SECURITY
AGREEMENT
SECURITY
AGREEMENT dated as of May 5, 2008 (this “
Agreement ”),
made by
the Borrower and each of the Guarantors referred to below (each a
“
Grantor ”
and, collectively, the “
Grantors ”),
in
favor of ACF CTC, L.L.C., a Delaware limited liability company, in
its capacity as agent (in such capacity, together with any
successor in such capacity, the “
Agent ”)
on behalf of itself and the Lenders referred to below.
W
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T
N
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S
S
E
T
H :
WHEREAS,
Composite Technology Corporation, a Nevada corporation, (the
“
Borrower ”),
each subsidiary of the Borrower listed as a “
Guarantor ”
on the signature pages thereto (together with each other Person
that executes a joinder agreement and becomes a “
Guarantor ”
thereunder or otherwise guaranties all or any part of the
Obligations, each a “
Guarantor ”
and collectively, the “
Guarantors ”),
the financial institutions from time to time party thereto (each a
“
Lender ”
and, collectively, the “
Lenders ”),
and the Agent are parties to the Financing Agreement, dated as of
the date hereof (such agreement, as amended, restated, supplemented
or otherwise modified from time to time, being hereinafter referred
to as the “
Financing Agreement ”),
pursuant to which the Lenders have agreed to make certain loans
(collectively, the “
Loans ”)
to the Borrower;
WHEREAS,
it is a condition precedent to the making of any Loan to the
Borrower pursuant to the Financing Agreement that each Grantor
shall have executed and delivered to the Agent a security
agreement providing for the grant to the Agent for the benefit
of the Agent and the Lenders of a security interest in all
personal property of such Grantor;
WHEREAS,
the Grantors are mutually dependent on each other in the
conduct of their respective businesses as an integrated
operation, with the credit needed from time to time by each
Grantor often being provided through financing obtained by the
other Grantors and the ability to obtain such financing being
dependent on the successful operations of all of the Grantors
as a whole; and
WHEREAS,
each Grantor has determined that the execution, delivery and
performance of this Agreement directly benefit, and are in the
best interest of, such Grantor.
NOW,
THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain
the Loans pursuant to the Financing Agreement, each Grantor
hereby jointly and severally agrees with the Agent, for the
benefit of the Agent and the Lenders, as follows:
SECTION
1.
Definitions .
(a)
Reference
is hereby made to the Financing Agreement for a statement of
the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Financing Agreement
or in Article 9 of the Uniform Commercial Code as in effect
from time to time in the State of New York (the “
Code ”)
and which are not otherwise defined herein shall have the same
meanings herein as set forth therein;
provided that
terms used herein which are defined in the Code as in
effect
in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of
such statute except as the Agent may otherwise
determine.
(b)
The
following terms shall have the respective meanings provided
for in the Code: “Accounts”, “Cash
Proceeds”, “Chattel Paper”,
“Commercial Tort Claim”, “Commodity
Account”, “Commodity Contracts”,
“Deposit Account”, “Documents”,
“Equipment”, “Fixtures”,
“General Intangibles”, “Goods”,
“Instruments”, “Inventory”,
“Investment Property”, “Letter-of-Credit
Rights”, “Noncash Proceeds”, “Payment
Intangibles”, “Proceeds”, “Promissory
Notes”, “Record”, “Security
Account”, “Software”, and “Supporting
Obligations” .
(c)
As
used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of
such terms:
“
Copyright Licenses ”
means all licenses, contracts or other agreements, whether written
or oral, naming any Grantor as licensee or licensor and providing
for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses
set forth in Schedule II hereto).
“
Copyrights ”
means all domestic and foreign copyrights, whether registered or
unregistered, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any
and all media (whether now or hereafter developed), in and to all
original works of authorship fixed in any tangible medium of
expression, acquired or used by any Grantor (including, without
limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in
the United States Copyright Office or in any similar office or
agency of the United States or any other country or any political
subdivision thereof), and all reissues, divisions, continuations,
continuations in part and extensions or renewals
thereof.
“
Intellectual Property ”
means the Copyrights, Trademarks and Patents.
“
Licenses ”
means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.
“
Patent Licenses ”
means all licenses, contracts or other agreements, whether written
or oral, naming any Grantor as licensee or licensor and providing
for the grant of any right to manufacture, use or sell any
invention covered by any Patent (including, without limitation, all
Patent Licenses set forth in Schedule II hereto).
“
Patents ”
means all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets,
ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how, formulae, rights of publicity
and other general intangibles of like nature, now existing or
hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial
designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology,
know-how and formulae described in Schedule II hereto), all
applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office, or in any similar
office or agency of the United States or any other country or any
political subdivision thereof), and all reissues, divisions,
continuations, continuations in part and extensions or renewals
thereof.
“
Trademark Licenses ”
means all licenses, contracts or other agreements, whether written
or oral, naming any Grantor as licensor or licensee and providing
for the grant of any right concerning any Trademark, together with
any goodwill connected with and symbolized by any such trademark
licenses, contracts or agreements and the right to prepare for sale
or lease and sell or lease any and all Inventory now or hereafter
owned by any Grantor and now or hereafter covered by such licenses
(including, without limitation, all Trademark Licenses described in
Schedule II hereto).
“
Trademarks ”
means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names,
d/b/a’s, Internet domain names, trade styles, designs, logos
and other source or business identifiers and all general
intangibles of like nature, now or hereafter owned, adopted,
acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks,
certification marks, trademark registrations, trade names, business
names, d/b/a’s, Internet domain names, trade styles, designs,
logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings
thereof (including, without limitation, applications, registrations
and recordings 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),
and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the
distribution of products and services in connection with which any
of such marks are used.
SECTION
2.
Grant of Security Interest .
As collateral security for all of the Obligations (as defined in
Section 3 hereof), each Grantor hereby pledges and assigns to the
Agent, and grants to the Agent for the benefit of the Agent and the
Lenders a continuing security interest in, all personal property of
such Grantor, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible (the “
Collateral ”),
including, without limitation, the following:
(a)
all
Accounts;
(b)
all
Chattel Paper (whether tangible or electronic);
(c)
the
Commercial Tort Claims specified on Schedule VI
hereto;
(d)
all
Deposit Accounts, all cash, and all other property from time
to time deposited therein and the monies and property in the
possession or under the control of the Agent or any Lender or
any affiliate, representative, agent or correspondent of the
Agent or any Lender;
(e)
all
Documents;
(f)
all
Equipment;
(g)
all
Fixtures;
(h)
all
General Intangibles (including, without limitation, all
Payment Intangibles);
(i)
all
Goods;
(j)
all
Instruments (including, without limitation, Promissory
Notes);
(k)
all
Inventory;
(l)
all
Investment Property;
(m)
all
Copyrights, Patents and Trademarks, and all
Licenses;
(n)
all
Letter-of-Credit Rights;
(o)
all
Supporting Obligations;
(p)
all
other tangible and intangible personal property of such
Grantor (whether or not subject to the Code), including,
without limitation, all bank and other accounts and all cash
and all investments therein, all proceeds, products,
offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property
of such Grantor described in the preceding clauses of this
Section 2 (including, without limitation, any proceeds of
insurance thereon and all causes of action, claims and
warranties now or hereafter held by such Grantor in respect of
any of the items listed above), and all books, correspondence,
files and other Records, including, without limitation, all
tapes, disks, cards, Software, data and computer programs in
the possession or under the control of such Grantor or any
other Person from time to time acting for such Grantor that at
any time evidence or contain information relating to any of
the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the
collection or realization thereof; and
(q)
all
Proceeds, including all Cash Proceeds and Noncash Proceeds,
and products of any and all of the foregoing
Collateral; in
each case howsoever such Grantor’s interest therein may
arise or appear (whether by ownership, security interest,
claim or otherwise).
SECTION
3.
Security for Obligations .
The security interest created hereby in the Collateral constitutes
continuing collateral security for all of the following
obligations, whether now existing or hereafter incurred (the
“
Obligations ”):
(a)
the
prompt payment by each Grantor, as and when due and payable
(by scheduled maturity, required prepayment, acceleration,
demand or otherwise), of all amounts from time to time owing
by it in respect of the Financing Agreement and the other Loan
Documents, including, without limitation, (i) the Obligations
(as defined in the Financing Agreement), (ii) principal of and
interest on the Loans (including, without limitation, all
interest that accrues after the commencement of any Insolvency
Proceeding of any Grantor, whether or not the payment of such
interest is unenforceable or is not allowable due to the
existence of such Insolvency Proceeding), (iii) in the case of
a Guarantor, all amounts from time to time owing by such
Grantor in respect of its guaranty made pursuant to Article XI
of the Financing Agreement or under any other Guaranty to
which it is a party, including all obligations guaranteed by
such Grantor and (iv) all fees, commissions, charges, expense
reimbursements, indemnifications and all other amounts due or
to become due under any Loan Document; and
(b)
the
due performance and observance by each Grantor of all of its
other obligations from time to time existing in respect of the
Loan Documents.
SECTION
4.
Representations and Warranties .
Each Grantor jointly and severally represents and warrants as
follows:
(a)
Schedule
I hereto sets forth (i) the exact legal name of each Grantor
and (ii) the organizational identification number of each
Grantor or states that no such organizational identification
number exists.
(b)
Each
Grantor (i) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in
good standing under the laws of the state or jurisdiction of
its organization as set forth on Schedule I hereto,
(ii) has all requisite power and authority to execute,
deliver and perform this Agreement and each other Loan
Document to be executed and delivered by it pursuant hereto
and to consummate the transactions contemplated hereby and
thereby, and (iii) is duly qualified to do business and
is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary ,
except where the failure to be so qualified could not be
expected to have a Material Adverse Effect.
(c)
The
execution, delivery and performance by each Grantor of this
Agreement and each other Loan Document to which such Grantor
is a party or will be a party (i) have been duly
authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, its limited liability
company or operating agreement or its certificate of
partnership or partnership agreement, as applicable, or any
applicable law or any contractual restriction binding on or
otherwise affecting such Grantor or its properties, (iii) do
not and will not result in or require the creation of any Lien
upon or with respect to any of its properties other than
pursuant to any Loan Document and (iv) do not and will
not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any
material permit, license, authorization or approval applicable
to it or its operations or any of its properties.
(d)
This
Agreement is, and each other Loan Document to which any
Grantor is or will be a party, when executed and delivered
pursuant hereto, will be, a legal, valid and binding
obligation of such Grantor, enforceable against such Grantor
in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting
creditors’ rights generally and by general equitable
principles.
(e)
Except
as set forth on Schedule 6.01(f) of the Financing Agreement,
there is no pending or, to the best knowledge of any Grantor,
threatened action, suit, proceeding or claim affecting any
Grantor or to which any of the properties of any Grantor is
subject, before any Governmental Authority or any arbitrator,
or any order, judgment or award by any Governmental Authority
or arbitrator, that may adversely affect the grant by any
Grantor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or the exercise by the
Agent of any of its rights or remedies hereunder.
(f)
All
taxes, assessments and other governmental charges imposed upon
any Grantor or any property of such Grantor (including,
without limitation, all federal income and social security
taxes on employees’ wages) and which have become due and
payable on or prior to the date hereof have been paid, except
to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or Lien
resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment
thereof on the Financial Statements in accordance with
GAAP.
(g)
All
Equipment, Fixtures, Goods and Inventory now existing are, and
all Equipment, Fixtures, Goods and Inventory hereafter
existing will be, located at the addresses specified therefor
in Schedule III hereto. Each Grantor’s chief place of
business and chief executive office, the place where such
Grantor keeps its Records concerning Accounts and all
originals of all Chattel Paper are located at the addresses
specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other
Instruments. Set forth in Schedule IV hereto is a complete and
accurate list, as of the date of this Agreement, of each
Deposit Account, Securities Account and Commodities Account of
each Grantor, together with the name and address of each
institution at which each such Account is maintained, the
account number for each such Account and a description of the
purpose of each such Account. Set forth in Schedule II hereto
is a complete and correct list of each trade name used by each
Grantor and the name of, and each trade name used by, each
person from which such Grantor has acquired any substantial
part of the Collateral.
(h)
Each
Grantor has delivered to the Agent complete and correct copies
of each License described in Schedule II hereto, including all
schedules and exhibits thereto, which represents all of the
Licenses existing on the date of this Agreement. Each such
License sets forth the entire agreement and understanding of
the parties thereto relating to the subject matter thereof,
and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters
covered thereby or the rights of any Grantor or any of its
Affiliates in respect thereof. Each License now existing is,
and each other License will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such
parties in accordance with its terms. No default thereunder by
any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any
such party.
(i)
The
Grantors own and control, or otherwise possess adequate rights
to use, all Trademarks, Patents and Copyrights, which are the
only trademarks, patents, copyrights, inventions, trade
secrets, proprietary information and technology, know-how,
formulae, and rights of publicity necessary to conduct their
business in substantially the same manner as conducted as of
the date hereof. Schedule II hereto sets forth a true and
complete list of all Intellectual Property and Licenses owned
or used by each Grantor as of the date hereof. All such
Intellectual Property is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable, is
valid and enforceable and has not been abandoned in whole or
in part. Except as set forth in Schedule II, no such
Intellectual Property is the subject of any licensing or
franchising agreement. No Grantor has any knowledge of any
conflict with the rights of others to any Intellectual
Property and, to the best knowledge of each Grantor, no
Grantor is now infringing or in conflict with any such rights
of others in any material respect, and to the best knowledge
of each Grantor, no other Person is now infringing or in
conflict in any material respect with any such properties,
assets and rights owned or used by any Grantor. No Grantor has
received any notice that it is violating or has violated the
trademarks, patents, copyrights, inventions, trade secrets,
proprietary information and technology, know-how, formulae,
rights of publicity or other intellectual property rights of
any third party.
(j)
The
Grantors are and will be at all times the sole and exclusive
owners of, or otherwise have and will have adequate rights in,
the Collateral free and clear of any Lien except for
(i) the Lien created by this Agreement and (ii) the
Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office except
(A) such as may have been filed in favor of the Agent
relating to this Agreement and (B) such as may have been
filed to perfect or protect any security interests or Liens
permitted by the Financing Agreement.
(k)
The
exercise by the Agent of any of its rights and remedies
hereunder will not contravene any law or any contractual
restriction binding on or otherwise affecting any Grantor or
any of its properties and will not result in or require the
creation of any Lien, upon or with respect to any of its
properties.
(l)
No
authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority or other regulatory
body, or any other Person, is required for (i) the grant
by any Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral or
(ii) the exercise by the Agent of any of its rights and
remedies hereunder, except (A) for the filing under the
Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in Schedule
V hereto, all of which financing statements have been duly
filed and are in full force and effect, (B) with respect
to the perfection of the security interest created hereby in
the United States Intellectual Property, for the recording of
the appropriate Assignment for Security, substantially in the
form of Exhibit A hereto in the United States Patent and
Trademark Office or the United States Copyright Office, as
applicable, (C) with respect to the perfection of the
security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in
jurisdictions located outside of the United States and
covering rights in such jurisdictions relating to the
Intellectual Property and Licenses, (D) with respect to
the perfection of the security interest created hereby in
motor vehicles for which the title to such motor vehicles is
governed by a certificate of title or ownership (collectively,
the “
Motor Vehicles ”),
for the submission of an appropriate application requesting that
the Lien of the Agent be noted on the certificate of title or
ownership, completed and authenticated by the applicable Grantor,
together with the certificate of title, with respect to each Motor
Vehicle, to the appropriate state agency ,
(E) with respect to any action that may be necessary to obtain
control in Collateral described in Sections 5(i) and 5(k) hereof,
the taking of such action and (F) the taking of possession of
all Documents, Chattel Paper, Instruments and cash constituting
Collateral.
(m)
This
Agreement creates in favor of the Agent a legal, valid and
enforceable security interest in the Collateral, as security
for the Obligations. The Agent’s having possession of
all Instruments, Documents, Chattel Paper and cash
constituting Collateral and obtaining control of all
Collateral described in Sections 5(i) and 5(k) hereof from
time to time, the recording of the appropriate Assignment for
Security executed pursuant hereto in the United States Patent
and Trademark Office and the United States Copyright Office,
as applicable, the submission of an appropriate application
requesting that the Lien of the Agent be noted on the
certificate of title or ownership, completed and authenticated
by the applicable Grantor, together with the certificate of
title or ownership, with respect to such Motor Vehicles, to
the applicable state agency, and the filing of the financing
statements described in Schedule V hereto and, with respect to
the Intellectual Property hereafter existing and not covered
by an appropriate Assignment for Security, the recording in
the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, of appropriate
instruments of assignment, result in the perfection of such
security interests. Such security interests are, or in the
case of Collateral in which any Grantor obtains rights after
the date hereof, will be, perfected, first priority security
interests, subject only to the Permitted Liens and the
recording of such instruments of assignment. Such recordings
and filings and all other action necessary or desirable to
perfect and protect such security interest have been duly
taken, except for (i) the Agent’s having possession
of Instruments, Documents, Chattel Paper and cash constituting
Collateral after the date hereof, (ii) the Agent
obtaining control of any Collateral described in Sections 5(i)
and 5(k) hereof and (iii) the other filings and
recordations described in Section 4(l) hereof.
(n)
No
Grantor holds any Commercial Tort Claims or is aware of any
such pending claims, except for such claims described in
Schedule VI.
SECTION
5.
Covenants as to the Collateral .
So long as any of the Obligations shall remain outstanding and all
Commitments shall not have expired or terminated, unless the Agent
shall otherwise consent in writing:
(a)
Further Assurances .
Each Grantor will at its expense, at any time and from time to
time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or
desirable or that the Agent may reasonably request in order to
(i) perfect and protect the security interest purported to be
created hereby; (ii) enable the Agent to exercise and enforce
its rights and remedies hereunder in respect of the Collateral; or
(iii) otherwise effect the purposes of this Agreement,
including, without limitation: (A) marking conspicuously all
Chattel Paper and each License and, at the request of the Agent,
each of its Records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Agent, indicating that such
Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) if any Account shall be evidenced
by Promissory Notes or other Instruments or Chattel Paper,
delivering and pledging to the Agent hereunder such Promissory
Notes, Instruments or Chattel Paper, duly endorsed and accompanied
by executed instruments of transfer or assignment, all in form and
substance reasonably satisfactory to the Agent, (C) executing
and filing (to the extent, if any, that such Grantor’s
signature is required thereon) or authenticating the filing of,
such financing or continuation statements, or amendments thereto,
as may be necessary or desirable or that the Agent may reasonably
request in order to perfect and preserve the security interest
purported to be created hereby, (D) furnishing to the 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 Agent may reasonably request, all in
reasonable detail, (E) if any Collateral shall be in the
possession of a third party, notifying such Person of the
Agent’s security interest created hereby and obtaining a
written acknowledgment from such Person that such Person holds
possession of the Collateral
for
the benefit of the Agent, which such written acknowledgement shall
be in form and substance reasonably satisfactory to the Agent,
(F) if at any time after the date hereof, any Grantor acquires
or holds any Commercial Tort Claim, promptly notifying the Agent in
a writing signed by such Grantor setting forth a brief description
of such Commercial Tort Claim and granting to the Agent a security
interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and
substance reasonably satisfactory to the Agent, (G) if
requested by Agent after the occurrence or during the continuance
of an Event of Default, causing the Agent to be listed as the
lienholder, for the benefit of the Agent and the Lenders, on each
certificate of title or ownership with respect to each Motor
Vehicle or other item of Equipment subject to a certificate of
title or ownership (other than a Motor Vehicle or item of Equipment
that is subject to a purchase money security interest permitted by
Section 7.02(a) of the Financing Agreement) and within 30 days of
such request deliver evidence of the same to the Agent and
(H) taking all actions required by any earlier versions of the
Uniform Commercial Code or by other law, as applicable, in any
relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in any foreign jurisdiction .
(b)
Location of Equipment and Inventory .
Each Grantor will keep the Equipment and Inventory (other than used
Equipment and Inventory sold in the ordinary course of business in
accordance with Section 5(g) hereof) at the locations specified
therefor in Section 4(g) hereof or, upon not less than 30
days’ prior written notice to the Agent accompanied by a new
Schedule III hereto indicating each new location of the Equipment
and Inventory, at such other locations in the continental United
States as the Grantors may elect, provided that (i) all action has
been taken to grant to the Agent a perfected, first priority
security interest in such Equipment and Inventory (subject only to
Permitted Liens), and (ii) the Agent’s rights in such
Equipment and Inventory, including, without limitation, the
existence, perfection and priority of the security interest created
hereby in such Equipment and Inventory, are not adversely affected
thereby.
(c)
Condition of Equipment .
Each Grantor will maintain the Equipment or cause the Equipment to
be maintained and preserved in good condition, repair and working
order as when acquired and in accordance with any
manufacturer’s manual, ordinary wear and tear excepted, and
will forthwith, or in the case of any loss or damage to any
Equipment as quickly as practicable after the occurrence thereof,
make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary or
desirable, consistent with past practice, or which the Agent may
request to such end. Each Grantor will promptly furnish to the
Agent a statement describing in reasonable detail any loss or
damage in excess of $250,000 to any Equipment.
(d)
Taxes, Etc. Each
Grantor jointly and severally agrees to pay promptly when due all
property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the
non-payment thereof and with respect to which adequate reserves in
accordance with GAAP have been set aside for the payment
thereof.
(e)
Insurance .
(i)
Each
Grantor will, at its own expense, maintain (i) products
liability insurance in an amount not less than $12,000,000,
reasonably satisfactory to the Agent, and (ii) insurance
(including, without limitation, comprehensive general
liability and property insurance) with respect to the
Equipment and Inventory in such amounts, against such risks,
in such form and with responsible and reputable insurance
companies or associations as is required by any Governmental
Authority having jurisdiction with respect thereto or as is
carried generally in accordance with sound business practice
by companies in similar businesses similarly situated and in
any event, in amount, adequacy and scope reasonably
satisfactory to the Agent. Each policy for liability insurance
shall provide for all losses to be paid on behalf of the Agent
and the Grantors as their respective interests may appear, and
each policy for property damage insurance shall provide for
all losses (except for losses of less than $50,000 per
occurrence) to be adjusted with, and paid directly to, the
Agent. Each such policy shall in addition (A) name each
Grantor and the Agent as insured parties thereunder (without
any representation or warranty by or obligation upon the
Agent) as their interests may appear, (B) contain an agreement
by the insurer that any loss thereunder shall be payable to
the Agent on its own account notwithstanding any action,
inaction or breach of representation or warranty by any
Grantor, (C) provide that there shall be no recourse against
the Agent for payment of premiums or other amounts with
respect thereto and (D) provide that at least 30 days’
prior written notice of cancellation, lapse, expiration or
other adverse change shall be given to the Agent by the
insurer. Each Grantor will, if so requested by the Agent,
deliver to the Agent original or duplicate policies of such
insurance and, as often as the Agent may reasonably request, a
report of a reputable insurance broker with respect to such
insurance. Each Grantor will also, at the request of the
Agent, execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to
acknowledge notice of such assignment.
(ii)
Reimbursement
under any liability insurance maintained by any Grantor
pursuant to this Section 5(e) may be paid directly to the
Person who shall have incurred liability covered by such
insurance. In the case of any loss involving damage to
Equipment or Inventory, any proceeds of insurance maintained
by a Grantor pursuant to this Section 5(e) shall be paid to
the Agent (except as to which paragraph (iii) of this Section
5(e) is not applicable), such Grantor will make or cause to be
made the necessary repairs to or replacements of such
Equipment or Inventory, and any proceeds of insurance
maintained by such Grantor pursuant to this Section 5(e) shall
be paid by the Agent to such Grantor as reimbursement for the
costs of such repairs or replacements.
(iii)
Upon
the occurrence and during the continuance of a Default or
Event of Default or upon any insurance payment (in excess of
$50,000 per occurrence) in respect of any Equipment or
Inventory, all insurance payments in respect of such Equipment
or Inventory shall be paid to the Agent and applied as
specified in Section 7(b) hereof.
(f)
Provisions Concerning the Accounts and the Licenses
.
(i)
No
Grantor shall, without the prior written consent of the Agent,
change (A) its name, identity or organizational
structure, or (B) its
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