GUARANTEE AND COLLATERAL AGREEMENT

Exhibit 10.2

GUARANTEE AND COLLATERAL AGREEMENT

dated as of

March 31, 2009,

among

HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

HARMAN HOLDING GMBH & CO. KG

THE SUBSIDIARIES OF HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

IDENTIFIED HEREIN

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

TABLE OF CONTENTS

 

 

 

Schedules

Exhibits

 

 

Reference is made to the Second Amended and Restated Multi-Currency, Multi-Option Credit Agreement dated as of March 31, 2009 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Harman International Industries, Incorporated, a Delaware corporation (the “ Company ”), Harman Holding GmbH & Co. KG, a company organized under the laws of Germany (the “ Additional Borrower ”), the Lenders party thereto, the other parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, and to the Guarantee Agreement (the “ Harman International Guarantee ”) dated as of June 22, 2006, made by the Company in favor of JPMorgan Chase Bank, N.A., as administrative agent for the several banks and other financial institutions or entities party to the Existing Credit Agreement.

The Extended Tranche Lenders have agreed to make certain accommodations under the Credit Agreement and to continue to extend credit to the Borrowers subject to the terms and conditions set forth in the Credit Agreement.  The obligations of the Extended Tranche Lenders to make such accommodations and to continue to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement.  The Subsidiary Loan Parties are Affiliates of the Borrowers, will derive substantial benefits from such accommodations under the Credit Agreement and the continued extension of credit to the Borrowers pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Extended Tranche Lenders to make such accommodations under the Credit Agreement and to continue to extend such credit.  Accordingly, the parties hereto agree as follows:

ARTICLE I

 

Definitions

SECTION 1.01.   Defined Terms.   i)Each capitalized term used but not defined herein shall have the meaning specified in the Credit Agreement.  Each term defined in the New York UCC and not defined in this Agreement shall have the meaning specified therein.  The term “instrument” shall have the meaning specified in Article 9 of the New York UCC.

(b)  The rules of construction specified in subsections 1.2 and 1.3 of the Credit Agreement also apply to this Agreement, mutatis mutandis .

SECTION 1.02.   Other Defined Terms .  As used in this Agreement, the following terms have the meanings specified below:

 

 

“ Account Debtor ” means any Person that is or may become obligated to any Grantor under, with respect to or on account of an Account.

“ Additional Borrower ” has the meaning assigned to such term in the introductory paragraph to this Agreement.

“ Agreement ” has the meaning assigned to such term in the introductory paragraph to this Agreement.

“ Article 9 Collateral ” has the meaning assigned to such term in Section 4.01.

“ Auditor’s Determination ” has the meaning assigned to such term in Section 2.04(d).

“ Capital Impairment ” has the meaning assigned to such term in Section 2.04.

“ Capital Stock ” means, when used in this Agreement, the Capital Stock of any Subsidiary.

“ Cash Collateral Account ” means a cash collateral account established at the office of JPMORGAN CHASE BANK, N.A. located at 270 Park Avenue, New York, NY 10017, in the name of the Administrative Agent, for purposes of this Agreement.

“ Collateral ” means Article 9 Collateral and Pledged Collateral.

“ Company ” has the meaning assigned to such term in the introductory paragraph to this Agreement.

“ Contributing Party ” has the meaning assigned to such term in Section 6.02.

“ Copyright License ” means any written agreement, now or hereafter in effect, granting to any third party any right now or hereafter under any Copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any Copyright now or hereafter owned by any third party, or that a third party now or hereafter otherwise has the right to license and all rights of such Grantor under any such agreement.

“ Copyrights ” means, with respect to any Grantor, all of the following now owned or hereafter acquired by such Grantor:  (a) all copyright rights including any economic or moral rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any similar office in any other country), including, in the case of clauses (a) and (b), those listed on Schedule III.

 

 

“ Credit Agreement ” has the meaning assigned to such term in the introductory paragraph of this Agreement.

“ Deposit Account ” means any deposit account, not including any Excluded Deposit Accounts.

“ Domestic Secured Obligations ” means all the Secured Obligations of the Company and any Domestic Subsidiary, in each case, other than in respect of any guarantee of the obligations of any Foreign Subsidiary.

 “ Enforcement Notice ” has the meaning assigned to such term in Section 2.04(d).

“ Extended Tranche Obligations ” means the due and punctual payment and performance (i) by the Company of the Extended Tranche Company Obligations and (ii) by the Additional Borrower of the Extended Tranche Additional Borrower Obligations (including, in each case, monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding).

“ Federal Securities Laws ” has the meaning assigned to such term in Section 5.04.

“ First-Tier Subsidiary ” means any Subsidiary the Capital Stock of which is directly owned by the Company or any other US Guarantor.

“ Foreign Guarantors ” means the Additional Borrower (except with respect to the obligations of the Additional Borrower) and each Subsidiary Loan Party that is a Foreign Subsidiary.

“ Foreign Secured Obligations ” means all the Secured Obligations of the Additional Borrower and any Foreign Guarantor.

“ German GmbH & Co. KG Guarantor ” means a Foreign Guarantor incorporated or formed under the laws of Germany and constituted in the form of a limited partnership with a limited liability company as general partner ( GmbH & Co. KG ).

“ German GmbH Guarantor ” means a Foreign Guarantor incorporated or formed under the laws of Germany and constituted in the form of a limited liability company ( GmbH ).

“ German Guarantors ” means the German GmbH Guarantors and the German GmbH & Co. KG Guarantors.

 

 

“ Grantor ” means the Company, the Additional Borrower, the other US Guarantors and the Foreign Guarantors.

“ Guaranteed Obligations ” means:

(i) in the case of the Additional Borrower, the obligations of the Designated Foreign Subsidiaries in respect of all the Secured Hedging Agreement Obligations, all the Secured Cash Management Obligations and all the Secured Other Facility Obligations;

(ii) in the case of the Foreign Guarantors (other than the Additional Borrower), (A) the Extended Tranche Obligations of the Additional Borrower and (B) the obligations of the Additional Borrower and the Designated Foreign Subsidiaries in respect of all the Secured Hedging Agreement Obligations, all the Secured Cash Management Obligations and all the Secured Other Facility Obligations;

(iii)  in the case of the Company, (A) the Extended Tranche Obligations of the Additional Borrower and (B) the obligations of the other Loan Parties and the other Subsidiaries in respect of all the Secured Hedging Agreement Obligations, all the Secured Cash Management Obligations and all the Secured Other Facility Obligations;

(iv) in the case of the US Guarantors (other than the Company), (A) the Extended Tranche Obligations of the Borrowers and (B) the obligations of the Loan Parties and the other Subsidiaries in respect of all the Secured Hedging Agreement Obligations, all the Secured Cash Management Obligations and all the Secured Other Facility Obligations.

“ Guarantors ” means the US Guarantors and the Foreign Guarantors.

“ Harman International Guarantee ” has the meaning assigned to such term in the introductory paragraph to this agreement.

“ Harman LLC Agreement ” means the Limited Liability Company Agreement of Harman KG Holding, LLC, dated as of March 31, 2009 (as amended, supplemented or replaced from time to time).

“ Harman Trust Agreement ” means the Trust Agreement between Harman International Industries, Incorporated, as Trustor, and Harman KG Holding, LLC, as Trustee, dated as of March 31, 2009 (as amended, supplemented or replaced from time to time).

“ IP Security Agreements ” has the meaning assigned to such term in Section 4.02(b).

“ Intellectual Property ” means all intellectual and similar property of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, domain names, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions.

 

 

“ License ” means any Intellectual Property license or sublicense agreement to which any Grantor is a party.

“ Management Determination ” has the meaning assigned to such term in Section 2.04(d).

“ New York UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“ Patent License ” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use, sell, offer for sale or import any invention on which a Patent, now or hereafter owned by any Grantor or that any Grantor now or hereafter otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use, sell, offer for sale or import any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

“ Patents ” means all of the following now owned or hereafter acquired by such Grantor:  (a) all pending patent applications or issued patents of the United States or any foreign country, all registrations and recordings thereof, including those listed on Schedule III, and (b) all continuation applications, divisional applications, continuation-in-part applications, those issued patents that are subject to reissue or reexamination certificates, and the inventions disclosed or claimed therein, including the right to make, use sell, offer for sale or import the inventions.

“ Payment Obligation ” has the meaning assigned to such term in Section 2.04(a).

“ Perfection Certificate ” means a certificate substantially in the form of Exhibit II, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer and the chief legal officer of the Company.

“ Permitted Liens ” has the meaning assigned to such term in Section 3.03.

“ Pledged Collateral ” has the meaning assigned to such term in Section 3.01.

“ Pledged Debt Securities ” has the meaning assigned to such term in Section 3.01.

“ Pledged Securities ” means any promissory notes, stock certificates, or other certificated securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

 

 

“ Pledged Stock ” has the meaning assigned to such term in Section 3.01.

“ PPSA ” means the Personal Property Security Act (Ontario), including the regulations thereto, provided that, if perfection or the effect of perfection or non-perfection or the priority of any Lien created hereunder on the Collateral is governed by the personal property security legislation or other applicable legislation with respect to personal property security as in effect in a jurisdiction other than Ontario, “PPSA” means the Personal Property Security Act or such other applicable legislation as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

“ Qualified CFC Holding Company ” means any Wholly Owned Subsidiary of the Company or any Subsidiary Loan Party that is treated as a disregarded entity for U.S. federal income tax purposes, that (a) is in compliance with Qualified CFC Holding Company Limitation and (b) the primary asset of which consists of Capital Stock in either (i) a Foreign Subsidiary or (ii) a Delaware limited liability company that is in compliance with the Qualified CFC Holding Company Limitation and the primary asset of which consists of Capital Stock in a Foreign Subsidiary.

“ Qualified CFC Holding Company Limitation ” means that any Person (a) shall not have created, incurred or assumed any Indebtedness or created, incurred, assumed or suffered to exist any Lien on any of its assets except for Liens or Indebtedness created under the Loan Documents and (b) does not engage in any business or activity or acquire or hold any assets other than the Capital Stock of one or more Foreign Subsidiaries of the Company and/or one or more other Qualified CFC Holding Companies and the receipt and distribution of dividends and distributions in respect thereof.

“ Secured Cash Management Obligations ” means any obligations of any Loan Party in respect of overdrafts or other liabilities owed to an Extended Tranche Lender or an Affiliate of an Extended Tranche Lender arising from treasury, depository or cash management services.

“ Secured Hedging Agreement Obligations ” means all obligations of each Loan Party under each Hedging Agreement that is (i) in effect on the Restatement Effective Date with a counterparty that is an Extended Tranche Lender or an Affiliate of an Extended Tranche Lender as of the Restatement Effective Date or (ii) entered into after the Restatement Effective Date with any counterparty that is an Extended Tranche Lender or an Affiliate of an Extended Tranche Lender at the time such Hedging Agreement is entered into.

“ Secured Obligations ” means, with respect to any Grantor, its Extended Tranche Obligations, its Secured Cash Management Obligations, its Secured Hedging Agreement Obligations, its Secured Other Facility Obligations and its Guaranteed Obligations, as applicable.

 

 

“ Secured Other Facility Obligations ” means any Indebtedness or other financial obligations owed to any Extended Tranche Lender or Affiliate of an Extended Tranche Lender under any line of credit or other bilateral credit facility extended by such Extended Tranche Lender or Affiliate to the Company or a Subsidiary, but only to the extent such Indebtedness shall have been incurred in compliance with the provisions of the Credit Agreement.

“ Secured Parties ” means (a) the Extended Tranche Lenders, (b) the Administrative Agent, (c) the Issuing Bank, (d) each provider of treasury, depository or cash management services the liabilities in respect of which constitute Secured Obligations, (e) each counterparty to any Hedging Agreement with a Loan Party the obligations under which constitute Secured Hedging Agreement Obligations, (f) each provider of any line of credit or other bilateral credit facility the obligations under which constitute Secured Other Facility Obligations, (g) each other person to which any Secured Obligation is owed and (h) the successors and assigns of each of the foregoing.

“ Security Interest ” has the meaning assigned to such term in Section 4.01(a).

“ Subsidiary Loan Party ” means each Subsidiary that is a party hereto on the date hereof and each Subsidiary that becomes a party hereto pursuant to Section 7.17.

“ Trademark License ” means any written agreement, now or hereafter in effect, granting to any Grantor any right to use any Trademark now or hereafter owned by any third party (including, without limitation, any such rights that such Grantor has the right to license).

“ Trademarks ” means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, including all common law rights, applications or registrations filed in the United States Patent and Trademark Office, any similar offices in any State of the United States, any other country or any political subdivision (except for “intent-to-use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of Lanham Act has been filed, to the extent, if any, that any assignment of an “intent-to-use” application prior to such filing would violate the Lanham Act), and all related extensions or renewals, including those listed on Schedule III, (b) all associated goodwill and (c) all other intangible assets, rights and interests that uniquely reflect or embody such goodwill.

 

 

“ US Guarantors ” means the Company (except with respect to the obligations of the Company) and each Subsidiary Loan Party that is not a Foreign Subsidiary.

SECTION 1.03.   Inconsistencies with Foreign Agreements or Foreign Law.   Notwithstanding any other provision contained herein, in the event that any agreement made by any Grantor in this Agreement, or any right of the Administrative Agent under this Agreement, (a) shall be inconsistent with the provisions of any Foreign Pledge Agreement covering Pledged Stock of such Grantor or the provisions of any Collateral Document governed by foreign law with respect to the grant of a security interest in the Collateral owned by such Grantor, the provisions of such Foreign Pledge Agreement or such Collateral Document will control and, to the extent of such inconsistency, no Default or Event of Default will be deemed to occur as a result of any Grantor’s non-compliance with the applicable agreement contained herein; or (b) shall be contrary to the laws of the jurisdiction of organization of any Foreign Subsidiary that is the issuer of any Pledged Stock or owner of any Collateral, such agreement or right will, insofar as it relates to the Pledged Stock issued by such Foreign Subsidiary or any Collateral owned by such Foreign Subsidiary and to the extent of such contrariety, be of no force or effect.  Notwithstanding anything herein or in any Loan Document to the contrary, no Borrower nor any other Loan Party makes any representation or warranty as to the effects of perfection or non-perfection, the priority or enforceability of any pledge of or security interest in any assets (including Capital Stock) of any Foreign Subsidiary, or as to the rights and remedies of the Administrative Agent or any Lender with respect thereto, in each case under any foreign law (other than, in the case of any other Loan Document, the laws of the jurisdiction by which such Loan Document is governed).

ARTICLE II

 

Guarantees

SECTION 2.01.   Guarantees .  Each Guarantor unconditionally and irrevocably guarantees, jointly with the other Guarantors and severally, to the Administrative Agent, for the ratable benefit of the Secured Parties, as a primary obligor and not merely as a surety, the due and punctual payment and performance of its Guaranteed Obligations.  Each Guarantor further agrees that its Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligation.  Each Guarantor waives presentment to, demand of payment from and protest to any Borrower or any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

SECTION 2.02.   Guarantee of Payment; Continuing Guarantee .  i)Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual of collection of any of the Guaranteed Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by the Administrative Agent or any other Secured Party to any security held for the payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any other Secured Party in favor of the Borrowers, any other party, or any other Person.  Each Guarantor agrees that its guarantee hereunder is continuing in nature and applies to all of its Guaranteed Obligations, whether currently existing or hereafter incurred.

 

 

(b)  As an original and independent obligation under this guarantee, each Guarantor shall:

SECTION 2.03.   No Limitations.   i)Subject to Section 2.04 and except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.16, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations, any impossibility in the performance of the Guaranteed Obligations, or otherwise.  Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Administrative Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement; (iii) the release of any security held by the Administrative Agent or any other Secured Party for the Guaranteed Obligations or any of them; (iv) any default, failure or delay, wilful or otherwise, in the performance of the Guaranteed Obligations; or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Guaranteed Obligations).  Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment and performance of the Guaranteed Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed Obligations, all without affecting the obligations of any Guarantor hereunder.

 

 

(b)  To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of any Borrower or any other Loan Party or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Guaranteed Obligations.  The Administrative Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any Borrower or any other Loan Party or exercise any other right or remedy available to them against any Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the applicable Guaranteed Obligations in respect of which such Guarantor is liable have been fully and indefeasibly paid in full in cash or immediately available funds or the guarantee of such Guarantor has been terminated and released pursuant to Section 7.16. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any Borrower or any other Loan Party, as the case may be, or any security.

 

 

(b)  Upon delivery of an Enforcement Notice (as defined below) and upon request of the Administrative Agent, the German Guarantor shall as soon as reasonably practicable and in any event within three months after such notice realize any asset that is shown in the balance sheet with a book value ( Buchwert ) that is significantly lower than the market value of such asset, which is not necessary for the German Guarantor's business ( betriebsnotwendig ). After the expiry of such three months period the German Guarantor shall notify the Administrative Agent of the amount of the proceeds from the sale and submit an accompanying statement to the Administrative Agent stating the amount of the net assets ( Reinvermögen ) of the German Guarantor or, in the case of a German GmbH & Co. KG Guarantor, its general partner, and the amount by which such net assets ( Reinvermögen ) exceed its respective registered share capital, each recalculated (as of the date of delivery of an Enforcement Notice) for the purposes of paragraph (a) hereof to take into account such proceeds.

(c)  The limitations set out in paragraph (a) hereof shall not apply:

 

 

(d)  The limitations set out in paragraph (a) hereof only apply if and to the extent that:

(e)  If the Administrative Agent disagrees with the Auditor's Determination, the Secured Parties shall be entitled to enforce the Payment Obligation up to the amount which is undisputed between themselves and the German Guarantor. In relation to the amount which is disputed, the Secured Parties shall be entitled to further pursue their claims (if any) and the German Guarantor shall be entitled to prove that this amount is necessary for maintaining its or, in the case of a German GmbH & Co. KG Guarantor, its general partner's stated share capital ( Stammkapital ) without violation of Section 30 GmbHG (calculated as of the date that the Enforcement Notice was given).

(f)  If the Payment Obligation was enforced without limitation because the Management Determination and/or the Auditor's Determination (as the case may be) was not delivered within the relevant time or for any other reason, the Secured Parties shall promptly upon demand by the relevant German Guarantor repay to such German Guarantor any amount which is necessary pursuant to Section 30 GmbHG to maintain the stated share capital ( Stammkapital ) of the German Guarantor or, in the case of a German GmbH & Co. KG Guarantor, its general partner, calculated as of the date that the Enforcement Notice was given provided the relevant Secured Party has received a corresponding amount by the relevant German Guarantor as a consequence of enforcement of the relevant Payment Obligation.

 

 

(g)  No reduction of the amount enforceable under this guarantee in accordance with the above limitations will prejudice the rights of the Secured Parties to continue enforcing the guarantee (subject always to the operation of the limitation set out above at the time of such enforcement) until full satisfaction of the guaranteed claims. For the avoidance of doubt, nothing in this Section 2.04 shall affect the right of the Secured Parties (or any of them) to accelerate the Loans pursuant to Section 10 of the Credit Agreement or to enforce the security granted under any Collateral Document.

SECTION 2.05.   Reinstatement .  Each of the Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of its Guaranteed Obligation is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any Borrower, any other Loan Party or otherwise.

SECTION 2.06.   Agreement to Pay; Subrogation.   In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any Borrower or any other Loan Party to pay its Guaranteed Obligation as expressly contemplated by Section 2.01 when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the applicable Secured Parties in cash the amount of its unpaid Guaranteed Obligation owed.  Upon payment by any Guarantor of any sums to the Administrative Agent as provided above, all rights of such Guarantor against any Borrower or any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.

SECTION 2.07.   Information .  Each Guarantor (a) assumes all responsibility for being and keeping itself informed of each of the Borrower’s and each other Loan Party’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and (b) agrees that none of the Administrative Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

ARTICLE III

 

Pledge of Certain Securities

SECTION 3.01.   Pledge .  As security for the payment or performance, as the case may be, in full of its Secured Obligations, each Grantor hereby assigns and pledges to the Administrative Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under the following:

 

 

(a)  (i) the shares of Capital Stock directly owned by such Grantor on the date hereof (including those listed opposite the name of such Grantor on Schedule II), (ii) any other Capital Stock obtained in the future by such Grantor and (iii) the certificates representing all such Capital Stock (collectively, the “ Pledged Stock ”); provided that with respect to any Domestic Secured Obligations, the Pledged Stock shall not include (A) more than 66% of the issued and outstanding voting Capital Stock of any Foreign Subsidiary that is a First-Tier Subsidiary, (B) more than 66% of the issued and outstanding voting Capital Stock of any Qualified CFC Holding Company that is a First Tier Subsidiary, (C) any issued and outstanding Capital Stock of any Foreign Subsidiary that is not a First Tier Subsidiary, or (D) any issued and outstanding Capital Stock of any Qualified CFC Holding Company that is not a First Tier Subsidiary; provided further , that it is the intent of this Agreement that not more than 66% of the issued and outstanding voting Capital Stock of the Additional Borrower directly or indirectly owned by the Company shall be pledged hereunder with respect to any Domestic Secured Obligations, and to give effect to such intent, 100% of the limited partnership interests issued by the Additional Borrower that are owned by the Company shall be pledged hereunder and none of the voting Capital Stock of Harman KG Holding, LLC that is owned by the Company (and, for the avoidance of doubt, none of the general partner interests issued by the Additional Borrower) shall be pledged hereunder, in each case to secure Domestic Secured Obligations, (b)(i) the debt securities and inter-company loans or advances owned by such Grantor (including those listed opposite the name of such Grantor on Schedule II), (ii) any debt securities or inter-company loans or advances in the future held by or owed to such Grantor and (iii) all promissory notes and any other instruments evidencing any such debt securities or inter-company loans or advances (collectively, the “ Pledged Debt Securities ”); (c) subject to the provisos in clause (a) above, all other property that may be delivered to and held by the Administrative Agent pursuant to the terms of this Section 3.01; (d) subject to Section 3.07, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities or instruments referred to in clauses (a) and (b) above; (e) subject to Section 3.07, all rights and privileges of such Grantor with respect to the securities, instruments and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any and all of the foregoing (the items referred to in the foregoing clauses (a) through (f) above being collectively referred to as the “ Pledged Collateral ”). Notwithstanding anything to the contrary, no pledge or security interest is created hereby, and the Pledged Collateral, Pledged Stock and Pledged Debt Securities shall not include, any property that would be excluded pursuant to Section 4.01(d) of this Agreement.

SECTION 3.02.   Delivery of the Pledged Collateral .  i)Each Grantor agrees promptly to deliver or cause to be delivered to the Administrative Agent, for the ratable benefit of the Secured Parties, any and all Pledged Securities to the extent that such Pledged Securities are either (i) certificated Capital Stock or (ii) in the case of promissory notes, required to be delivered pursuant to paragraph (b) of this Section 3.02.

 

 

(b)  (i) All Indebtedness of the Company and each Subsidiary owing to any Loan Party shall be evidenced by a promissory note (which may be a global intercompany note) and (ii) all such Indebtedness described under clause (i), and all Indebtedness of any other Person (other than any such Indebtedness that, individually, has a principal amount of less than $5,000,000) owing to any Loan Party that is evidenced by a promissory note of which a Responsible Officer is aware shall be pledged and delivered to the Administrative Agent, for the ratable benefit of the Secured Parties, pursuant to the terms hereof.

(c)  Upon delivery to the Administrative Agent, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraphs (a) and (b) shall be accompanied by undated stock powers duly executed by the applicable Grantor in blank or other instruments of transfer satisfactory to the Administrative Agent and by such other instruments and documents as the Administrative Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied by undated proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Administrative Agent may reasonably request.  Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities so delivered, which schedule shall be attached hereto as Schedule II and made a part hereof, provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities.  Each schedule so delivered shall supplement any prior schedules so delivered.

SECTION 3.03.   Representations, Warranties and Covenants .  The Grantors jointly and severally represent, warrant and covenant to and with the Administrative Agent, for the ratable benefit of the Secured Parties, that:

 

 

 

 

SECTION 3.04.   Certification of Limited Liability Company and Limited Partnership Interests .  To the extent any interest in a limited liability company or limited partnership that is a Domestic Subsidiary and that is controlled by any Grantor is represented by a certificate and is pledged hereunder, each such interest shall be a “security” within the meaning of Article 8 of the New York UCC.  

SECTION 3.05.   Unlimited Liability Companies .  Notwithstanding the grant of security interest made by the Grantors in favor of the Administrative Agent, its successor and assigns, for the ratable benefit of the Secured Parties, of all of its Pledged Stock, any Grantor that controls any interest (for the purposes of this Section 3.05, “ ULC Interests ”) in any unlimited liability company (for the purposes of this Section 3.05, a “ ULC ”) pledged hereunder shall remain registered as the sole registered and beneficial owner of such ULC Interests and will remain as registered and beneficial owner until such time as such ULC Interests are effectively transferred into the name of the Administrative Agent or any other person on the books and records of such ULC.  Nothing in this Agreement is intended to or shall constitute the Administrative Agent or any person as a shareholder or member of any ULC until such time as notice is given to such ULC and further steps are taken thereunder so as to register the Administrative Agent or any other person as the holder of the ULC Interests of such ULC.  To the extent any provision hereof would have the effect of constituting the Administrative Agent or any other person as a shareholder or member of a ULC prior to such time, such provision shall be severed therefrom and ineffective with respect to the ULC Interests of such ULC without otherwise invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it relates to Pledged Stock which are not ULC Interests.  Except upon the exercise of rights to sell or otherwise dispose of ULC Interests following the occurrence and during the continuance of an Event of Default hereunder, no Grantor shall cause or permit, or enable any ULC in which it holds ULC Interests to cause or permit, the Administrative Agent to: (a) be registered as shareholders or members of such ULC; (b) have any notation entered in its favor in the share register of such ULC; (c) be held out as a shareholder or member of such ULC; (d) receive, directly or indirectly, any dividends, property or other distributions from such ULC by reason of the Administrative Agent holding a security interest in such ULC; or (e) act as a shareholder or member of such ULC, or exercise any rights of a shareholder or member of such ULC including the right to attend a meeting of, or to vote the shares of, such ULC.

SECTION 3.06.   Registration in Nominee Name; Denominations .  The Administrative Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or in the name of its nominees (as pledgee or as sub-agent).  Each Grantor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor.  The Administrative Agent shall at all reasonable times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any reasonable purpose consistent with this Agreement.  Each Grantor shall use its commercially reasonable efforts to cause any Loan Party that is not a party to this Agreement to comply with a request by the Administrative Agent, pursuant to this Section 3.06, to exchange certificates representing Pledged Securities of such Loan Party for certificates of smaller or larger denominations.

 

 

SECTION 3.07.   Voting Rights; Dividends and Interest.   i)Unless and until an Event of Default shall have occurred and be continuing and the Administrative Agent shall have notified the Grantors that their rights under this Section 3.07 are being suspended:

 

 

(b)  Upon the occurrence and during the continuance of an Event of Default, after the Administrative Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.07, all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.07 shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions.  All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.07 shall be held in trust for the benefit of the Administrative Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Administrative Agent upon demand in the form in which so received (with any necessary endorsement).  Any and all money and other property paid over to or received by the Administrative Agent pursuant to the provisions of this paragraph (b) shall be retained by the Administrative Agent in an account to be established by the Administrative Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02.  After all Events of Default have been cured or waived and the Company has delivered to the Administrative Agent a certificate to that effect, the Administrative Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.07 and that remain in such account.

(c)  Upon the occurrence and during the continuance of an Event of Default, after the Administrative Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.07, all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.07, and the obligations of the Administrative Agent under paragraph (a)(ii) of this Section 3.07, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, unless otherwise directed by the Majority Extended Tranche Lenders, the Administrative Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

(d)