EXHIBIT 10.15
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 16, 2002, among each of
the parties named as a Grantor on the signature pages hereto (individually a
"Grantor" and collectively, the "Grantors"), and BANK OF AMERICA, N.A., in its
capacity as agent (the "Agent") for the Lenders (defined below).
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and among the financial institutions from time to time
parties thereto (such financial institutions, together with their respective
successors and permitted assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"), the Agent, and certain of the
Grantors consisting of Coltec Industries, Inc., a Pennsylvania corporation
("Coltec"), Coltec Industrial Products LLC, a Delaware limited liability company
("CIP"), Xxxxxxx Sealing Technologies LLC, a Delaware limited liability company
("Xxxxxxx Sealing"), Xxxxxxx Bearings LLC, a Delaware limited liability company
("Garlock Bearing"), Xxxxx Tool Company, a Michigan corporation ("Xxxxx Tool"),
and Stemco LLC, a Delaware limited liability company ("Stemco" and, together
with Coltec, Xxxxxxx Sealing, Garlock Bearing and Xxxxx Tool, each individually
referred to herein as a "Borrower" and collectively as the "Borrowers")
(including all annexes, exhibits and schedules thereto, as from time to time
amended, restated, supplemented or otherwise modified, the "Credit Agreement"),
the Lenders have agreed to make the Loans and issue Letters of Credit on behalf
of the Borrowers;
WHEREAS, EnPro Industries, Inc., as parent company to the
Borrowers and other Grantors and as a Grantor hereunder (herein, the "Parent
Grantor"), has executed that certain Parent Guarantee dated as of the date
hereof (as from time to time reaffirmed, amended, restated, supplemented or
otherwise modified, the "Parent Guarantee") in favor of the Agent, pursuant to
which the Parent has agreed to guarantee all the "Obligations" (as defined in
the Credit Agreement);
WHEREAS, the Grantors hereunder, other than the Borrowers and
the Parent Grantor (herein, the "Subsidiary Grantors"), have executed that
certain Subsidiary Guarantee dated as of the date hereof (as from time to time
reaffirmed, amended, restated, supplemented or otherwise modified, the
"Subsidiary Guarantee") in favor of the Agent, pursuant to which such Grantors
have agreed to guarantee all the "Obligations" (as defined in the Credit
Agreement);
WHEREAS, in order to induce the Agent and the Lenders to enter
into the Credit Agreement and the other Loan Documents and to induce the Lenders
to make the Loans and issue Letters of Credit as provided for in the Credit
Agreement, the Grantors have agreed to grant a continuing Lien on the Collateral
(as hereinafter defined) to secure the "Obligations" (as herein defined);
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. The following terms shall have the following
respective meanings:
"Accounts" means, with respect to any Grantor, all of such
Grantor's now owned or hereafter acquired or arising accounts, as defined in the
UCC, including any rights to payment for the sale or lease of goods or rendition
of services, whether or not they have been earned by performance, and all
medical receivables.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, five percent
(5%) or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.
"Asbestos Insurance Policy" has the meaning ascribed to such
term in the Credit Agreement.
"Borrower Grantor" means each of Coltec, CIP, Xxxxxxx Sealing,
Garlock Bearing, Xxxxx Tool and Stemco.
"Chattel Paper" means, with respect to any Grantor, all of
such Grantor's now owned or hereafter acquired chattel paper, as defined in the
UCC, including electronic chattel paper.
"Deposit Accounts" means all "deposit accounts" as such term
is defined in the UCC, now or hereafter held in the name of any Grantor.
"Documents" means all documents as such term is defined in the
UCC, including bills of lading, warehouse receipts or other documents of title,
now owned or hereafter acquired by any Grantor.
"EIFA" has the meaning ascribed to such term in the Credit
Agreement.
"Equipment" means, with respect to any Grantor, all of such
Grantor's now owned and hereafter acquired machinery, equipment, furniture,
furnishings, fixtures, and other tangible personal property (except Inventory),
including embedded software, motor vehicles with respect to which a certificate
of title has been issued, aircraft, dies, tools, jigs, molds and office
equipment, as well as all of such types of property leased by such Grantor and
all of such Grantor's rights and interests with respect thereto under such
leases (including, without limitation, options to purchase); together with all
present and future additions and accessions thereto, replacements therefor,
component and auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing; wherever any of the
foregoing is located.
"General Intangibles" means, with respect to any Grantor, all
of such Grantor's now owned or hereafter acquired general intangibles, choses in
action and causes of action and all other intangible personal property of such
Grantor of every kind and nature (other than
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Accounts), including, without limitation, all contract rights, payment
intangibles, Proprietary Rights, corporate or other business records,
inventions, designs, blueprints, plans, all manuals, drawings, instructions,
warranties and rights with respect to any Equipment, specifications, patents,
patent applications, trademarks, service marks, trade names, trade secrets,
goodwill, copyrights, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due to such
Grantor in connection with the termination of any employee benefit plan or any
rights thereto and any other amounts payable to such Grantor from any employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which such Grantor is a
beneficiary, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged equity interests or
Investment Property and any letter of credit, guarantee, claim, security
interest or other security held by or granted to such Grantor.
"Goods" means all "goods" as defined in the UCC, now owned or
hereafter acquired by any Grantor, wherever located, including embedded software
to the extent included in "goods" as defined in the UCC, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.
"Instruments" means all instruments as such term is defined in
the UCC, now owned or hereafter acquired by any Grantor.
"Insurance Receivables Rights" means all rights and interests,
now owned or hereafter acquired, in and to the insurance accounts receivable
with respect to the Asbestos Insurance Policies, and any supplementary and other
contracts issued in connection with such Asbestos Insurance Policies (including,
if the applicable insurer is a party thereto, the EIFA), any additional
insurance proceeds of such insurance policies which are or may hereafter become
payable, and all claims, options, privileges, rights, and interests in and under
such policies to collect and receive such accounts receivable and insurance
proceeds, subject to all the terms and conditions of such policies.
"Inventory" means, with respect to any Grantor, all of such
Grantor's now owned and hereafter acquired inventory, goods and merchandise,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, work-in-process, finished goods
(including embedded software), other materials and supplies of any kind, nature
or description which are used or consumed in such Grantor's business or used in
connection with the packing, shipping, advertising, selling or finishing of such
goods, merchandise.
"Investment Property" means, with respect to any Grantor, all
of such Grantor's right title and interest in and to any and all: (a) securities
whether certificated or uncertificated; (b) securities entitlements; (c)
securities accounts; (d) commodity contracts; or (e) commodity accounts.
"Letter-of-Credit Rights" means "letter-of-credit rights" as
such term is defined in the UCC, now owned or hereafter acquired by any Grantor,
including rights to payment or
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performance under a letter of credit, whether or not any Grantor, as
beneficiary, has demanded or is entitled to demand payment or performance.
"Obligations" means (i) with respect to each Borrower Grantor,
the Obligations (as defined in the Credit Agreement), (ii) with respect to the
Parent Grantor, all obligations and liabilities of the Parent Grantor under the
Parent Guarantee and (iii) with respect to the Subsidiary Grantors, all
obligations and liabilities of the Subsidiary Grantors under the Subsidiary
Guarantee.
"Payment Account" means each bank account established pursuant
to this Security Agreement, to which the proceeds of Accounts and other
Collateral are deposited or credited, and which is maintained in the name of the
Agent or one or more Grantors, as the Agent may determine, on terms acceptable
to the Agent.
"Proprietary Rights" means, with respect to any Grantor, all
of such Grantor's now owned and hereafter arising or acquired: licenses,
franchises, permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, service marks, trade names, trade
styles, patent, trademark and service xxxx applications, and all licenses and
rights related to any of the foregoing, and all other rights under any of the
foregoing, all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to xxx for past,
present and future infringement of any of the foregoing.
"Software" means all "software" as such term is defined in the
UCC, now owned or hereafter acquired by any Grantor, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"Supporting Obligations" means all supporting obligations as
such term is defined in the UCC.
"UCC" means the Uniform Commercial Code, as in effect from
time to time, of the State of North Carolina or of any other state the laws of
which are required as a result thereof to be applied in connection with the
issue of perfection of security interests.
"Uniform Commercial Code jurisdiction" means any jurisdiction
that has adopted "Revised Article 9" of the UCC on or after July 1, 2001.
All other capitalized terms used but not otherwise defined
herein have the meanings given to them in the Credit Agreement or in Annex A
thereto. All other undefined terms contained in this Security Agreement, unless
the context indicates otherwise, have the meanings provided for by the UCC to
the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) As security for all of its Obligations, each Grantor
hereby grants to the Agent, for the benefit of the Agent and the Lenders, a
continuing security interest in and lien on all of the following property and
assets of such Grantor, whether now owned or existing or hereafter acquired or
arising, regardless of where located:
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(i) all Accounts;
(ii) all Inventory;
(iii) all Chattel Paper;
(iv) all Documents;
(v) all Instruments;
(vi) all Supporting Obligations and Letter-of-Credit
Rights;
(vii) all General Intangibles (including payment
intangibles and Software), excluding, however, rights under (but not excluding
Proceeds of) any lease, contract or agreement (including, without limitation,
any license), that contains an enforceable restriction on such Grantor's right
to grant the security interest to the Agent contemplated by this Security
Agreement, unless and until such Grantor shall have obtained consent from the
relevant party or parties thereto to the grant of such security interest;
(viii) all Goods;
(ix) all Equipment;
(x) all Investment Property;
(xi) all Insurance Receivables Rights;
(xii) all money, cash, cash equivalents, securities and
other property of any kind of such Grantor held directly or indirectly by the
Agent or any Lender;
(xiii) all of such Grantor's Deposit Accounts, credits, and
balances with and other claims against the Agent or any Lender or any of their
Affiliates or any other financial institution with which such Grantor maintains
deposits, including any Payment Accounts;
(xiv) all books, records and other property related to or
referring to any of the foregoing, including books, records, account ledgers,
data processing records, computer software and other property and General
Intangibles at any time evidencing or relating to any of the foregoing; and
(xv) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, together with the Real Estate covered by Mortgage(s) (if
any), and all other personal property of the Grantors in which the Agent or any
Lender may at any time be granted a Lien as collateral for the Obligations, is
herein collectively referred to as the "Collateral."
(b) All of the Obligations shall be secured by all of the
Collateral.
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3. PERFECTION AND PROTECTION OF SECURITY INTEREST.
(a) Each Grantor shall, at its expense, subject to
clauses (c), (d) and (e) below, perform all steps requested by the Agent at any
time to perfect, maintain, protect, and enforce the Agent's Liens, including:
(i) executing, delivering and/or filing and recording of the Copyright Security
Agreements, the Patent and Trademark Agreements and executing and filing
financing or continuation statements, and amendments thereof, in form and
substance reasonably satisfactory to the Agent; (ii) delivering to the Agent
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued to the extent Collateral located in
any such warehouse exceeds $100,000 or if Agent shall request delivery of such
warehouse receipts, (iii) delivering to Agent certificates of title covering any
portion of the Collateral for which certificates of title have been issued to
the extent such Collateral exceeds $100,000 or if Agent shall request delivery
of such certificates of title; (iv) when an Event of Default has occurred and is
continuing, transferring Inventory to warehouses or other locations designated
by the Agent; (v) placing notations on its books of account to disclose the
Agent's security interest; and (vi) taking such other steps as are deemed
necessary or desirable by the Agent to maintain and protect the Agent's Liens.
Each Grantor agrees that a carbon, photographic, photostatic, or other
reproduction of this Security Agreement or of a financing statement is
sufficient as a financing statement.
(b) Unless the Agent shall otherwise consent in writing
(which consent may be revoked), the Grantors shall deliver to the Agent all
Collateral consisting of negotiable Documents (subject to Section 3(a) above),
certificated securities (accompanied by stock powers executed in blank), Chattel
Paper and Instruments promptly after the Grantors receive the same.
(c) The Grantors shall, in accordance with the terms of
the Credit Agreement, obtain or use their commercially reasonable efforts to
obtain waivers or subordinations of Liens from landlords and mortgagees for
locations at which Collateral in excess of $1,000,000 is located, and the
Grantors shall in all instances obtain or use commercially reasonable efforts to
obtain signed acknowledgements of the Agent's Liens from bailees having
possession of any Collateral in excess of $1,000,000 that they hold for the
benefit of the Agent; provided that no Collateral may be deemed Eligible
Inventory unless all the eligibility requirements set forth in the definition of
Eligible Inventory are satisfied.
(d) If required by the terms of the Credit Agreement and
not waived by the Agent in writing (which waiver may be revoked), the Grantors
shall use commercially reasonable efforts to obtain authenticated control
agreements from each issuer of uncertificated securities, securities
intermediary, or commodities intermediary issuing or holding any financial
assets or commodities to or for the Grantors.
(e) If a Grantor is or becomes the beneficiary of a
letter of credit such Grantor shall promptly notify the Agent thereof and use
commercially reasonable efforts to enter into a tri-party agreement with the
Agent and the issuer and/or confirmation bank with respect to Letter-of-Credit
Rights assigning such Letter-of-Credit Rights to the Agent and directing all
payments thereunder to the Payment Account, all in form and substance reasonably
satisfactory to the Agent.
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(f) The Grantors shall take all commercially reasonable
steps necessary to grant the Agent control of all electronic chattel paper in
accordance with the Code and all "transferable records" as defined in the
Uniform Electronic Transactions Act.
(g) Each Grantor hereby irrevocably authorizes the Agent
at any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the Collateral (i) as all assets of such Grantor or
words of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the UCC of the State of
North Carolina or such jurisdiction, or (ii) as being of an equal or lesser
scope or with greater detail, and (b) contain any other information required by
part 5 of Article 9 of the UCC of the State of North Carolina for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether such Grantor is an organization, the type of organization
and any organization identification number issued to such Grantor, and (ii) in
the case of a financing statement filed as a fixture filing, a sufficient
description of real property to which the Collateral relates. The Grantors agree
to furnish any such information to the Agent promptly upon request. The Grantors
also ratify their authorization for the Agent to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements or amendments
thereto if filed prior to the date hereof. In addition, each Grantor hereby
irrevocably authorizes the Agent, at any time, to notify any applicable
insurance company of the security interest granted to the Agent in the Insurance
Receivables Rights pursuant to this Security Agreement.
(h) Each Grantor shall promptly notify the Agent of any
commercial tort claim (as defined in the UCC) in excess of $100,000 individually
or in excess of $500,000 in the aggregate for all commercial tort claims
acquired by it and unless otherwise consented to by the Agent, such Grantor
shall enter into a supplement to this Security Agreement, granting to the Agent
a Lien in such commercial tort claim(s).
(i) From time to time, the Grantors shall, upon the
Agent's request, execute and deliver confirmatory written instruments pledging
to the Agent, for the ratable benefit of the Agent and the Lenders, the
Collateral, but any Grantor's failure to do so shall not affect or limit any
security interest or any other rights of the Agent or any Lender in and to the
Collateral with respect to such Grantor. So long as the Credit Agreement is in
effect and until all Obligations have been fully satisfied, the Agent's Liens
shall continue in full force and effect in all Collateral (whether or not deemed
eligible for the purpose of calculating the Availability or as the basis for any
advance, loan, extension of credit, or other financial accommodation).
(j) Good Standing Certificates. Not less frequently than
once during each calendar year, each Grantor shall, unless the Agent shall
otherwise consent, provide to the Agent a certificate of good standing from its
state or country of incorporation or organization.
(k) No Reincorporation. Except as permitted by the Credit
Agreement, the Grantors shall not reincorporate or reorganize themselves under
the laws of any jurisdiction other than the respective jurisdiction in which
they are incorporated or organized as of the date hereof or change their
respective type of entity as identified on Schedule II without the prior written
consent of the Agent.
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(l) Terminations Amendments Not Authorized. The Grantors
acknowledge that they are not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of the Agent and agree that they will not do
so without the prior written consent of the Agent, subject to the Grantors'
rights under Section 9-509(d)(2).
(m) No Restriction on Payments to Agent. The Grantors
shall not enter into any Contract that restricts or prohibits the grant of a
security interest in Accounts, Chattel Paper, Instruments or payment intangibles
or the proceeds of the foregoing to the Agent. To the best of any Grantor's
knowledge, no material General Intangible contains any provision that restricts
or prohibits the grant of the security interest contemplated by this Security
Agreement in such General Intangible except as set forth on Schedule IV hereto.
4. LOCATION OF COLLATERAL. (a) Each Grantor represents and warrants to
the Agent and the Lenders that: (A) Schedule I is a correct and complete list as
of the Closing Date of the location of such Grantor's chief executive office,
the location of its books and records, the locations of the Collateral, and the
locations of all of its other places of business; and (b) Schedule I correctly
identifies any of such facilities and locations that are not owned by such
Grantor and sets forth the names of the owners and lessors or sublessors of such
facilities and locations. Each Grantor covenants and agrees that it will not (i)
maintain any Collateral at any location other than those locations listed for
such Grantor on Schedule I, (ii) otherwise change or add to any of such
locations, or (iii) change the location of its chief executive office from the
location identified in Schedule I, unless it gives the Agent at least twenty
(20) days' prior written notice thereof and executes any and all financing
statements and other documents that the Agent reasonably requests in connection
therewith. Without limiting the foregoing, each Grantor represents that all of
its Inventory (other than Inventory in transit) is, and covenants that all of
its Inventory will be, located either (a) on premises owned by such Grantor, (b)
on premises leased by such Grantor; provided that (i) with respect to any such
premises leased pursuant to a lease entered into prior to the Closing Date, such
Grantor shall have used commercially reasonable efforts to obtain an executed
landlord waiver from the landlord of such premises in form and substance
satisfactory to the Agent to the extent that the Inventory at such location is
at least $1,000,000 and with respect to any such premises leased pursuant to a
lease agreement entered into on or after the Closing Date, such Grantor shall
have used commercially reasonable efforts to obtain an executed landlord waiver
from the landlord of such premises in form and substance satisfactory to the
Agent to the extent that the Inventory at such location is at least $1,000,000,
or (c) in a warehouse or with a bailee, provided that (i) with respect to any
such agreement with respect to the storage of such Inventory or with any such
bailees entered into prior to the Closing Date, such Grantor shall have used
commercially reasonable efforts to obtain an executed bailee letter from the
applicable Person in form and substance satisfactory to the Agent to the extent
that the Inventory at such location is at least $1,000,000 and (ii) with respect
to any other such agreement relating to such stored Inventory entered into on or
after the Closing Date, such Grantor shall have used commercially reasonable
efforts to obtain an executed bailee letter from the applicable Person in form
and substance satisfactory to the Agent to the extent that the Inventory at such
location is at least $1,000,000. Notwithstanding the foregoing, no Inventory
described in the immediately preceding sentence may be deemed to be Eligible
Inventory unless all the eligibility requirements set forth in the definition of
Eligible Inventory are satisfied.
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5. JURISDICTION OF ORGANIZATION. Schedule II hereto identifies each
Grantor's name as of the Closing Date as it appears in official filings in the
state or country of its incorporation or other organization, the type of entity
of each Grantor (including corporation, partnership, limited partnership or
limited liability company), organizational identification number issued by each
Grantor's state or country of incorporation or organization or a statement that
no such number has been issued and the jurisdiction in which each Grantor is
incorporated or organized. Each Grantor has only one state or country of
incorporation or organization.
6. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. Each Grantor
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) such Grantor has rights in and the power to transfer
all of the Collateral free and clear of all Liens whatsoever, except for Liens
permitted by Section 7.18 of the Credit Agreement; (b) the Agent's Liens in the
Collateral will not be subject to any prior Lien except for those Liens
identified in clauses (a), (c), (d) and (e) of the definition of Permitted Liens
existing as of the Closing Date and described on Schedule 6.9 to the Credit
Agreement and Liens securing Capital Leases and purchase money Liens on
Collateral (other than Inventory) securing purchase money Debt permitted by
Section 7.13 of the Credit Agreement; and (c) such Grantor will use, store, and
maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only.
7. APPRAISALS. Whenever a Default or Event of Default exists, each
Grantor shall, at its expense and upon the Agent's request, provide the Agent
with appraisals or updates thereof of any or all of the Collateral from an
appraiser, and prepared on a basis, satisfactory to the Agent, such appraisals
and updates to include, without limitation, information required by applicable
law and regulation and by the internal policies of the Lenders.
8. ACCESS AND EXAMINATION. The Agent, accompanied by any Lender which
so elects, may at all reasonable times during regular business hours (and at any
time when a Default or Event of Default exists and is continuing) have access
to, examine, audit, make extracts from or copies of and inspect any or all of
each Grantor's records, files, and books of account and the Collateral, and
discuss each Grantor's affairs with such Grantor's officers and management. Each
Grantor will deliver to the Agent any instrument necessary for the Agent to
obtain records from any service bureau maintaining records for such Grantor. The
Agent may, and at the direction of the Required Lenders shall, at any time when
a Default or Event of Default exists, and at each Grantor's expense, make copies
of all of such Grantor's books and records, or require such Grantor to deliver
such copies to the Agent. The Agent may, without expense to the Agent, use such
of each Grantor's supplies and Real Estate as may be reasonably necessary for
maintaining or enforcing the Agent's Liens and each Grantor shall cause its
applicable personnel to provide such assistance as Agent shall reasonably
require to effectuate the terms of this Section 8. The Agent shall have the
right, at any time, in the Agent's name or in the name of a nominee of the
Agent, to verify the validity, amount or any other matter relating to the
Accounts, Inventory, or other Collateral, by mail, telephone, or otherwise.
9. COLLATERAL REPORTING. Each Borrower Grantor shall provide the Agent
with the following documents at the following times in form satisfactory to the
Agent: (a) at the times specified in Section 5.2(j) of the Credit Agreement, a
schedule of such Borrower Grantor's Accounts created, credits given, cash
collected and other adjustments to Accounts since the last
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such schedule and a Borrowing Base Certificate; (b) on a monthly basis, by the
20th day of the following month, an aging of such Borrower Grantor's Accounts,
together with a reconciliation to the corresponding Borrowing Base and to such
Borrower Grantor's general ledger; (c) on a monthly basis by the 20th day of the
following month, an aging of such Borrower Grantor's accounts payable; (d) at
the time of delivery of each Borrowing Base Certificate required to be delivered
pursuant to the Credit Agreement (or more frequently if requested by the Agent),
a detailed calculation of Eligible Accounts and Eligible Inventory; (e) on a
monthly basis by the 20th day of the following month (or more frequently if
requested by the Agent), Inventory reports by category and business division
(and if requested by the Agent, location), together with a reconciliation to the
corresponding Borrowing Base and to such Borrower Grantor's general ledger; (f)
upon request, copies of invoices in connection with such Borrower Grantor's
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with such Borrower
Grantor's Accounts and for Inventory and Equipment acquired by such Borrower
Grantor, purchase orders and invoices; (g) upon request, a statement of the
balance of each of the Intercompany Accounts; (h) such other reports as to the
Collateral of such Borrower Grantor as the Agent shall reasonably request from
time to time; and (i) with the delivery of each of the foregoing, a certificate
of such Borrower Grantor executed by an officer thereof certifying as to the
accuracy and completeness in all material respects of the foregoing; provided
that with respect to any deliveries made under clauses (f), (g) and (h), such
certificate shall be given upon Agent's request. If any of a Borrower Grantor's
records or reports of the Collateral are prepared by an accounting service or
other agent, such Borrower Grantor hereby authorizes such service or agent to
deliver such records, reports, and related documents to the Agent, for
distribution to the Lenders.
10. ACCOUNTS.
(a) Each Borrower Grantor hereby represents and warrants
to the Agent and the Lenders, with respect to such Borrower Grantor's Eligible
Accounts used in calculating the Borrowing Base, that: (i) each existing
Eligible Account represents, and each future Eligible Account will represent, a
bona fide sale or lease and delivery of goods by such Borrower Grantor, or
rendition of services by such Borrower Grantor, in the ordinary course of such
Borrower Grantor's business; (ii) each existing Eligible Account is, and each
future Eligible Account will be, for a liquidated amount payable by the Account
Debtor thereon on the terms set forth in the invoice therefor or in the schedule
thereof delivered to the Agent, without any offset, deduction, defense, or
counterclaim except those known to such Borrower Grantor and disclosed to the
Agent and the Lenders pursuant to this Security Agreement; (iii) no payment will
be received with respect to any Eligible Account, and no credit, discount, or
extension, or agreement therefor will be granted on any Eligible Account, except
as reported to the Agent and the Lenders in Borrowing Base Certificates
delivered in accordance with this Security Agreement; (iv) each copy of an
invoice delivered to the Agent by such Borrower Grantor will be a genuine copy
of the original invoice sent to the Account Debtor named therein; and (v) all
goods described in any invoice representing a sale of goods will have been
delivered to the Account Debtor and all services of such Borrower Grantor
described in each invoice will have been performed.
(b) Each Borrower Grantor shall not re-date any invoice
or sale or make sales on extended dating beyond that customary in such Borrower
Grantor's business or extend or
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modify any Eligible Account. If a Borrower Grantor becomes aware of any matter
adversely affecting the collectibility of any Eligible Account or the Account
Debtor therefor involving an amount greater than $1,000,000, including
information regarding the Account Debtor's creditworthiness, such Borrower
Grantor will promptly so advise the Agent and exclude such Account from Eligible
Accounts.
(c) Each Grantor shall not accept any note or other
instrument (except a check or other instrument for the immediate payment of
money) with respect to any Account other than in the ordinary course of business
but only to the extent such Account is defaulted or delinquent or only to the
extent such Account is not included in the Borrowing Base as an Eligible
Account. Any acceptance of any such instrument, shall be considered as evidence
of the Account and not payment thereof and such Grantor will promptly deliver
such instrument to the Agent, endorsed by such Grantor to the Agent in a manner
satisfactory in form and substance to the Agent. Regardless of the form of
presentment, demand, notice of protest with respect thereto, such Grantor (as
the endorser thereof) shall remain liable thereon until such instrument is paid
in full.
(d) Each Borrower Grantor shall notify the Agent promptly
of all disputes and claims in excess of $1,000,000 with any Account Debtor, and
agrees to settle, contest, or adjust such dispute or claim at no expense to the
Agent or any Lender. No discount, credit or allowance shall be granted to any
such Account Debtor without the Agent's prior written consent, except for
discounts, credits and allowances made or given in the ordinary course of such
Borrower Grantor's business when no Event of Default exists hereunder. Each
Borrower Grantor shall send the Agent a copy of each credit memorandum in excess
of $1,000,000 as soon as issued, and such Borrower Grantor shall promptly report
that credit on Borrowing Base Certificates submitted by it. The Agent may at all
times when an Event of Default exists hereunder, settle or adjust disputes and
claims directly with Account Debtors for amounts and upon terms which the Agent
or the Required Lenders, as applicable, shall consider advisable and, in all
cases, the Agent will credit such Grantor's Loan Account with the net amounts
received by the Agent in payment of any Accounts.
(e) If an Account Debtor returns any Inventory to a
Borrower Grantor when no Event of Default exists, then such Borrower Grantor
shall promptly determine the reason for such return and shall issue a credit
memorandum to the Account Debtor in the appropriate amount. Each Borrower
Grantor shall immediately report to the Agent any return involving an amount in
excess of $1,000,000. Each such report shall indicate the reasons for the
returns and the locations and condition of the returned Inventory. In the event
any Account Debtor returns Inventory to a Grantor when an Event of Default
exists, such Borrower Grantor, upon the request of the Agent, shall: (i) hold
the returned Inventory in trust for the Agent; (ii) segregate all returned
Inventory from all of its other property; (iii) dispose of the returned
Inventory solely according to the Agent's written instructions; and (iv) not
issue any credits or allowances with respect thereto without the Agent's prior
written consent. All returned Inventory shall be subject to the Agent's Liens
thereon. Whenever any Inventory is returned, the related Account shall be deemed
ineligible to the extent of the amount owing by the Account Debtor with respect
to such returned Inventory and such returned Inventory shall not be Eligible
Inventory unless (i) such Inventory meets the criteria for Eligible Inventory
and (ii) the related Account has been made ineligible.
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11. COLLECTION OF ACCOUNTS; PAYMENTS.
(a) Each Borrower Grantor shall make collection of all
Accounts and other Collateral for the Agent, shall receive all payments as the
Agent's trustee, and shall immediately deliver all payments in their original
form duly endorsed in blank to the Agent, in each case in accordance with
Section 3.3 of the Credit Agreement. If, notwithstanding such instructions, a
Borrower Grantor receives any proceeds of Accounts, it shall receive such
payments as the Agent's trustee, and shall immediately deliver such payments to
the Agent in their original form duly endorsed in blank or deposit them into the
Agent Account. The Agent or the Agent's designee may, at any time after the
occurrence of an Event of Default, notify Account Debtors that the Accounts have
been assigned to the Agent and of the Agent's security interest therein, and may
collect them directly and charge the collection costs and expenses to the Loan
Account as a Revolving Loan. So long as an Event of Default has occurred and is
continuing, each Borrower Grantor, at the Agent's request, shall execute and
deliver to the Agent such documents as the Agent shall require to grant the
Agent access to any post office box in which collections of Accounts are
received.
(b) If sales of Inventory are made or services are
rendered for cash, each Borrower Grantor shall immediately deliver to the Agent
or deposit into the Agent Account the cash which such Borrower Grantor receives.
(c) All payments, including immediately available funds
received by the Agent at a bank account designated by it, will be the Agent's
sole property for its benefit and the benefit of the Lenders and will be
credited to the Loan Account (conditional upon final collection) after allowing
one (1) Business Day for collection of such payments (excluding payments
consisting of immediately available funds which shall be credited to the Loan
Account immediately upon receipt); provided, however, that such payments shall
be deemed to be credited to the Loan Account immediately upon receipt for
purposes of (i) determining Availability, (ii) calculating the Unused Line Fee
pursuant to Section 2.5 of the Credit Agreement and (iii) calculating the amount
of interest accrued thereon solely for purposes of determining the amount of
interest to be distributed by the Agent to the Lenders (but not the amount of
interest payable by the Borrower Grantors).
(d) In the event that the Borrower Grantors repay all of
the Obligations upon the termination of the Credit Agreement or upon
acceleration of the Obligations, other than through the Agent's receipt of
payments on account of the Accounts or proceeds of the other Collateral, such
payment will be credited to the appropriate Borrower Grantor's Loan Account upon
the Agent's receipt of immediately available funds.
12. INVENTORY; PERPETUAL INVENTORY.
(a) Each Grantor represents and warrants to the Agent and
the Lenders and agrees with the Agent and the Lenders that all of the Inventory
owned by such Grantor is and will be held for sale or lease, or to be furnished
in connection with the rendition of services, in the ordinary course of such
Grantor's business. Each Grantor will keep its Inventory in good and marketable
condition, except for damaged or defective goods arising in the ordinary course
of such Grantor's business. Each Grantor will not, without the prior written
consent of the Agent,
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acquire or accept any Inventory on consignment or approval unless such Inventory
is segregated from such Grantor's other owned Inventory and is marked in a
manner designating the true owner thereof. Each Grantor agrees that all
Inventory produced by such Grantor in the United States of America will be
produced in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations, and orders thereunder. Each Grantor will
conduct a physical count of the Inventory at least once per Fiscal Year, and
after and during the continuation of an Event of Default, at such other times as
the Agent requests. Each Grantor will maintain a perpetual inventory reporting
system at all times. Each Grantor will not, without the Agent's written consent,
sell any Inventory on a xxxx-and-hold, guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis except that Grantors
may sell non-Eligible Inventory on a consignment basis in the ordinary course of
their business to the extent the amount of such Inventory does not exceed
$2,000,000 in the aggregate for all Grantors.
(b) In connection with all Inventory financed by Letters
of Credit, each Grantor will, at the Agent's request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, Documents or Instruments in which the Agent holds a
security interest to deliver them to the Agent and/or subject to the Agent's
order, and if they shall come into such Grantor's possession, to deliver them,
upon request, to the Agent in their original form. Each Grantor shall also, at
the Agent's request, designate the Agent as the consignee on all bills of lading
and other negotiable and non-negotiable documents.
13. EQUIPMENT.
(a) Each Grantor represents and warrants to the Agent and
the Lenders and agrees with the Agent and the Lenders that all of the Equipment
owned by such Grantor is and will be used or held for use in such Grantor's
business. Each Grantor shall keep and maintain its Equipment necessary for the
conduct of its business in operating condition and repair sufficient for the
conduct of its business (ordinary wear and tear excepted) and shall make all
necessary replacements thereof.
(b) Each Grantor shall promptly inform the Agent of any
material deletions from the Equipment. Each Grantor shall not permit any
Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Agent does not have a Lien. Each Grantor will not, without
the Agent's prior written consent, alter or remove any identifying symbol or
number on any of such Grantor's Equipment constituting Collateral.
(c) Except as permitted by the Credit Agreement, each
Grantor shall not, without the Agent's prior written consent, sell, license,
lease as a lessor, or otherwise dispose of any of such Grantor's Equipment.
14. DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. Each Grantor represents
and warrants to the Agent and the Lenders that (a) all Documents, Instruments,
and Chattel Paper describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete, valid, and
genuine, and (b) all goods evidenced
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by such Documents, Instruments, Letter of Credit Rights and Chattel Paper are
and will be owned by such Grantor, free and clear of all Liens other than
Permitted Liens, Liens securing Capital Leases and purchase money Liens on
Collateral (other than Inventory) securing purchase money Debt permitted by
Section 7.13 of the Credit Agreement. If a Grantor retains possession of any
Chattel Paper or Instruments with Agent's consent, such Chattel Paper and
Instruments shall be marked with the following legend: "This writing and the
obligations evidenced or served hereby are subject to the security interest of
Bank of America, N.A., as Agent, for the benefit of the Agent and certain
Lenders."
15. RIGHT TO CURE. The Agent may, in its discretion, and shall, at the
direction of the Required Lenders, pay any amount or do any act required of a
Grantor hereunder or under any other Loan Document in order to preserve,
protect, maintain or enforce the Obligations, the Collateral or the Agent's
Liens therein, and which such Grantor fails to pay or do, including payment of
any judgment against such Grantor, any insurance premium, any warehouse charge,
any finishing or processing charge, any landlord's or bailee's claim, and any
other Lien upon or with respect to the Collateral. All payments that the Agent
makes under this Section 15 and all out-of-pocket costs and expenses that the
Agent pays or incurs in connection with any action taken by it hereunder shall
be charged to the Loan Account of the Borrowers as a Revolving Loan. Any payment
made or other action taken by the Agent under this Section 15 shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
thereafter as herein provided.
16. POWER OF ATTORNEY. Each Grantor hereby appoints the Agent and the
Agent's designee as such Grantor's attorney, with power at any time that any
Event of Default shall have occurred and be continuing (except as noted below):
(a) to endorse such Grantor's name on any checks, notes, acceptances, money
orders, or other forms of payment or security that come into the Agent's or any
Lender's possession; (b) to sign such Grantor's name on any invoice, xxxx of
lading, warehouse receipt or other negotiable or non-negotiable Document
constituting Collateral, on drafts against customers, on public records and on
assignments of Accounts, (c) regardless of whether any Event of Default shall
then exist, to sign such Grantor's name on any on notices of assignment, and
financing statements and to file any such financing statements by electronic
means with or without a signature as authorized or required by applicable law or
filing procedure; (d) to notify the post office authorities to change the
address for delivery of such Grantor's mail to an address designated by the
Agent and to receive, open and dispose of all mail addressed to such Grantor;
(e) regardless of whether any Event of Default shall then exist to send requests
for verification of Accounts to customers or Account Debtors; (f) to complete in
such Grantor's name or the Agent's name, any order, sale or transaction, obtain
the necessary Documents in connection therewith, and collect the proceeds
thereof; (g) to clear Inventory through customs in such Grantor's name, the
Agent's name or the name of the Agent's designee, and to sign and deliver to
customs officials powers of attorney in such Grantor's name for such purpose;
(h) to the extent that such Grantor's authorization given in Section 3(g) of
this Security Agreement is not sufficient, to file such financing statements
with respect to this Security Agreement, with or without such Grantor's
signature, or to file a photocopy of this Security Agreement in substitution for
a financing statement, as the Agent may deem appropriate and to execute in such
Grantor's name such financing statements and amendments thereto and continuation
statements which may require such Grantor's signature; and (i) to do all things
necessary to exercise the Agent's rights and remedies under the Credit
14
Agreement or this Security Agreement. Each Grantor ratifies and approves all
acts of such attorney. None of the Lenders or the Agent nor their attorneys will
be liable for any acts or omissions or for any error of judgment or mistake of
fact or law except for their gross negligence or willful misconduct. This power,
being coupled with an interest, is irrevocable until the Credit Agreement has
been terminated and the Obligations have been fully satisfied.
17. THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES.
(a) Each Grantor assumes all responsibility and liability
arising from or relating to the use, sale, license or other disposition of such
Grantor's Collateral. The Obligations shall not be affected by any failure of
the Agent or any Lender to take any steps to perfect the Agent's Liens or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release any Grantor from any of the Obligations. Following the
occurrence and during the continuation of an Event of Default, the Agent may
(but shall not be required to), and at the direction of the Required Lenders
shall, without notice to or consent from any Grantor, xxx upon or otherwise
collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take any other action with respect to the Collateral, any security therefor,
any agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of any Grantor for the
Obligations or under the Credit Agreement or any other agreement now or
hereafter existing between the Agent and/or any Lender and the Grantors.
(b) It is expressly agreed by each Grantor 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.
Neither the Agent nor any Lender shall have any obligation or liability under
any contract or license by reason of or arising out of this Security Agreement
or the granting herein of a Lien thereon or the receipt by the Agent or any
Lender of any payment relating to any contract or license pursuant hereto.
Neither the Agent nor any Lender shall be required or obligated in any manner to
perform or fulfill any of the obligations of the Grantors under or pursuant to
any contract or license, 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 contract or license, or to present or
file any claims, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(c) The Agent may at any time after a Default or an Event
of Default has occurred and be continuing (or if any rights of set-off (other
than set-offs against an Account arising under the contract giving rise to the
same Account) or contra accounts may be asserted with respect to the following),
without prior notice to the Grantors, notify Account Debtors, and other Persons
obligated on the Collateral that the Agent has a security interest therein, and
that payments shall be made directly to the Agent, for itself and the benefit of
the Lenders. Upon the request of the Agent, each Grantor shall so notify Account
Debtors and other Persons obligated on Collateral. Once any such notice has been
given to any Account Debtor or other Person
15
obligated on the Collateral, each Grantor shall not give any contrary
instructions to such Account Debtor or other Person without the Agent's prior
written consent.
(d) The Agent may at any time in the Agent's own name or
in the name of any Grantor communicate with Account Debtors, parties to
Contracts and obligors in respect of Instruments to verify with such Persons, to
the Agent's satisfaction, the existence, amount and terms of Accounts, payment
intangibles, Instruments or Chattel Paper. If a Default or Event of Default
shall have occurred and be continuing, each Grantor, at its own expense, shall
cause the independent certified public accountants then engaged by such Grantor
to prepare and deliver to the Agent and each Lender at any time and from time to
time promptly upon the Agent's request the following reports with respect to
such Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all
Accounts; (iii) trial balances; and (iv) a test verification of such Accounts as
the Agent may request. Upon the Agent's request, each Grantor, at its own
expense, shall deliver to the Agent the results of each physical verification,
if any, which such Grantor may in its discretion have made, or caused any other
Person to have made on its behalf, of all or any portion of its Inventory.
18. PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.
(a) The Grantors do not have any interest in, or title
to, any U.S. Patent, U.S. registered Trademark or U.S. registered Copyright
except as set forth in Schedule III hereto. This Security Agreement is effective
to create a valid and continuing Lien on and, upon filing of the Copyright
Security Agreement with the United States Copyright Office and filing of the
Patent and Trademark Agreements with the United States Patent and Trademark
Office, and filing of appropriate financing statements, perfected Liens in favor
of the Agent on each Grantor's U.S. patents, U.S. registered trademarks and U.S.
registered copyrights and such perfected Liens are enforceable against any and
all creditors of and purchasers from any Grantor, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, or by general equitable
principles. Upon filing of the Copyright Security Agreements with the United
States Copyright Office and filing of the Patent and Trademark Agreements with
the United States Patent and Trademark Office and the filing of appropriate
financing statements, all action necessary or desirable to protect and perfect
the Agent's Lien on each Grantor's U.S. patents, U.S. registered trademarks or
U.S. registered copyrights shall have been duly taken.
(b) Each Grantor shall promptly notify the Agent if it
knows that any application or registration relating to any material patent,
trademark or copyright (now or hereafter existing) may become abandoned or
dedicated, or of any material adverse determination or development (including
the institution of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding such Grantor's ownership of any material patent,
trademark or copyright, its right to register the same, or to keep and maintain
the same.
(c) In no event shall a Grantor, either directly or
through any agent, employee, licensee or designee, file an application for the
registration of any U.S. patent, U.S. registered trademark or U.S. registered
copyright with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency without giving the Agent prompt
16
written notice thereof, and, upon request of the Agent, such Grantor shall
execute and deliver any and all Patent Security Agreements, Copyright Security
Agreements or Trademark Security Agreements as the Agent may request to evidence
the Agent's Lien on such U.S. patent, U.S. registered trademark or U.S.
registered copyright, and the General Intangibles of Grantor relating thereto or
represented thereby.
(d) Each Grantor shall take all commercially reasonable
actions necessary or reasonably requested by the Agent to maintain and pursue
each application, to obtain the relevant registration and to maintain the
registration of each of the U.S. patents, U.S. registered trademarks and U.S.
registered copyrights (now or hereafter existing), including the filing of
applications for renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings, unless such Grantor
shall determine that such patent, trademark or copyright is not material to the
conduct of its business.
(e) In the event that any of the U.S. patent, U.S.
registered trademark or U.S. registered copyright Collateral relating to the
manufacture, processing, production, sale or disposition of any Inventory or any
of the other material patent, trademark or copyright Collateral (in each case,
whether now or hereafter existing) is infringed upon, or misappropriated or
diluted by a third party, the appropriate Grantor shall notify the Agent
promptly after such Grantor learns thereof. Such Grantor shall, unless it shall
reasonably determine that such patent, trademark or copyright Collateral is in
no way material to the conduct of its business or operations, unless otherwise
consented to by the Agent in writing, promptly xxx for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other actions as
the Agent shall deem appropriate under the circumstances to protect such patent,
trademark or copyright Collateral.
19. INDEMNIFICATION. In any suit, proceeding or action brought by the
Agent or any Lender relating to any Collateral for any sum owing with respect
thereto or to enforce any rights or claims with respect thereto, each Grantor
will save, indemnify and keep the Agent and the Lenders harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the Account Debtor or other Person
obligated on the Collateral, arising out of a breach by such Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from such Grantor, except in the case of the Agent or any Lender, to the extent
such expense, loss, or damage is attributable primarily to the gross negligence
or willful misconduct of the Agent or such Lender. All such obligations of the
Grantors shall be and remain enforceable against and only against the Grantors
and shall not be enforceable against the Agent or any Lender.
20. LIMITATION ON LIENS ON COLLATERAL. The Grantors will not create,
permit or suffer to exist, and will defend the Collateral against, and take such
other action as is necessary to remove, any Lien on the Collateral except Liens
permitted by Section 7.18 of the Credit Agreement, and will defend the right,
title and interest of the Agent and the Lenders in and to any of the Grantors'
rights under the Collateral against the claims and demands of all Persons
whomsoever.
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21. NOTICE REGARDING COLLATERAL. Each Grantor will advise the Agent
promptly, in reasonable detail, (i) of any Lien (other than Liens permitted by
Section 7.18 of the Credit Agreement) or claim (to the extent such claim is in
excess of $100,000) made or asserted against any of such Grantor's Collateral,
and (ii) of the occurrence of any other event which would have a Material
Adverse Effect.
22. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted
to it under this Security Agreement, the Credit Agreement, the other Loan
Documents and under any other instrument or agreement securing, evidencing or
relating to any of the Obligations, if any Event of Default shall have occurred
and be continuing, the Agent may exercise all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, each
Grantor expressly agrees that in any such event the Agent, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
such Grantor or any other Person (all and each of which demands, advertisements
and notices are hereby expressly waived to the maximum extent permitted by the
UCC and other applicable law), may forthwith enter upon the premises of such
Grantor where any Collateral is located through self-help, without judicial
process, without first obtaining a final judgment or giving such Grantor or any
other Person notice and opportunity for a hearing on the Agent's claim or action
and may collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, license, assign,
give an option or options to purchase, or sell or otherwise dispose of and
deliver said Collateral (or contract to do so), or any part thereof, in one or
more parcels at a public or private sale or sales, at any exchange at such
prices as it may deem acceptable, for cash or on credit or for future delivery
without assumption of any credit risk. The Agent or any Lender 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 for the benefit of the Agent
and the Lenders, the whole or any part of said Collateral so sold, free of any
right or equity of redemption, which equity of redemption each Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. The Agent shall have the right to conduct such sales on any
Grantor's premises or elsewhere and shall have the right to use each Grantor's
premises without charge for such time or times as the Agent deems necessary or
advisable.
(b) Each Grantor further agrees, at the Agent's request
during the existence of an Event of Default, to assemble the Collateral and make
it available to the Agent at a place or places designated by the Agent which are
reasonably convenient to the Agent and such Grantor, whether at such Grantor's
premises or elsewhere. Until the Agent is able to effect a sale, lease, or other
disposition of the Collateral, the Agent shall have the right to hold or use the
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by the Agent. The Agent shall have no obligation to the
Grantors to maintain or preserve the rights of the Grantors as against third
parties with respect to Collateral while Collateral is in the possession of the
Agent. The Agent may, if it so elects, seek the appointment of a receiver or
keeper to take possession of the Collateral and to enforce any of the Agent's
remedies (for the benefit of the Agent and the Lenders), with respect to such
appointment without prior notice or hearing as to such appointment. The Agent
shall apply the net proceeds of any such collection, recovery, receipt,
18
appropriation, realization or sale to the Obligations as provided in the Credit
Agreement, and only after so paying over such net proceeds, and after the
payment by the Agent of any other amount required by any provision of law, need
the Agent account for the surplus, if any, to the Grantors. To the maximum
extent permitted by applicable law, each Grantor waives all claims, damages, and
demands against the Agent or any Lender arising out of the repossession,
retention or sale of the Collateral except such as arise primarily out of the
gross negligence or willful misconduct of the Agent or any Lender as finally
determined by a court of competent jurisdiction. The Grantors agree that ten
(10) days prior notice by the Agent of the time and place of any public sale or
of the time after which a private sale may take place is reasonable notification
of such matters. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are insufficient to pay
all Obligations, including any attorneys' fees or other expenses incurred by the
Agent or any Lender to collect such deficiency.
(c) Except as otherwise specifically provided herein, the
Grantors hereby waive presentment, demand, protest or any notice (to the maximum
extent permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
(d) To the extent that applicable law imposes duties on
the Agent to exercise remedies in a commercially reasonable manner, each Grantor
acknowledges and agrees that it is not commercially unreasonable for the Agent
(a) to fail to incur expenses reasonably deemed significant by the Agent to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (b)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against Account Debtors or other Persons obligated on Collateral or to
remove Liens on or any adverse claims against Collateral, (d) to exercise
collection remedies against Account Debtors and other Persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (f) to contact other Persons, whether or not in the
same business as such Grantor, for expressions of interest in acquiring all or
any portion of such Collateral, (g) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the Collateral is of
a specialized nature, (h) to dispose of Collateral by utilizing internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capacity of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, such as title, possession or
quiet enjoyment, (k) to purchase insurance or credit enhancements to insure the
Agent against risks of loss, collection or disposition of Collateral or to
provide to the Agent a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist the Agent in the collection or disposition of any of the
Collateral. Each Grantor acknowledges that the purpose of this Section 22(d) is
to provide non-exhaustive indications of what actions or omissions by the Agent
would not be commercially unreasonable in the Agent's exercise of remedies
against the Collateral and that other actions or omissions by the Agent shall
not be deemed commercially unreasonable solely on account of not being indicated
in this Section 22(d). Without limitation upon the foregoing, nothing contained
in this Section 22(d)
19
shall be construed to grant any rights to the Grantors or to impose any duties
on the Agent that would not have been granted or imposed by this Security
Agreement or by applicable law in the absence of this Section 22(d).
23. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the purpose of
enabling the Agent to exercise rights and remedies under Section 22 hereof
(including, without limiting the terms of Section 22 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) during the existence of an Event
of Default, each Grantor hereby grants to the Agent, for the benefit of the
Agent and the Lenders, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Grantor but with such quality
controls as are necessary to avoid abandonment of any trademark) to use, license
or sublicense any Proprietary Rights now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.
24. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.
The Agent and each Lender shall use reasonable care with respect to the
Collateral in its possession or under its control and shall account for money
actually received by it. Neither the Agent nor any Lender shall have any other
duty as to any Collateral in its possession or control or in the possession or
control of any agent or nominee of the Agent or such Lender, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
25. MISCELLANEOUS.
(a) 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 Grantor for liquidation or reorganization, should any
Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any
significant part of any Grantor's assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the 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 Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
(b) NOTICES. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, 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 and serve upon any other party any 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 in the
manner, and deemed received, as provided for in the Credit Agreement, the Parent
Guarantee or Subsidiary Guarantee, as applicable.
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(c) SEVERABILITY. Whenever possible, each provision of
this Security Agreement shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Loan Documents which, taken together,
set forth the complete understanding and agreement of the Agent, the Lenders and
the Grantors with respect to the matters referred to herein and therein.
(d) NO WAIVER; CUMULATIVE REMEDIES. Neither the Agent nor
any Lender 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, signed by Agent and then only to the extent therein set
forth. A waiver by the Agent 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 the Agent or any Lender, 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. 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. 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 the Agent and the Grantors.
(e) LIMITATION BY LAW. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be limited
to the extent necessary so that they shall not render this Security Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
(f) TERMINATION OF THIS SECURITY AGREEMENT. Subject to
Section 26(a) hereof, this Security Agreement shall terminate upon the
satisfactory collateralization of all Letters of Credit and the payment in full
of all other Obligations (other than indemnification Obligations as to which no
claim has been asserted).
(g) SUCCESSORS AND ASSIGNS. This Security Agreement and
all obligations of Grantors hereunder shall be binding upon their respective
successors and assigns (including any debtor-in-possession on behalf of any
Grantor) and shall, together with the rights and remedies of the Agent, for the
benefit of the Agent and the Lenders, hereunder, inure to the benefit of the
Agent and the Lenders, all future holders of any instrument evidencing any of
the Obligations and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Obligations or any portion
thereof or interest therein shall in any manner affect the Lien granted to the
Agent, for the benefit of the Agent and the Lenders, hereunder. The Grantors may
not
21
assign, sell, hypothecate or otherwise transfer any interest in or obligation
under this Security Agreement.
(h) COUNTERPARTS. This Security Agreement may be
authenticated in any number of separate counterparts, each of which shall
collectively and separately constitute one and the same agreement. This Security
Agreement may be authenticated by manual signature, facsimile or, if approved in
writing by the Agent, electronic means, all of which shall be equally valid.
(i) GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS
PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE
EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF
THE UCC) OF THE STATE OF NORTH CAROLINA, PROVIDED THAT THE AGENT AND THE LENDERS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(j) JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NORTH CAROLINA OR OF THE UNITED STATES OF AMERICA LOCATED IN THE WESTERN
DISTRICT OF NORTH CAROLINA, AND BY EXECUTION AND DELIVERY OF THIS SECURITY
AGREEMENT, EACH OF THE GRANTORS, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF THE GRANTORS, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
SECURITY AGREEMENT. NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND THE LENDERS
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY GRANTOR OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS
DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER
SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES
THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
(k) SERVICE OF PROCESS. EACH GRANTOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED)
DIRECTED TO SUCH GRANTOR AT ITS ADDRESS SET FORTH HEREIN AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL
AFFECT THE RIGHT OF
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AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY
LAW.
(l) WAIVER OF JURY TRIAL. EACH GRANTOR, THE LENDERS AND
THE AGENT EACH IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
SECURITY AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED
PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. EACH GRANTOR, THE LENDERS AND THE AGENT EACH AGREE THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
(m) SECTION TITLES. The Section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
(n) NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Security Agreement.
In the event an ambiguity or question of intent or interpretation arises, this
Security Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Security
Agreement.
(o) ADVICE OF COUNSEL. Each of the parties represents to
each other party hereto that it has discussed this Security Agreement and,
specifically, the provisions of Section 26(i) and Section 26(j), with its
counsel.
(p) BENEFIT OF LENDERS. All Liens granted or contemplated
hereby shall be for the benefit of the Agent and the Lenders, and all proceeds
or payments realized from Collateral in accordance herewith shall be applied to
the Obligations in accordance with the terms of the Credit Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
ENPRO INDUSTRIES, INC., as Grantor
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
COLTEC INDUSTRIES INC, as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
COLTEC INDUSTRIAL PRODUCTS LLC, as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
XXXXXXX SEALING TECHNOLOGIES LLC, as Grantor
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
XXXXXXX BEARINGS LLC, as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
XXXXX TOOL COMPANY INC, as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
S-1
STEMCO LLC, as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
QFM SALES AND SERVICES, INC., as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
COLTEC TECHNICAL SERVICES INC., as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
COLTEC INTERNATIONAL
SERVICES CO., as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
XXXXXXXX LITIGATION
MANAGEMENT GROUP, LTD., as
Grantor
By: /s/ Xxxxxxx X'Xxxxxx
------------------------------------------
Name: Xxxxxxx X'Xxxxxx
Title: President
S-2
GLACIER XXXXXXX BEARINGS, INC., as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
XXXXXXX INTERNATIONAL INC., as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
XXXXXXX OVERSEAS CORPORATION, as Grantor
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and Treasurer
BANK OF AMERICA, N.A.,
as Agent
By: /s/ Xxxxx X. Love
------------------------------------------
Name: Xxxxx X. Love
Title: Assistant Vice President
S-3