any Contract or License pursuant
hereto, nor shall Agent or any of the Lenders be required or obligated in any
manner to perform or fulfill any of the respective obligations of any Grantor
under or pursuant to any Contracts or Licenses of such Grantor, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any such Contract or License, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to Agent or any Lender or to which Agent or any Lender
may be entitled at any time or times.
4. NOTICE TO ACCOUNT DEBTORS. Upon the occurrence and during the
continuance of an Event of Default, Agent may at any time or times and without
prior notice to any of the Grantors, notify any or all Account Debtors, parties
to Contracts and obligors under Instruments and Chattel Paper, in each case with
respect to any Grantor, that the Accounts of such Grantor and the right, title
and interest of such Grantor in, to and under such Contracts, Instruments or
Chattel Paper, as the case may be, have been assigned to Agent and that payments
thereon or in connection therewith shall thereupon be made directly to Agent.
5. VERIFICATION OF ACCOUNTS. From and after the Initial Funding Date,
Agent shall have the right, at any time or times hereafter, in Agent's name or
in the name of a nominee of Agent, to communicate with Account Debtors, parties
to Contracts and obligors under Instruments and Chattel Paper of each of the
Grantors to verify with such Persons to Agent's satisfaction the existence,
amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper,
as the case may be. Agent shall have the right, at any time or times hereafter,
to make test
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verifications of the Accounts of each of the Grantors and physical verifications
of the Inventory of each of the Grantors in any manner and through any medium
that it considers advisable, and each of the Grantors agrees to furnish all such
assistance and information as Agent may reasonably require in connection
therewith.
6. REPRESENTATIONS AND WARRANTIES. Each of the Grantors hereby
represents and warrants that:
(a) Except for Permitted Liens, each of the Grantors is the
sole legal and beneficial owner of each item of Collateral in which
such Grantor purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all Liens.
No amount payable under or in connection with any of the Accounts or
Contracts of any of the Grantors are evidenced by Instruments which
have not been endorsed and previously delivered to Agent.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by Grantors in
favor of Agent pursuant to the Collateral Documents or such as relate
to Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien in favor of Agent for the benefit of Agent and the
ratable benefit of the Lenders on the Collateral with respect to which
a Lien may be perfected by filing pursuant to the UCC, and, assuming
such filing, the Lien created hereby will be prior to all other Liens
except Permitted Liens, and will be enforceable as such as against
creditors of and purchasers from the respective Grantors (other than
purchasers of Inventory of the respective Grantors in the ordinary
course of business).
(d) The principal place of business of each of the Grantors,
and the places where the records of each of the Grantors concerning
Collateral are kept are located at the respective addresses set forth
on SCHEDULE B, PART 6.1 of the Credit Agreement, and none of the
Grantors will change such principal place of business or remove such
records unless it has taken such action as is necessary to cause the
Lien of
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Lender in the Collateral to continue to be perfected. None of the
Grantors will change its principal place of business or the place where
its records concerning Collateral are kept without giving thirty (30)
days' prior written notice thereof to Agent.
(e) With respect to Accounts of each of the Grantors
scheduled, listed or otherwise referred to in any monthly Borrowing
Base Certificate delivered by the Hawk Funds Administrator to Agent
pursuant to SECTION 7.2(a) of the Credit Agreement, each of the
Grantors represents and warrants
that:
(i) they are genuine, in all material respects what
they purport to be and are not evidenced by a judgment;
(ii) except as expressly set forth in such monthly
Borrowing Base Certificate, they represent undisputed, bona
fide transactions completed in accordance with the terms and
provisions referred to or contained in any documents delivered
to Agent with respect thereto;
(iii) the face amounts thereof shown on such monthly
Borrowing Base Certificate, the applicable Grantor's books and
records and all invoices and statements which may be delivered
to Agent with respect thereto are actually owing to the
applicable Grantor on the date thereof;
(iv) no payments have been or shall be made thereon
except, from and after December 31, 1996, payments immediately
deposited into a Lockbox Account pursuant to SECTION 4.10 of
the Credit Agreement;
(v) except as expressly set forth in such monthly
Borrowing Base Certificate, there are no setoffs,
counterclaims or disputes existing or asserted with respect
thereto and the applicable Grantor has not made any agreement
with any Account Debtor for any deduction therefrom;
(vi) there are no facts, events or occurrences known
to the Grantors which in any way impair the validity or
enforcement thereof or tend to reduce the amount payable
thereunder as shown on the respective
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weekly or monthly Borrowing Base Certificate, any Grantor's
books and records and all invoices and statements delivered to
Agent with respect thereto;
(vii) to Grantor's knowledge, all Account Debtors
have the capacity to contract and are solvent;
(viii) such Grantor has no knowledge of any fact or
circumstances which could reasonably be expected to impair the
validity or collectibility thereof;
(ix) they have not been sold or transferred under,
and are not otherwise subject to, a factoring agreement;
(x) the Account Debtors are not parties to, and
they are not otherwise payable under or otherwise subject
to, a factoring agreement;
(xi) the Account Debtors are not Account Debtors on
any Account which has been sold or otherwise transferred
under, or is otherwise subject to, a factoring agreement;
and
(xii) to such Grantor's knowledge, there are no
proceedings or actions which are pending which could
reasonably be expected to result in a material adverse change
in any Account Debtor's financial condition.
(f) With respect to Inventory of each of the Grantors
Inventory scheduled, listed or otherwise referred to in any monthly
Borrowing Base Certificate, each of the Grantors represents and
warrants that:
(i) except for Inventory with an aggregate book value
for all Grantors not exceeding $4,000,000, delivered to
third-parties for processing and similar services, such
Inventory is not stored with a bailee, warehouseman, consignee
or similar third party unless such third party has entered
into a Collateral Access Agreement with respect to such
Inventory;
(ii) except as permitted under clause (i) of this
section (F), it is located on the premises of such Grantor
listed on SCHEDULE B, PART 6.10 to the Credit Agreement; and
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(iii) it is of good and merchantable quality, free
from any defects which would affect the market value of such
Inventory.
7. COVENANTS. Each of the Grantors covenants and agrees with
Agent and each of the Lenders that from and after the date of this Security
Agreement and until the Secured Obligations are fully paid and satisfied and the
Credit Agreement and each of the other Credit Documents have terminated pursuant
to the respective terms and provisions thereof:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At
any time and from time to time upon the written request of
Agent, and at the sole expense of such Grantor, each of the
Grantors will promptly and duly execute and deliver any and
all such further instruments and documents and take such
further action as Agent may reasonably deem necessary or
desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted,
including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for
the assignment to Agent of any License or Contract that
constitutes Collateral and that is held by such Grantor or in
which such Grantor has any rights not heretofore assigned, the
filing of any financing or continuation statements under the
UCC with respect to the Liens and security interests granted
hereby, transferring Collateral to Agent's possession (if a
security interest in such Collateral can be perfected by
possession) and using its best efforts to obtain waivers of
liens from landlords and mortgagees. Each of the Grantors
also authorizes Agent to file any such financing or
continuation statement without the signature of Grantor to the
extent permitted by applicable law. Each of the Grantors
further agrees that a carbon, photographic or other
reproduction of this Security Agreement or of a financing
statement is sufficient as a financing statement. If any
Collateral shall be or become evidenced by any Instrument, the
applicable Grantor will within ten (10) days notify Agent
thereof and upon Agent's request, such Instrument shall be
immediately pledged to Agent hereunder, and shall be duly
endorsed in a manner satisfactory to Agent and delivered to
Agent.
(b) MAINTENANCE OF RECORDS. Each of the Grantors will,
at all times hereafter, keep and maintain at its own cost and
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expense satisfactory and complete records of the Collateral of such
Grantor, including, without limitation, records sufficient to permit
the preparation of all reports, schedules and other information
required by Lender pursuant to SECTIONS 7.1 and 7.2 of the Credit
Agreement. Each of the Grantors will xxxx its books and records
pertaining to Collateral to evidence this Security Agreement and the
security interests granted hereby. All Chattel Paper will be marked
with the following legend: "This writing and the obligations evidenced
or secured hereby are subject to the security interest of BT Commercial
Corporation, as Agent." Upon the occurrence and during the continuance
of an Event of Default, if requested by Agent, the security interest of
Agent shall be noted on the certificate of title of each vehicle.
(c) INDEMNIFICATION. In any suit, proceeding or action brought
by Agent or any Lender relating to any Account, Chattel Paper,
Contract, General Intangible, Document or Instrument of any of the
Grantors for any sum owing thereunder, or to enforce any provision of
any Account, Chattel Paper, Contract, General Intangible, Document or
Instrument of any of the Grantors, the Grantors will jointly and
severally save, indemnify and keep Agent and each of the Lenders
harmless from and against all expense, loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, that arises out of the
unenforceability or non-conformity with any applicable law of such
Collateral or that arises out of a breach by any Grantor of any
obligation thereunder arising out of any other agreement, indebtedness
or liability at any time owing to, or in favor of, such obligor or its
successors from any Grantor.
(d) CONFIRMATION OF CERTAIN PROVISIONS OF THE CREDIT
DOCUMENTS. Each of the Grantors hereby confirms and agrees that it will
perform and observe all of the covenants and agreements set forth in
the Credit Agreement on its part to be performed or observed or that
any other Grantor has agreed to cause such Grantor to perform or
observe to the same extent as provided for in the Credit Agreement.
(e) SAFEKEEPING OF INVENTORY; INVENTORY COVENANTS.
Neither Agent nor any of the Lenders shall be responsible for:
(i) the safekeeping of the Inventory of any of the Grantors;
(ii) any loss or damage to the Inventory of any of the
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Grantors; (iii) any diminution in the value of the Inventory of any of
the Grantors; or (iv) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. As between each of the
Grantors and Agent, and each of the Grantors and Lenders, all risk of
loss, damage, destruction or diminution in value of the Inventory of
such Grantor shall be borne by such Grantor except in the case of
Agent's or any Lender's gross negligence or willful misconduct.
(f) LIMITATION ON LIENS ON COLLATERAL. No Grantor will create,
permit or suffer to exist, and each Grantor will defend, the Collateral
against and take such other action as is necessary to remove any Lien
on the Collateral, except Permitted Liens, and will defend the right,
title and interest of Agent in and to all of such Grantor's rights
under the Chattel Paper, Contracts, Documents, General Intangibles and
Instruments of such Grantor and to the Inventory of such Grantor and in
and to the Proceeds thereof against the claims and demands of all
Persons whomsoever.
(g) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. No Grantor will
(other than in the ordinary course of such Grantor's business so long
as an Event of Default shall not have occurred and be continuing),
without Agent's prior written consent, grant any extension of the time
of payment of any of the Accounts, Chattel Paper or Instruments of such
Grantor, compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon
other than trade discounts granted in the ordinary course of business
or otherwise deemed necessary by such Grantor in the exercise of its
reasonable business judgment of such Grantor.
(h) MAINTENANCE OF INSURANCE. Each of the Grantors will
maintain, with respect to the Collateral of such Grantor, insurance in
accordance with all of the requirements of SECTION 7.6 of the Credit
Agreement.
(i) LIMITATIONS ON DISPOSITION. No Grantor will sell, lease,
transfer or otherwise dispose of any of the Collateral of such Grantor,
or attempt or contract to do so, except as otherwise expressly
permitted under the Credit Agreement.
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(j) FURTHER IDENTIFICATION OF COLLATERAL. Each of the Grantors
will, if requested by Agent, furnish to Agent statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably
request, all in reasonable detail.
(k) NOTICES. Each of the Grantors will advise Agent promptly,
in reasonable detail, (i) of any material Lien made or asserted against
any of the Collateral, (ii) of any material change in the composition
of the Collateral, and (iii) of the occurrence of any other event which
could reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or on the Lien granted hereunder.
(l) CONTINUOUS PERFECTION. No Grantor will change its name,
identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith
seriously misleading within the meaning of section 9-402(7) of the UCC
(or any other then applicable provision of the UCC) unless such Grantor
shall have given Agent at least thirty (30) days' prior written notice
thereof and shall have taken all action (or made arrangements to take
such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably
requested by Agent to amend such financing statement or continuation
statement so that it is not seriously misleading.
8. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each of the Grantors hereby irrevocably constitutes and
appoints Agent, and any officer, employee or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of such
Grantor and in the name of such Grantor or in its own name, from time
to time in Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate
action and to execute and deliver any and all documents and instruments
which Agent may deem necessary or desirable to accomplish the purposes
of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives Agent, and any officer, employee or agent
thereof, the power
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and right, on behalf of such Grantor, without notice to or assent by
such Grantor to do the following:
(i) at any time and from time to time from and after
the Initial Funding Date, to pay or discharge taxes and Liens
(other than Permitted Liens) levied or placed on or threatened
against the Collateral, to effect any insurance called for by
the terms of this Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof;
(ii) from and after the Initial Funding Date and
following the occurrence and during the continuance of an
Event of Default (A) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral and, in the name of such
Grantor or its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances
or other Instruments for the payment of moneys due under any
Collateral; (B) to receive payment of and receipt for any and
all moneys, claims and other amounts due, and to become due at
any time, in respect or arising out of any Collateral; and (C)
to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notice in connection
with Accounts and other Documents constituting or relating to
the Collateral; (D) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to Agent or
as Agent shall direct; (E) to file any claim or to take any
other action or proceeding in any court of law or equity or
otherwise deemed appropriate by Agent for the purpose of
collecting any and all such moneys due under any Collateral
whenever payable; (F) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any
Collateral; (G) to defend any suit, action or proceeding
brought against Grantor with respect to any Collateral; (H) to
settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such
discharges or releases as Agent may deem appropriate; and (I)
generally to sell,
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transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though Agent were the absolute owner thereof for
all purposes, and to do, at Agent's option and such Grantor's
expense, at any time, or from time to time, all acts and
things which Agent reasonably deems necessary to protect,
preserve or realize upon the Collateral and Agent's Lien
thereon, in order to effect the intent of this Security
Agreement, all as fully and effectively as such Grantor might
do.
(b) Each of the Grantors hereby ratifies, to the extent
permitted by law, all that said attorneys shall lawfully do or cause to
be done by virtue hereof. The power of attorney granted pursuant to
this SECTION 8 is a power coupled with an interest and shall be
irrevocable until the Secured Obligations are paid and satisfied in
full and the Credit Agreement and each of the other Collateral
Documents have terminated pursuant to the respective terms and
provisions thereof.
(c) The powers conferred on Agent hereunder are solely to
protect the respective interests of Agent and the Lenders in the
Collateral and shall not impose any duty upon it to exercise any such
powers. Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither Agent
nor any of its officers, directors, employees or agents shall be
responsible to any of the Grantors for any act or failure to act,
except for their own gross negligence or willful misconduct.
(d) Each of the Grantors also authorizes Agent, and any
officer, employee or agent thereof, at any time and from time to time
following the Initial Funding Date, (i) to communicate in its own name
with any party to any of such Grantor's Contracts with regard to the
assignment of the right, title and interest of such Grantor in and
under such Contracts hereunder and other matters relating thereto and
(ii) to execute, in connection with the sale provided for in SECTION
10(C) hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
9. PERFORMANCE BY AGENT OF A GRANTOR'S OBLIGATIONS. If
any of the Grantors fails to perform or comply with any of its
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agreements contained herein and Agent, as provided for by the terms of this
Security Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the reasonable expenses of Agent
incurred in connection with such performance or compliance, together with
interest thereon at the highest rate then in effect in respect of any of the
Loans, shall be payable by such Grantor to Agent on demand and shall constitute
Secured Obligations secured hereby.
10. REMEDIES; RIGHTS UPON DEFAULT.
(a) RIGHTS AND REMEDIES GENERALLY. Upon the occurrence of an
Event of Default, Agent shall have, in addition to any other rights and
remedies contained in this Security Agreement or in any of the other
Credit Documents, all of the rights and remedies of a secured party
under the UCC or other applicable laws, all of which rights and
remedies shall be cumulative, and none exclusive, to the extent
permitted by law. In addition to all such rights and remedies, the
sale, lease or other disposition of the Collateral, or any part
thereof, by Agent after an Event of Default may be for cash, credit or
any combination thereof, and Agent may purchase all or any part of the
Collateral at public or, if permitted by law, private sale, and in lieu
of actual payment of such purchase price, may set off the amount of
such purchase price against the Secured Obligations then owing. All
sales of the Collateral may be adjourned from time to time with or
without notice. Agent may, in its sole discretion, cause the Collateral
to remain on the respective premises of the Grantors, at such Grantors'
expense, pending sale or other disposition of the Collateral. Agent
shall have the right to conduct such sales on each Grantor's premises,
at Grantors' expense, or elsewhere, on such occasion or occasions as
Agent may see fit.
(b) ENTRY UPON PREMISES AND ACCESS TO INFORMATION. Upon
the occurrence and during the continuance of an Event of
Default, Agent shall have the right to enter upon the premises
of each of the Grantors where any Collateral is located (or is
reasonably believed to be located) without any obligation to
pay rent to such Grantor, or any other place or places where
the Collateral is reasonably believed to be located and kept,
and render the Collateral unusable or remove the Collateral
therefrom to the premises of Agent or any agent of Agent, for
such time as Agent may desire, in order effectively to collect
or liquidate the Collateral, and/or Agent may require each of
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the Grantors to assemble the Collateral and make it available to Agent
at a place or places to be designed by Agent. Upon the occurrence and
during the continuance of an Event of Default, Agent shall have the
right to obtain access to each Grantor's data processing equipment,
computer hardware and software relating to the Collateral and to use
all of the foregoing and the information contained therein in any
manner Agent deems appropriate; and Agent shall have the right to
notify post office authorities to change the address for delivery of
each Grantor's mail to an address designated by Lender and to receive
and open all mail addressed to such Grantor and to deal with all mail
addressed to such Grantor relating to the Collateral or the rights and
remedies of any of the Lenders hereunder or under any of the Collateral
Documents.
(c) SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER. Any
notice required to be given by Agent of a sale, lease or other
disposition of, or other intended action by Agent with respect to, any
Collateral of a Grantor which is deposited in the United States
certified or registered mail, postage prepaid and duly addressed to
such Grantor at the address specified in SECTION 13 below, at least ten
(10) Business Days prior to such proposed action shall constitute fair
and reasonable notice to such Grantor of any such action, provided,
that Agent may give any shorter notice that is commercially reasonable
under the circumstances. The net proceeds realized by Agent upon any
such sale or other disposition, after deduction for the Expenses
incurred by Agent in connection therewith, shall be applied as provided
in SECTION 4.11 of the Credit Agreement toward satisfaction of the
Secured Obligations. Agent shall account to the respective Grantors for
any surplus realized upon any such sale or other disposition, and
Grantors shall remain jointly and severally liable for any deficiency.
The commencement of any action, legal or equitable, or the rendering of
any judgment or decree or any deficiency shall not affect Agent's
security interest in the Collateral until the Secured Obligations are
fully paid. Each of the Grantors agrees that Agent has no obligation to
preserve rights to the Collateral against any other Persons.
(d) WAIVER OF DEMAND, ETC.. Each of the Grantors hereby
waives presentment and demand for payment of any of the
Secured Obligations, protest and notice of dishonor or of the
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occurrence of any default with respect to any of the Secured
Obligations, and all other notices to which the Grantors might
otherwise be entitled, except as otherwise expressly provided herein,
in the Credit Agreement or in any of the other Credit Documents. Each
of the Grantors also waives the benefit of all valuation, appraisal and
exemption laws.
(e) COSTS AND EXPENSES. The Grantors also jointly and
severally agree to pay all Expenses incurred by Agent and each of the
Lenders in connection with the enforcement of their respective rights
and remedies hereunder.
11. LIMITATION ON DUTY IN RESPECT OF COLLATERAL. Agent and each of the
Lenders shall use reasonable care with respect to any Collateral in their
possession or under their control. Neither Agent nor any of the Lenders shall
have any duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of any of such Persons or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto. Upon the request of Grantors, Agent shall
promptly account for any monies received by it in respect of any foreclosing on
or disposition of the Collateral.
12. REINSTATEMENT. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any of the Grantors for liquidation or reorganization, should any of the
Grantors become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of the
assets of any of the Grantors, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment, observance or
performance of the Secured Obligations, or any part thereof is, pursuant to
applicable law, rescinded or reduced in amount, or shall otherwise be restored
or returned by any obligee of the Secured Obligations, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
13. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request,
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consent, approval, declaration or other communication shall or may be given to
or served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other communication with respect to
this Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given (and
deemed to have been given) in the manner and to the respective addresses set
forth in SECTION 11.7 of the Credit Agreement. Failure or delay in delivering
copies of any such notice, demand, request, consent, approval, declaration or
other communication to any Persons designated in this Security Agreement or any
other Credit Document to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
14. SEVERABILITY. In case any provision in or obligation under
this Security Agreement or any Credit Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
15. NO WAIVER; CUMULATIVE REMEDIES.
(a) Neither Agent nor any of the Lenders shall by any act,
delay, omission or otherwise be deemed to have waived any of its rights
or remedies hereunder, and no waiver shall be valid unless in writing,
approved by the Majority Lenders (or by all Lenders where the approval
of each Lender is required under the Credit Agreement) and signed by
Agent, and then only to the extent therein set forth. A waiver by Agent
or any of the Lenders of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which
Agent would otherwise have had on any future occasion. No failure to
exercise nor any delay in exercising on the part of Agent or any of the
Lenders, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.
(b) The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and
are not exclusive of any rights and remedies provided by law
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or any of the other Credit Documents. None of the terms or provisions
of this Security Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by Agent and, where
applicable, by each of the Grantors.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of each of the Grantors hereunder shall be binding upon the
successors and assigns of such Grantor and shall, together with the rights and
remedies of Agent and each of the Lenders hereunder, inure to the benefit of
Agent and the Lenders and their respective successors and assigns.
17. FURTHER INDEMNIFICATION. Each of the Grantors agrees to pay, and
to save Agent and each of the Lenders harmless from and against, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
excise, sales or other taxes which may be payable or determined to be payable
with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Security Agreement.
18. CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF
LAWS PROVISIONS.
19. WAIVER OF JURY TRIAL. EACH OF THE GRANTORS HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
20. BOND. EACH OF THE GRANTORS HEREBY WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED TO BE POSTED BY AGENT OR ANY OF THE LENDERS IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY,
ATTACH, OR LEVY UPON COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED
OBLIGATIONS, TO ENFORCE OR APPEAL ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF AGENT OR ANY OF THE LENDERS, OR IN FAVOR OF THE HAWK FUNDS
ADMINISTRATOR OR ANY OF THE GRANTORS, AS THE CASE MAY BE, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION, THIS SECURITY AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, each of the Grantors has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
FRICTION PRODUCTS CO.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
HAWK BRAKE, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
XXXXXX, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
XXXXXXXXXX PRODUCTS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
Security Agreement
22
XXXXX METAL STAMPINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
X.X. XXXXXXX HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
X.X. XXXXXXX CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
XXXXXXX FRICTION PRODUCTS U.K.
CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President-Finance
----------------------------
ACCEPTED AND ACKNOWLEDGED,
AS OF NOVEMBER 27, 1996:
BT COMMERCIAL CORPORATION,
as Agent
By: /s/ Xxxxx X. Xxxxxxx
--------------------------
Its: Senior Vice President
-------------------------
Security Agreement
