Pledge and Security Agreement - Aviall Services Inc. and Citicorp USA Inc.
PLEDGE AND SECURITY AGREEMENT
DATED AS OF DECEMBER 21, 2001
AMONG
AVIALL SERVICES, INC. AND EACH OTHER GRANTOR
FROM TIME TO TIME PARTY HERETO
AND
CITICORP USA, INC.
AS ADMINISTRATIVE AGENT
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
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PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of December 21, 2001,
by Aviall Services, Inc. (the "Borrower") and each of the other entities listed
on the signature pages hereof or which becomes a party hereto pursuant to
Section 7.10 (each a "Grantor" and, collectively, the "Grantors"), in favor of
Citicorp USA, Inc. ("Citicorp"), as agent for the Secured Parties (as defined in
the Credit Agreement referred to below) (in such capacity, the "Administrative
Agent").
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, dated as of
December 17, 2001 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
Borrower, Aviall, Inc., a Delaware corporation ("Holdings"), the Lenders and
Issuers party thereto and Citicorp, as agent for the Lenders and Issuers, the
Lenders and the Issuers have severally agreed to make extensions of credit to
the Borrower upon the terms and subject to the conditions set forth therein; and
WHEREAS, the Grantors other than the Borrower are party to the
Guaranty pursuant to which they have guaranteed the Obligations; and
WHEREAS, a condition precedent to the obligation of the
Lenders and the Issuers to make their respective extensions of credit to the
Borrower under the Credit Agreement that the Grantors shall have executed and
delivered this Agreement to the Administrative Agent;
NOW, THEREFORE, in consideration of the premises and to induce
the Lenders, the Issuers and the Administrative Agent to enter into the Credit
Agreement and to induce the Lenders and the Issuers to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby agrees with
the Administrative Agent as follows:
ARTICLE I. DEFINED TERMS
SECTION 1.1 DEFINITIONS.
(a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein have the meanings given to them in the Credit
Agreement.
(b) Terms used herein that are defined in the UCC have the
meanings given to them in the UCC, including the following which are capitalized
herein:
"Account Debtor"
"Accounts"
"Chattel Paper"
"Commodity Account"
"Commodity Intermediary"
"Deposit Account"
"Documents"
"Entitlement Holder"
"Entitlement Order"
"Equipment"
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"Financial Asset"
"General Intangibles"
"Instruments"
"Inventory"
"Investment Property"
"Letter of Credit Right"
"Proceeds"
"Securities Account"
"Securities Intermediary"
"Security"
"Security Entitlement"
(c) The following terms shall have the following meanings:
"Additional Pledged Collateral" means all shares of, limited
and/or general partnership interests in, and limited liability company interests
in, and all securities convertible into, and warrants, options and other rights
to purchase or otherwise acquire, stock of, any Person that, after the date of
this Agreement, as a result of any occurrence, becomes a direct Subsidiary of
any Grantor; provided, that with respect to Foreign Subsidiaries such shares
shall not exceed 65% of the voting power of all classes of capital stock of such
Foreign Subsidiary entitled to vote or (ii) any issuer of Pledged Stock, any
Partnership or any LLC that are acquired by any Grantor after the date hereof;
all certificates or other instruments representing any of the foregoing; all
Security Entitlements of any Grantor in respect of any of the foregoing; all
additional indebtedness from time to time owed to any Grantor by any obligor on
the Pledged Notes and the instruments evidencing such indebtedness; and all
interest, cash, instruments and other property or Proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing. Additional Pledged Collateral may be General
Intangibles or Investment Property.
"Agreement" means this Pledge and Security Agreement.
"Approved Deposit Account" means a Deposit Account maintained
by any Grantor with a Deposit Account Bank which account is the subject of an
effective Deposit Account Control Agreement, and includes all monies on deposit
therein and all certificates and instruments, if any, representing or evidencing
such Approved Deposit Account.
"Approved Securities Intermediary" means a Securities
Intermediary or Commodity Intermediary selected or approved by the
Administrative Agent and with respect to which a Grantor has delivered to the
Administrative Agent an executed Control Account Agreement.
"Cash Collateral Account" means any Deposit Account or
Securities Account established by the Administrative Agent as provided in
Section 2.3 in which cash and Cash Equivalents may from time to time be on
deposit or held therein as provided in Section 5.2 or 5.4 or the Credit
Agreement.
"Collateral" has the meaning specified in Section 2.1.
"Control Account" means a Securities Account or Commodity
Account maintained by any Grantor with an Approved Securities Intermediary which
account is the
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subject of an effective Control Account Agreement, and includes
all Financial Assets held therein and all certificates and instruments, if any,
representing or evidencing the Financial Assets contained therein.
"Control Account Agreement" means a letter agreement,
substantially in the form of Annex 2 (with such changes as may be agreed to by
the Administrative Agent), executed by the relevant Grantor, the Administrative
Agent and the relevant Approved Securities Intermediary.
"Copyright Licenses" means any written agreement naming any
Grantor as licensor or licensee granting any right under any Copyright,
including the grant of rights to copy, publicly perform, create derivative
works, manufacture, distribute, exploit and sell materials derived from any
Copyright.
"Copyrights" means (a) all copyrights arising under the laws
of the United States, any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any foreign counterparts thereof and (b)
the right to obtain all renewals thereof.
"Deposit Account Bank" means a financial institution selected
or approved by the Administrative Agent and with respect to which a Grantor has
delivered to the Administrative Agent an executed Deposit Account Control
Agreement.
"Deposit Account Control Agreement" means a letter agreement,
substantially in the form of Annex 1 (with such changes as may be agreed to by
the Administrative Agent), executed by the Grantor, the Administrative Agent and
the relevant Deposit Account Bank.
"Intellectual Property" means, collectively, all rights,
priorities and privileges of any Grantor relating to intellectual property,
whether arising under United States, multinational or foreign laws or otherwise,
including Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks,
Trademark Licenses and trade secrets, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.
"Intercompany Note" means any promissory note evidencing loans
made by any Grantor to any of its Subsidiaries or another Grantor.
"LLC" means each limited liability company in which a Grantor
has an interest, including those set forth on Schedule 2.
"LLC Agreement" means each operating agreement with respect to
an LLC, as each agreement has heretofore been and may hereafter be amended,
restated, supplemented or otherwise modified from time to time.
"Material Intellectual Property" means Intellectual Property
owned by or licensed to a Grantor which is material to its business.
"Material Owned Intellectual Property" means Intellectual
Property owned by a Grantor which is material to its business.
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"Partnership" means each partnership in which a Grantor has an
interest, including those set forth on Schedule 2.
"Partnership Agreement" means each partnership agreement
governing a Partnership, as each such agreement has heretofore been and may
hereafter be amended, restated, supplemented or otherwise modified.
"Patents" means (a) all letters patent of the United States,
any other country or any political subdivision thereof and all reissues and
extensions thereof, (b) all applications for letters patent of the United States
or any other country and all divisions, continuations and continuations-in-part
thereof, and (c) all rights to obtain any reissues or extensions of the
foregoing.
"Patent License" means all agreements, whether written or
oral, providing for the grant by or to any Grantor of any right to manufacture,
use, import, sell or offer for sale any invention covered in whole or in part by
a Patent.
"Pledged Collateral" means, collectively, the Pledged Notes,
the Pledged Stock, the Pledged Partnership Interests, the Pledged LLC Interests,
any other Investment Property of any Grantor, all certificates or other
instruments representing any of the foregoing and all Security Entitlements of
any Grantor in respect of any of the foregoing. Pledged Collateral may be
General Intangibles or Investment Property.
"Pledged LLC Interests" means all right, title and interest of
any Grantor as a member of any LLC and all right, title and interest of any
Grantor in, to and under any LLC Agreement to which it is a party.
"Pledged Notes" means all right, title and interest of any
Grantor in the Instruments evidencing all Indebtedness owed to such Grantor,
including all Indebtedness described on Schedule 2, issued by the obligors named
therein.
"Pledged Partnership Interests" means all right, title and
interest of any Grantor as a limited and/or general partner in all Partnerships
and all right, title and interest of any Grantor in, to and under any
Partnership Agreements to which it is a party.
"Pledged Stock" means the shares of capital stock owned by
each Grantor, including all shares of capital stock listed on Schedule 2;
provided, however, that only the outstanding capital stock of a direct Foreign
Subsidiary possessing up to but not exceeding 65% of the voting power of all
classes of capital stock of such controlled foreign corporation entitled to vote
shall be deemed to be pledged hereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Trademark License" means any agreement, whether written or
oral, providing for the grant by or to any Grantor of any right to use any
Trademark.
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
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therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, and (b) the right to obtain all renewals thereof.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the State of New York; provided, however, that in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Administrative Agent's and the Secured Parties'
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, 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.
"Vehicles" means all vehicles covered by a certificate of
title law of any state.
SECTION 1.2 CERTAIN OTHER TERMS.
(a) The words "herein," "hereof," "hereto" and "hereunder" and
similar words refer to this Agreement as a whole and not to any particular
Article, Section, subsection or clause in this Agreement.
References herein to an Annex, Schedule, Article, Section,
subsection or clause refer to the appropriate Annex or Schedule to, or Article,
Section, subsection or clause in this Agreement.
The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
Where the context requires, provisions relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
Any reference in this Agreement to a Loan Document shall
include all appendices, exhibits and schedules thereto, and, unless specifically
stated otherwise all amendments, restatements, supplements or other
modifications thereto, and as the same may be in effect at any and all times
such reference becomes operative.
The term "including" means "including without limitation"
except when used in the computation of time periods.
The terms "Lender," "Issuer," "Administrative Agent" and
"Secured Party" include their respective successors.
References in this Agreement to any statute shall be to such
statute as amended or modified and in effect from time to time.
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ARTICLE II. GRANT OF SECURITY INTEREST
SECTION 2.1 COLLATERAL. For the purposes of this Agreement,
all of the following property now owned or at any time hereafter acquired by a
Grantor or in which a Grantor now has or at any time in the future may acquire
any right, title or interests is collectively referred to as the "Collateral":
all Accounts;
all Chattel Paper;
all Deposit Accounts;
all Documents;
all Equipment;
all General Intangibles;
all Instruments;
all Inventory;
all Investment Property;
all Letter of Credit Rights;
all Vehicles;
all books and records pertaining to the other property
described in this Section 2.1;
(a) all other goods and personal property of such Grantor
whether tangible or intangible wherever located;
(b) all property of any Grantor held by the Administrative
Agent or any other Secured Party, including all property of every description,
in the possession or custody of or in transit to the Administrative Agent or
such Secured Party for any purpose, including safekeeping, collection or pledge,
for the account of such Grantor or as to which such Grantor may have any right
or power; and
(c) to the extent not otherwise included, all Proceeds.
SECTION 2.2 GRANT OF SECURITY INTEREST IN COLLATERAL. Each
Grantor, as collateral security for the full, prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations of such Grantor, hereby collaterally assigns,
mortgages, pledges and hypothecates to the Administrative Agent for the benefit
of the Secured Parties, and grants to the Administrative Agent for the benefit
of the Secured Parties, a lien on and security interest in all of its right,
title and interest in, to and under the Collateral of such Grantor.
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SECTION 2.3 CASH COLLATERAL ACCOUNTS. The Administrative Agent
has established a Deposit Account at Citibank, N.A., designated as "CUSA FAO
Aviall Concentration Account". The Administrative Agent may establish one or
more other Deposit Accounts and one or more Securities Accounts with such
depositaries and Securities Intermediaries as it in its sole discretion shall
determine. Each such account shall be in the name of the Administrative Agent
(but may also have words referring to the Borrower and the account's purpose).
Each Grantor agrees that each such account shall be under the sole dominion and
control of the Administrative Agent. The Administrative Agent shall be the
entitlement holder with respect to each such Securities Account and the only
Person authorized to give entitlement orders with respect thereto. Without
limiting the foregoing, funds on deposit in any Cash Collateral Account may be
invested in Cash Equivalents at the direction of the Administrative Agent;
provided, however, that the Administrative Agent shall not have any
responsibility for, or bear any risk of loss of, any such investment or income
thereon. Neither the Borrower nor any other Loan Party or Person claiming on
behalf of or through the Borrower or any other Loan Party shall have any right
to demand payment of any of the funds held in any Cash Collateral Account at any
time prior to the termination of all outstanding Letters of Credit and the
payment in full of all then outstanding and payable monetary Obligations. The
Administrative Agent shall apply all funds on deposit in a Cash Collateral
Account as provided in the Credit Agreement and except during the continuance of
an Event of Default agrees to cause any funds remaining on deposit therein after
all Obligations then due and payable have been satisfied and all Letter of
Credit Obligations have been cash collateralized at 105% to be paid at the
written direction of the Borrower.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuers and the Administrative
Agent to enter into the Credit Agreement, each Grantor hereby represents and
warrants to the Administrative Agent, the Lenders, the Issuers and the other
Secured Parties that:
SECTION 3.1 TITLE; NO OTHER LIENS. Except for the Lien granted
to the Administrative Agent pursuant to this Agreement and the other Liens
permitted to exist on the Collateral under the Credit Agreement, such Grantor is
the record and beneficial owner of the Pledged Collateral pledged by it
hereunder constituting Instruments or certificated securities, is the
entitlement holder of all such Pledged Collateral constituting Investment
Property held in a Securities Account and has rights in or the power to transfer
each other item of Collateral in which a Lien is granted by it hereunder, free
and clear of any and all Liens.
SECTION 3.2 PERFECTION AND PRIORITY. The security interest
granted pursuant to this Agreement will constitute a valid and continuing
perfected security interest in favor of the Administrative Agent in the
Collateral for which perfection is governed by the UCC or, with respect to
registered Copyrights, filing with the United States Copyright Office upon (i)
the completion of the filings in the appropriate offices and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on such schedule, have been delivered to the Administrative Agent in
completed and duly executed form), (ii) the delivery to the Administrative Agent
of all Collateral consisting of Instruments and certificated securities, in each
case properly endorsed for transfer to the Administrative Agent or in blank,
(iii) the execution of Control Account Agreements with respect to Investment
Property not in certificated form, (iv) the execution of Deposit Account Control
Agreements with respect to all Deposit Accounts (other than the Cash Collateral
Account), and (v) all appropriate filings having been made with the United
States Copyright Office. Such security interest will be prior to all other
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Liens on the Collateral except for Customary Permitted Liens which have priority
over the Administrative Agent's Lien by operation of law or otherwise as
permitted under the Credit Agreement.
SECTION 3.3 JURISDICTION OF ORGANIZATION; CHIEF EXECUTIVE
OFFICE. On the date hereof such Grantor's jurisdiction of organization,
organizational identification number, if any, and the location of such Grantor's
chief executive office or sole place of business is specified on Schedule 1.
SECTION 3.4 INVENTORY AND EQUIPMENT. On the date hereof, such
Grantor's Inventory and Equipment (other than mobile goods and Inventory or
Equipment in transit) are kept at the locations listed on Schedule 4.
SECTION 3.5 PLEDGED COLLATERAL.
(a) The Pledged Stock, Pledged Partnership Interests and
Pledged LLC Interests pledged hereunder by such Grantor are listed on Schedule 2
and constitute that percentage of the issued and outstanding equity of all
classes of each issuer thereof as set forth on Schedule 2.
(b) All of the Pledged Stock, Pledged Partnership Interests
and Pledged LLC Interests have been duly and validly issued and are fully paid
and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(d) All Pledged Collateral and, if applicable, any Additional
Pledged Collateral, consisting of certificated securities or Instruments has
been delivered to the Administrative Agent in accordance with Section 4.4(a).
(e) All Pledged Collateral held by a Securities Intermediary
in a Securities Account is in a Control Account.
(f) Other than the Pledged Partnership Interests and the
Pledged LLC Interests that constitute General Intangibles, there is no Pledged
Collateral other than that represented by certificated securities or Instruments
in the possession of the Administrative Agent or that consisting of Financial
Assets held in a Control Account.
(g) The LLC Agreement governing any Pledged LLC Interests and
the Partnership Agreement governing any Pledged Partnership Interests provide
that, upon the occurrence and during the continuance of an Event of Default, the
Administrative Agent shall be entitled to exercise all of the rights of the
Grantor granting the security interest therein, and that a transferee or
assignee of a membership interest or partnership interest, as the case may be,
of such LLC or Partnership, as the case may be, shall become a member or
partner, as the case may be, of such LLC or Partnership, as the case may be,
entitled to participate in the management thereof and, upon the transfer of the
entire interest of such Grantor, such Grantor ceases to be a member or partner,
as the case may be.
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SECTION 3.6 ACCOUNTS. No amount payable to such Grantor under
or in connection with any Account is evidenced by any Instrument or Chattel
Paper which has not been delivered to the Administrative Agent, properly
endorsed for transfer, to the extent delivery is required by Section 4.4.
SECTION 3.7 NO OTHER NAMES. Except as set forth on Schedule 1,
within the five-year period preceding the date hereof such Grantor has not had,
or operated in any jurisdiction, under any trade name, fictitious name or other
name other than its legal name.
SECTION 3.8 INTELLECTUAL PROPERTY.
(a) Schedule 5 lists all Material Intellectual Property of
such Grantor on the date hereof, separately identifying that owned by such
Grantor and that licensed to such Grantor. The Material Intellectual Property
for such Grantor constitutes all of the intellectual property rights necessary
to conduct its business.
(b) On the date hereof, all Material Owned Intellectual
Property is valid, subsisting, unexpired and enforceable, has not been adjudged
invalid and has not been abandoned and the use thereof in the business of such
Grantor does not infringe the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 5, on the date hereof,
none of the Material Owned Intellectual Property is the subject of any licensing
or franchise agreement pursuant to which such Grantor is the licensor or
franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority that would limit, cancel or question the validity of, or
such Grantor's rights in, any Material Owned Intellectual Property, and to the
Grantor's best knowledge, any Material Licensed Intellectual Property.
(e) No action or proceeding seeking to limit, cancel or
question the validity of any Material Owned Intellectual Property or such
Grantor's ownership interest therein is on the date hereof pending or, to the
knowledge of such Grantor, threatened. There are no claims, judgments or
settlements to be paid by such Grantor relating to the Material Intellectual
Property.
SECTION 3.9 DEPOSIT ACCOUNTS; CONTROL ACCOUNTS. The only
Deposit Accounts or Securities Accounts maintained by any Grantor on the date
hereof are those listed on Schedule 6, which sets forth such information
separately for each Grantor.
ARTICLE IV. COVENANTS
As long as any of the Obligations or the Commitments remain
outstanding, unless the Requisite Lenders otherwise consent in writing, each
Grantor agrees with the Administrative Agent that:
SECTION 4.1 GENERALLY. Such Grantor shall (a) except for the
security interest created by this Agreement, not create or suffer to exist any
Lien upon or with respect to any of the Collateral, except Liens permitted under
Section 8.2 of the Credit Agreement; (b) not use or permit any Collateral to be
used unlawfully or in violation of any provision of this Agreement, any other
Loan Document, any Requirement of Law or any policy of insurance
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covering the Collateral; (c) not sell, transfer or assign (by operation of law
or otherwise) any Collateral except as permitted under the Credit Agreement; (d)
not enter into any agreement or undertaking restricting the right or ability of
such Grantor or the Administrative Agent to sell, assign or transfer any of the
Collateral if such restriction would have a Material Adverse Effect; and (e)
promptly notify the Administrative Agent of its entry into any agreement or
assumption of undertaking that restricts the ability to sell, assign or transfer
any of the Collateral regardless of whether or not it has a Material Adverse
Effect.
SECTION 4.2 MAINTENANCE OF PERFECTED SECURITY INTEREST;
FURTHER DOCUMENTATION.
(a) Such Grantor will maintain the security interest created
by this Agreement as a perfected security interest having at least the priority
described in Section 3.2 and shall defend such security interest against the
claims and demands of all Persons.
(b) Such Grantor will furnish to the Administrative Agent from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further action as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including the filing of any financing or continuation statement
under the UCC (or other similar laws) in effect in any jurisdiction with respect
to the security interest created hereby and the execution and delivery of
Deposit Account Control Agreements and Control Account Agreements.
SECTION 4.3 CHANGES IN LOCATIONS, NAME, ETC.
(a) Except upon 15 days' prior written notice to the
Administrative Agent and delivery to the Administrative Agent of (i) all
additional executed financing statements and other documents reasonably
requested by the Administrative Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (ii) if applicable, a
written supplement to Schedule 4 showing any additional location at which
Inventory or Equipment shall be kept, such Grantor will not:
(i) permit any of the Inventory or Equipment to be kept at a
location other than those listed on Schedule 4;
(ii) change its jurisdiction of organization or the location
of its chief executive office or sole place of business from that referred to in
Section 3.3; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed in connection with this Agreement
would become misleading.
(b) Such Grantor will keep and maintain at its own cost and
expense satisfactory and complete records of the Collateral, including a record
of all payments received and all credits
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granted with respect to the Collateral and all other dealings with the
Collateral. If requested by the Administrative Agent, the security interest of
the Administrative Agent shall be noted on the certificate of title of each
Vehicle.
SECTION 4.4 PLEDGED COLLATERAL.
(a) Such Grantor will (i) deliver to the Administrative Agent,
all certificates and Instruments representing or evidencing any Pledged
Collateral (including Additional Pledged Collateral), whether now existing or
hereafter acquired, in suitable form for transfer by delivery or, as applicable,
accompanied by such Grantor's endorsement, where necessary, or duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Administrative Agent, together, in respect of any Additional
Pledged Collateral, with a Pledge Amendment, duly executed by the Grantor, in
substantially the form of Annex 3 (a "Pledge Amendment") or such other
documentation acceptable to the Administrative Agent and (ii) maintain all other
Pledged Collateral constituting Investment Property in a Control Account. Such
Grantor authorizes the Administrative Agent to attach each Pledge Amendment to
this Agreement. The Administrative Agent shall have the right, at any time in
its discretion and without notice to the Grantor, to transfer to or to register
in its name or in the name of its nominees any or all of the Pledged Collateral.
The Administrative Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing any of the Pledged
Collateral for certificates or instruments of smaller or larger denominations.
(b) Except as provided in Article V, such Grantor shall be
entitled to receive all cash dividends paid in respect of the Pledged Collateral
(other than liquidating or distributing dividends) with respect to the Pledged
Collateral. Any sums paid upon or in respect of any of the Pledged Collateral
upon the liquidation or dissolution of any issuer of any of the Pledged
Collateral, any distribution of capital made on or in respect of any of the
Pledged Collateral or any property distributed upon or with respect to any of
the Pledged Collateral pursuant to the recapitalization or reclassification of
the capital of any issuer of Pledged Collateral or pursuant to the
reorganization thereof shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Secured Obligations. If any sums of money or property so paid
or distributed in respect of any of the Pledged Collateral shall be received by
such Grantor, such Grantor shall, until such money or property is paid or
delivered to the Administrative Agent, hold such money or property in trust for
the Administrative Agent, segregated from other funds of such Grantor, as
additional security for the Secured Obligations.
(c) Except as provided in Article V, such Grantor will be
entitled to exercise all voting, consent and corporate rights with respect to
the Pledged Collateral; provided, however, that no vote shall be cast, consent
given or right exercised or other action taken by such Grantor which would
impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, this Agreement or any other
Loan Document or which would, without prior notice to the Administrative Agent,
enable or permit any issuer of Pledged Collateral to issue any stock or other
equity securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or other equity
securities of any nature of any issuer of Pledged Collateral, other than
securities issued pursuant to the Equity Documents and the Mezzanine Documents.
(d) Such Grantor shall not grant control over any Investment
Property to any Person other than the Administrative Agent.
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(e) In the case of each Grantor which is an issuer of Pledged
Collateral, such Grantor agrees to be bound by the terms of this Agreement
relating to the Pledged Collateral issued by it and will comply with such terms
insofar as such terms are applicable to it. In the case of each Grantor which is
a partner in a Partnership, such Grantor hereby consents to the extent required
by the applicable Partnership Agreement to the pledge by each other Grantor,
pursuant to the terms hereof, of the Pledged Partnership Interests in such
Partnership and to the transfer of such Pledged Partnership Interests to the
Administrative Agent or its nominee and to the substitution of the
Administrative Agent or its nominee as a substituted partner in such Partnership
with all the rights, powers and duties of a general partner or a limited
partner, as the case may be. In the case of each Grantor which is a member of an
LLC, such Grantor hereby consents to the extent required by the applicable LLC
Agreement to the pledge by each other Grantor, pursuant to the terms hereof, of
the Pledged LLC Interests in such LLC and to the transfer of such Pledged LLC
Interests to the Administrative Agent or its nominee and to the substitution of
the Administrative Agent or its nominee as a substituted member of the LLC with
all the rights, powers and duties of a member of the LLC in question.
(f) Such Grantor will not agree to any amendment of an LLC
Agreement or Partnership Agreement that in any way adversely affects the
perfection of the security interest of the Administrative Agent in the Pledged
Partnership Interests or Pledged LLC Interests pledged by such Grantor
hereunder, including any amendment electing to treat the membership interest or
partnership interest of such Grantor as a security under Section 8-103 of the
UCC.
SECTION 4.5 CONTROL ACCOUNTS; APPROVED DEPOSIT ACCOUNTS.
(a) Such Grantor will (i) deposit in an Approved Deposit
Account all cash received by such Grantor, (ii) not establish or maintain any
Securities Account that is not a Control Account and (iii) not establish or
maintain any Deposit Account other than with a Deposit Account Bank, a Lender or
an Affiliate of a Lender; provided, however, that any Grantor may (i) maintain
payroll, withholding tax and other fiduciary accounts and (ii) maintain other
accounts so long as the aggregate balance in all such accounts does not exceed
$1,000,000.
(b) Such Grantor shall instruct each Account Debtor or other
Person obligated to make a payment to such Grantor under a General Intangible to
make payment, or to continue to make payment, as the case may be, to an Approved
Deposit Account and will deposit in an Approved Deposit Account all Proceeds of
such Accounts and General Intangibles received by such Grantor from any other
Person immediately upon receipt.
(c) In the event (i) such Grantor or any Approved Securities
Intermediary or Deposit Account Bank shall, after the date hereof, terminate an
agreement with respect to the maintenance of a Control Account or Approved
Deposit Account for any reason, (ii) the Administrative Agent shall demand such
termination as a result of the failure of an Approved Securities Intermediary or
Deposit Account Bank to comply with the terms of the applicable Control Account
Agreement or Deposit Account Control Agreement, or (iii) the Administrative
Agent determines in its sole discretion that the financial condition of an
Approved Securities Intermediary or Deposit Account Bank, as the case may be,
has materially deteriorated, such Grantor agrees to notify all of its obligors
that were making payments to such terminated Control Account or Approved Deposit
Account, as the case may be, to make all future payments to another Control
Account or Approved Deposit Account, as the case may be. In any such
circumstances, Grantor and the Administrative Agent shall cooperate to develop a
reasonable timetable for such transition which shall not exceed 10 Business
Days.
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SECTION 4.6 ACCOUNTS.
(a) Such Grantor will not, other than in the ordinary course
of business consistent with its past practice, (i) grant any extension of the
time of payment of any Account, (ii) compromise or settle any Account for less
than the full amount thereof, (iii) release, wholly or partially, any Person
liable for the payment of any Account, (iv) allow any credit or discount on any
Account, or (v) amend, supplement or modify any Account in any manner that could
adversely affect the value thereof.
(b) The Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and such Grantor shall furnish all such
assistance and information as the Administrative Agent may reasonably require in
connection therewith. At any time and from time to time, upon the Administrative
Agent's request and at the expense of the relevant Grantor, such Grantor shall
cause independent public accountants or others satisfactory to the
Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts; provided, however, that unless a Default or Event of Default shall be
continuing, the Administrative Agent shall request no more than four such
reports during any calendar year.
SECTION 4.7 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any
amount in excess of $50,000 payable under or in connection with any of the
Collateral owned by such Grantor shall be or become evidenced by an Instrument
or Chattel Paper, such Grantor shall immediately deliver such Instrument or
Chattel Paper to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, or, if consented to by the
Administrative Agent, shall mark all such Instruments and Chattel Paper with the
following legend: "This writing and the obligations evidenced or secured hereby
are subject to the security interest of Citicorp USA, Inc., as Administrative
Agent".
SECTION 4.8 INTELLECTUAL PROPERTY.
(a) Such Grantor (either itself or through licensees) will, to
the extent consistent with the exercise of reasonable business judgment in the
operation of the business and does not result in a Material Adverse Effect with
respect to such Grantor, (i) continue to use each Trademark that is Material
Intellectual Property in order to maintain such Trademark in full force and
effect with respect to each class of goods for which such Trademark is currently
used, free from any claim of abandonment for non-use, (ii) maintain as in the
past the quality of products and services offered under such Trademark, (iii)
use such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Administrative Agent shall obtain a perfected security
interest in such mark pursuant to this Agreement and (v) not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby such Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees), to the
extent consistent with the exercise of reasonable business judgment in the
operation of the business and does not result in a Material Adverse Effect with
respect to such Grantor, will not do any act, or omit to do any act, whereby any
Patent which is Material Intellectual Property may become forfeited, abandoned
or dedicated to the public.
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(c) Such Grantor (either itself or through licensees), to the
extent consistent with the exercise of reasonable business judgment in the
operation of the business and does not result in a Material Adverse Effect with
respect to such Grantor, (i) will not (and will not permit any licensee or
sublicensee thereof to) do any act or omit to do any act whereby any portion of
the Copyrights which is Material Intellectual Property may become invalidated or
otherwise impaired and (ii) will not (either itself or through licensees) do any
act whereby any portion of the Copyrights which is Material Intellectual
Property may fall into the public domain.
(d) Such Grantor (either itself or through licensees), to the
extent consistent with the exercise of reasonable business judgment in the
operation of the business and does not result in a Material Adverse Effect with
respect to such Grantor, will not do any act, or omit to do any act, whereby any
trade secret which is Material Intellectual Property may become publicly
available or otherwise unprotectable.
(e) Such Grantor (either itself or through licensees) will not
do any act that knowingly uses any Material Intellectual Property to infringe
the intellectual property rights of any other Person.
(f) Such Grantor will notify the Administrative Agent
immediately if it knows, or has reason to know, that any application or
registration relating to any Material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any 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 or tribunal in any country)
regarding such Grantor's ownership of, right to use, interest in, or the
validity of, any Material Intellectual Property or such Grantor's right to
register the same or to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any
agent, licensee or designee, shall file an application for the registration of
any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency within or
outside the United States, such Grantor shall report such filing to the
Administrative Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Administrative Agent,
such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Administrative Agent may
request to evidence the Administrative Agent's security interest in any
Copyright, Patent or Trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby.
(h) Such Grantor, to the extent consistent with the exercise
of reasonable business judgment in the operation of the business and does not
result in a Material Adverse Effect with respect to such Grantor, will take all
reasonable actions necessary or requested by the Administrative Agent, including
in any proceeding before the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency, to maintain and
pursue each application (and to obtain the relevant registration) and to
maintain each registration of any Copyright, Trademark or Patent that is
Material Intellectual Property, including filing of applications for renewal,
affidavits of use, affidavits of incontestability and opposition and
interference and cancellation proceedings.
(i) In the event that any Material Intellectual Property is
infringed upon or misappropriated or diluted by a third party, such Grantor
shall notify the Administrative Agent
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promptly after such Grantor learns thereof. Such Grantor, to the extent
consistent with the exercise of reasonable business judgment in the operation of
the business and does not result in a Material Adverse Effect with respect to
such Grantor, shall take appropriate action in response to such infringement,
misappropriation of dilution, including promptly bringing suit for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation of dilution, and shall take such other actions
may be appropriate in its reasonable judgment under the circumstances to protect
such Material Intellectual Property.
(j) Unless otherwise agreed to by the Administrative Agent,
such Grantor will execute and deliver to the Administrative Agent for filing in
(i) the United States Copyright Office a short-form copyright security agreement
in the form attached hereto as Annex 5, (ii) in the United States Patent and
Trademark Office a short-form patent security agreement in the form attached
hereto as Annex 6 and (iii) the United States Patent and Trademark Office a
short-form trademark security agreement in form attached hereto as Annex 7.
SECTION 4.9 VEHICLES. Upon the request of the Administrative
Agent, within 30 days after the date of such request and, with respect to any
Vehicles acquired by such Grantor subsequent to the date of any such request,
within 30 days after the date of acquisition thereof, such Grantor shall file
all applications for certificates of title/ownership indicating the
Administrative Agent's first priority security interest in the Vehicle covered
by such certificate, and any other necessary documentation, in each office in
each jurisdiction which the Administrative Agent shall deem advisable to perfect
its security interests in the Vehicles.
SECTION 4.10 PAYMENT OF OBLIGATIONS. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
ARTICLE V. REMEDIAL PROVISIONS
SECTION 5.1 CODE AND OTHER REMEDIES. During the continuance of
an Event of Default, the Administrative Agent may exercise, in addition to all
other rights and remedies granted to it in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The
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Administrative Agent shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released. Each Grantor further agrees, at the Administrative Agent's request, to
assemble the Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select, whether at such
Grantor's premises or elsewhere. The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to this Section 5.1, after deducting
all reasonable costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and any
other Secured Party hereunder, including reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Credit Agreement shall prescribe, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, need the Administrative Agent account
for the surplus, if any, to any Grantor. To the extent permitted by applicable
law, each Grantor waives all claims, damages and demands it may acquire against
the Administrative Agent or any other Secured Party arising out of the exercise
by them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.
SECTION 5.2 ACCOUNTS AND PAYMENTS IN RESPECT OF GENERAL
INTANGIBLES.
(a) If required by the Administrative Agent at any time during
the continuance of an Event of Default, any payments of Accounts or payments in
respect of General Intangibles, when collected by any Grantor, shall be
forthwith (and, in any event, within two Business Days deposited by such Grantor
in the exact form received, duly indorsed by such Grantor to the Administrative
Agent if required, in a Cash Collateral Account, subject to withdrawal by the
Administrative Agent as provided in Section 5.4. Until so turned over, such
payments shall be held by such Grantor in trust for the Administrative Agent,
segregated from other funds of such Grantor. Each such deposit of Proceeds of
Accounts and payments in respect of General Intangibles shall be accompanied by
a report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(b) At the Administrative Agent's request, during the
continuance of an Event of Default, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Accounts or payments
in respect of General Intangibles, including all original orders, invoices and
shipping receipts.
(c) The Administrative Agent may, without notice, at any time
during the continuance of an Event of Default, limit or terminate the authority
of a Grantor to collect its Accounts or amounts due under General Intangibles or
any thereof.
(d) The Administrative Agent in its own name or in the name of
others may at any time during the continuance of an Event of Default communicate
with Account Debtors to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Accounts or amounts due
under any General Intangibles.
(e) Upon the request of the Administrative Agent at any time
during the continuance of an Event of Default, each Grantor shall notify Account
Debtors that the Accounts
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or General Intangibles have been collaterally assigned to the Administrative
Agent and that payments in respect thereof shall be made directly to the
Administrative Agent. In addition, the Administrative Agent may at any time
during the continuance of an Event of Default enforce such Grantor's rights
against such Account Debtors and obligors of General Intangibles.
(f) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Accounts and payments in respect
of General Intangibles to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with the terms
of any agreement giving rise thereto. Neither the Administrative Agent nor any
other Secured Party shall have any obligation or liability under any agreement
giving rise to an Account or a payment in respect of a General Intangible by
reason of or arising out of this Agreement or the receipt by the Administrative
Agent nor any other Secured Party of any payment relating thereto, nor shall the
Administrative Agent nor any other Secured Party be obligated in any manner to
perform any of the obligations of any Grantor under or pursuant to any agreement
giving rise to an Account or a payment in respect of a General Intangible, to
make any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
SECTION 5.3 PLEDGED COLLATERAL.
(a) During the continuance of an Event of Default, upon notice
by the Administrative Agent to the relevant Grantor or Grantors, (i) the
Administrative Agent shall have the right to receive any and all Proceeds of the
Pledged Collateral and make application thereof to the Obligations in the order
set forth in the Credit Agreement, and (ii) the Administrative Agent or its
nominee may exercise (A) all voting, consent, corporate and other rights
pertaining to the Pledged Collateral at any meeting of shareholders, partners or
members, as the case may be, of the relevant issuer or issuers of Pledged
Collateral or otherwise and (B) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to the
Pledged Collateral as if it were the absolute owner thereof (including the right
to exchange at its discretion any and all of the Pledged Collateral upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any issuer of Pledged Securities, the right
to deposit and deliver any and all of the Pledged Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
(b) In order to permit the Administrative Agent to exercise
the voting and other consensual rights which it may be entitled to exercise
pursuant hereto and to receive all dividends and other distributions which it
may be entitled to receive hereunder, (i) each Grantor shall promptly execute
and deliver (or cause to be executed and delivered) to the Administrative Agent
all such proxies, dividend payment orders and other instruments as the
Administrative Agent may from time to time reasonably request and (ii) without
limiting the effect of clause (i) above, such Grantor hereby grants to the
Administrative Agent an irrevocable proxy to vote all or any part of the Pledged
Collateral and to exercise all other rights, powers, privileges and remedies to
which a holder of the Pledged Collateral would be entitled (including giving or
withholding written consents of shareholders, partners or members, as the case
may be, calling special meetings of
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shareholders, partners or members, as the case may be, and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Collateral on the
record books of the issuer thereof) by any other person (including the issuer of
such Pledged Collateral or any officer or agent thereof) during the continuance
of an Event of Default and which proxy shall only terminate upon the payment in
full of the Secured Obligations.
(c) Each Grantor hereby expressly authorizes and instructs
each issuer of any Pledged Collateral pledged hereunder by such Grantor to (i)
comply with any instruction received by it from the Administrative Agent in
writing that (A) states that an Event of Default has occurred and is continuing
and (B) is otherwise in accordance with the terms of this Agreement, without any
other or further instructions from such Grantor, and each Grantor agrees that
such issuer shall be fully protected in so complying and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Collateral directly to the Administrative Agent.
SECTION 5.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE
AGENT. All Proceeds received by the Administrative Agent hereunder shall be held
by the Administrative Agent in a Cash Collateral Account. All Proceeds while
held by the Administrative Agent in a Cash Collateral Account (or by such
Grantor in trust for the Administrative Agent) shall continue to be held as
collateral security for the Secured Obligations and shall not constitute payment
thereof until applied as provided in the Credit Agreement.
SECTION 5.5 REGISTRATION RIGHTS.
(a) If the Administrative Agent shall determine to exercise
its right to sell any or all of the Pledged Collateral pursuant to Section 5.1,
and if in the opinion of the Administrative Agent it is necessary or advisable
to have the Pledged Collateral, or any portion thereof to be registered under
the provisions of the Securities Act, the relevant Grantor will cause the issuer
thereof to (i) execute and deliver, and cause the directors and officers of such
issuer to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the opinion of the
Administrative Agent, necessary or advisable to register the Pledged Collateral,
or that portion thereof to be sold, under the provisions of the Securities Act,
(ii) use its best efforts to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Collateral, or that portion
thereof to be sold and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Administrative Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto. Each Grantor agrees to cause such issuer to comply with the provisions
of the securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) Each Grantor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Collateral by reason
of certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise or may determine that a public sale is
impracticable or not commercially reasonable and, accordingly, may resort to one
or more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a
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view to the distribution or resale thereof. Each Grantor acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Administrative Agent shall be under no
obligation to delay a sale of any of the Pledged Collateral for the period of
time necessary to permit the issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such issuer would agree to do so.
(c) Each Grantor agrees to use its commercially reasonable
best efforts to do or cause to be done all such other acts as may be necessary
to make such sale or sales of all or any portion of the Pledged Collateral
pursuant to this Section 5.5 valid and binding and in compliance with any and
all other applicable Requirements of Law. Each Grantor further agrees that a
breach of any of the covenants contained in this Section 5.5 will cause
irreparable injury to the Administrative Agent and other Secured Parties, that
the Administrative Agent and the other Secured Parties have no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 5.5 shall be specifically enforceable against
such Grantor, and such Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.
SECTION 5.6 DEFICIENCY. Each Grantor shall remain liable for
any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Administrative Agent or any other
Secured Party to collect such deficiency.
ARTICLE VI. THE ADMINISTRATIVE AGENT
SECTION 6.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS
ATTORNEY-IN-FACT.
(a) Each Grantor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer 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, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any Account
or General Intangible or with respect to any other Collateral and file any claim
or take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Account or General Intangible
or with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments, documents and
papers as the
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Administrative Agent may request to evidence the Administrative Agent's security
interest in such Intellectual Property and the goodwill and General Intangibles
of such Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance called
for by the terms of this Agreement and pay all or any part of the premiums
therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 5.1 or 5.5, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (A) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative Agent
shall direct; (B) ask or demand for, collect, and receive payment of and receipt
for, any and all moneys, claims and other amounts due or to become due at any
time in respect of or arising out of any Collateral; (C) sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) 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 portion thereof and to enforce any
other right in respect of any Collateral; (E) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral; (F)
settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Administrative
Agent may deem appropriate; (G) assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Trademark pertains),
throughout the world for such term or terms, on such conditions, and in such
manner, as the Administrative Agent shall in its sole discretion determine,
including without limitation the execution and filing of any documents necessary
to effectuate and/or record such assignment; and (H) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative Agent's
option and such Grantor's expense, at any time, or from time to time, all acts
and things which the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral and the Administrative Agent's and the other
Secured Parties' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 6.1(a) unless an Event of Default shall
be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 6.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Revolving
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Loans that are Base Rate Loans under the Credit Agreement, from the date of
payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
SECTION 6.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession shall be to deal with it in the
same manner as the Administrative Agent deals with similar property for its own
account. Neither the Administrative Agent, any other Secured Party nor any of
their respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Administrative Agent hereunder are solely to protect
the Administrative Agent's interest in the Collateral and shall not impose any
duty upon the Administrative Agent or any other Secured Party to exercise any
such powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
SECTION 6.3 EXECUTION OF FINANCING STATEMENTS. Each Grantor
authorizes the Administrative Agent to file or record financing statements and
other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as the Administrative Agent reasonably determines appropriate to perfect
the security interests of the Administrative Agent under this Agreement. A
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
SECTION 6.4 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Administrative Agent and the other Secured Parties with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
ARTICLE VII. MISCELLANEOUS
SECTION 7.1 AMENDMENTS IN WRITING. None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with Section 11.1 of the Credit Agreement.
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SECTION 7.2 NOTICES. All notices, requests and demands to or
upon the Administrative Agent or any Grantor hereunder shall be effected in the
manner provided for in Section 11.8 of the Credit Agreement; provided, however,
that any such notice, request or demand to or upon any Grantor shall be
addressed in case of the Borrower at the Borrower's notice address set forth in
such Section 11.8.
SECTION 7.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE
REMEDIES. Neither the Administrative Agent nor any other Secured Party shall by
any act (except by a written instrument pursuant to Section 7.1), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default. No failure
to exercise, nor any delay in exercising, on the part of the Administrative
Agent or any other Secured Party, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the
Administrative Agent or any other Secured Party of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy which
the Administrative Agent or such other Secured Party would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
SECTION 7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the successors and assigns of each Grantor and shall inure to the
benefit of the Administrative Agent and each other Secured Party and their
successors and assigns; provided, however, that no Grantor may assign, transfer
or delegate any of its rights or obligations under this Agreement without the
prior written consent of the Administrative Agent.
SECTION 7.5 COUNTERPARTS. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same agreement.
SECTION 7.6 SEVERABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 7.7 SECTION HEADINGS. The Article and Section titles
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not part of the agreement of the parties
hereto.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement together with the
other Loan Documents represents the entire agreement of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
SECTION 7.9 GOVERNING LAW. This agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.
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SECTION 7.10 ADDITIONAL GRANTORS. If, pursuant to Section
7.10(b) of the Credit Agreement, the Borrower shall be required to cause any
Subsidiary that is not a Grantor to become a Grantor hereunder, such Subsidiary
shall execute and deliver to the Administrative Agent a Joinder Agreement in the
form of Annex 4 and shall thereafter for all purposes be a party hereto and have
the same rights, benefits and obligations as a Grantor party hereto on the
Closing Date.
SECTION 7.11 RELEASE OF COLLATERAL.
(a) At the time provided in Section 10.7(b)(i) of the Credit
Agreement, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral of such
Grantor held by the Administrative Agent hereunder and execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
(b) If any of the Collateral shall be sold or disposed of by
any Grantor in a transaction permitted by the Credit Agreement, the Collateral
so sold or disposed of shall be released from the Lien created hereby to the
extent provided in Section 10.7(b)(ii) or (iii) of the Credit Agreement and, in
connection therewith, the Administrative Agent, at the request and sole expense
of the Borrower, shall execute and deliver to the Borrower all releases or other
documents reasonably necessary or desirable for the release of the Lien created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Grantor shall be released from its obligations hereunder in the event that all
the capital stock of such Grantor shall be so sold or disposed; provided,
however, that the Borrower shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Grantor and the terms of the sale
or other disposition in reasonable detail, including the price thereof and any
expenses in connection therewith, together with a certification by the Borrower
stating that such transaction is in compliance with the Credit Agreement and the
other Loan Documents.
SECTION 7.12 REINSTATEMENT. Each Grantor further agrees that,
if any payment made by any Loan Party or other Person and applied to the
Obligations is at any time annulled, avoided, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be refunded
or repaid, or the proceeds of Collateral are required to be returned by any
Secured Party to such Loan Party, its estate, trustee, receiver or any other
party, including any Grantor, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment,
any Lien or other Collateral securing such liability shall be and remain in full
force and effect, as fully as if such payment had never been made or, if prior
thereto the Lien granted hereby or other Collateral securing such liability
hereunder shall have been released or terminated by virtue of such cancellation
or surrender), such Lien or other Collateral shall be reinstated in full force
and effect, and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect any Lien or other Collateral
securing the obligations of any Grantor in respect of the amount of such
payment.
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[Signature page follows]
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IN WITNESS WHEREOF, each of the undersigned has caused this
Pledge and Security Agreement to be duly executed and delivered as of the date
first above written.
AVIALL, INC.
By: /s/ Jeffrey J. Murphy
--------------------------------------------
Name: Jeffrey J. Murphy
Title: Senior Vice President
AVIALL SERVICES, INC.
By: /s/ Jeffrey J. Murphy
--------------------------------------------
Name: Jeffrey J. Murphy
Title: Senior Vice President
INVENTORY LOCATOR SERVICE, INC.
By: /s/ Jeffrey J. Murphy
--------------------------------------------
Name: Jeffrey J. Murphy
Title: Senior Vice President
AVIALL PRODUCT REPAIR SERVICES, INC.
By: /s/ Jeffrey J. Murphy
--------------------------------------------
Name: Jeffrey J. Murphy
Title: Senior Vice President
ACCEPTED AND AGREED:
CITICORP USA, INC., as Administrative Agent
By: /s/ Shapleigh B. Smith
-----------------------------------------
Name: Shapleigh B. Smith
Title: Managing Director, Vice President