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EXHIBIT 10.4*
SECURITY AGREEMENT dated as of June 30, 1999,
among KNOWLES ELECTRONICS, INC., a Delaware corporation (the
"Parent Borrower"), each subsidiary of the Borrower listed on
Schedule I hereto (each such subsidiary individually a
"Subsidiary Guarantor" and collectively, the "Subsidiary
Guarantors"; the Subsidiary Guarantors and the Parent Borrower
are referred to collectively herein as the "Grantors") and THE
CHASE MANHATTAN BANK, a New York banking corporation ("Chase"),
as administrative agent (in such capacity, the "Administrative
Agent") for the Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of June 28,
1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Parent Borrower, the lenders from time to time
party thereto (the "Lenders"), Chase, as Administrative Agent for the Lenders,
Swingline Lender and as issuing bank (in such capacity, the "Issuing Bank") and
Morgan Stanley Senior Funding, Inc., as Syndication Agent, (b) the Parent
Guarantee Agreement dated as of June 30, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Parent Guarantee Agreement"),
between the Parent Borrower and the Administrative Agent and (c) the
Subsidiary Guarantee Agreement dated as of June 30, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Subsidiary Guarantee
Agreement"; and, collectively with the Parent Guarantee Agreement, the
"Guarantee Agreements"), among the Subsidiary Guarantors and the Administrative
Agent.
The Lenders have agreed to make Loans to the Borrowers, and the
Issuing Bank has agreed to issue Letters of Credit for the account of the
Borrowers, pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement. Each of the Subsidiary Guarantors has
agreed to guarantee, among other things, all the obligations of each Borrower
under the Credit Agreement. The obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit are conditioned upon, among
other things, the execution and delivery by the Grantors of an agreement in the
form hereof to secure (a) the due and punctual payment by each Borrower of (i)
the principal of and premium, if any, and
* Confidential Information in this Exhibit 10.4 has been omitted and filed
separately with the Securities and Exchange Commission.
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interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans made to such Borrower,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by such
Borrower under the Credit Agreement in respect of any Letter of Credit, when
and as due, including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of such Borrower to the Secured Parties under
the Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of each
Borrower under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all the
covenants, agreements, obligations and liabilities of each other Loan Party
under or pursuant to this Agreement and the other Loan Documents and (d) the
due and punctual payment and performance of all obligations of each Borrower
and any Loan Party under each Hedging Agreement entered into with any
counterparty that was a Lender (or an Affiliate of a Lender) at the time such
Hedging Agreement was entered into (all the monetary and other obligations
described in the preceding clauses (a) through (d) being collectively called
the "Obligations").
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Accordingly, the Grantors and the Administrative Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall
have the meanings set forth in the Credit Agreement and all references to the
Uniform Commercial Code shall mean the Uniform Commercial Code in effect in the
State of New York as of the date hereof.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become
obligated to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including Accounts Receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities
and guarantees with respect thereto, including any rights to stoppage in
transit, replevin, reclamation and resales, and all related security interests,
liens and pledges, whether voluntary or involuntary, in each case whether now
existing or owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents,
(c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash
accounts (including the
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Notice Deposit Accounts and the Collection Deposit Accounts), (g) Investment
Property and (h) Proceeds.
"Collection Deposit Account" shall mean a lockbox account of a Grantor
maintained for the benefit of the Secured Parties with the Administrative Agent
or with a Sub-Agent pursuant to a Lockbox and Depository Agreement.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an
option on a commodity futures contract, a commodity option or any other
contract that, in each case, is (a) traded on or subject to the rules of a
board of trade that has been designated as a contract market for such a
contract pursuant to the Federal commodities laws or (b) traded on a foreign
commodity board of trade, exchange or market, and is carried on the books of a
Commodity Intermediary for a Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is registered as
a futures commission merchant under the Federal commodities laws or (b) a
Person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a contract
market pursuant to Federal commodities laws.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by any Grantor or which such Grantor otherwise has the
right to license, or granting any right to such Grantor under any Copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee
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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, including those listed
on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.
"Entitlement Holder" shall mean a Person identified in the records of
a Securities Intermediary as the Person having a Security Entitlement against
the Securities Intermediary. If a Person acquires a Security Entitlement by
virtue of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such
Person is the Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and
all tangible personal property similar to any of the foregoing, including
tools, parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
Person or a share, participation or other interest in a Person or in property
or an enterprise of a Person, which is, or is of a type, dealt with in or
traded on financial markets, or which is recognized in any area in which it is
issued or dealt in as a medium for investment or (c) any property that is held
by a Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a Person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
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"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including all rights and interests in partnerships,
limited partnerships, limited liability companies and other unincorporated
entities, corporate or other business records, indemnification claims, contract
rights (including rights under leases, whether entered into as lessor or
lessee, Hedging Agreements and other agreements), Intellectual Property,
goodwill, registrations, franchises, tax refund claims and any letter of
credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable (other than any item of the foregoing which by its terms
automatically terminates or is terminable by any Person other than such Grantor
or its Affiliates upon assignment or grant of a security interest by such
Grantor).
"Intellectual Property" shall mean all intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, 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 to, and books and records describing or used in connection with,
any of the foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing
supplies and spare parts, and all such goods that have been returned to or
repossessed by or on behalf of any Grantor.
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"Investment Property" shall mean all Securities (whether certificated
or uncertificated), Security Entitlements, Securities Accounts, Commodity
Contracts and Commodity Accounts of any Grantor, whether now owned or
hereafter acquired by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof and listed on Schedule III and those license
agreements entered into after the date hereof, which by their terms prohibit,
or become terminable by any Person other than such Grantor or its Affiliates
upon, assignment or a grant of a security interest by such Grantor as licensee
thereunder).
"Lockbox and Depository Agreement" shall mean a Lockbox and Depository
Agreement substantially in the form of Annex 1 hereto among the Parent
Borrower, the Administrative Agent and a Sub-Agent.
"Lockbox System" shall have the meaning assigned to such term in Section 5.01.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Notice Deposit Account" shall have the meaning assigned to such term
in Section 4.13.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any
invention on which a Patent, now or hereafter owned by any Grantor or which any
Grantor otherwise has the right to license, is in existence, or granting to any
Grantor any right to make, use or sell 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" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all letters patent of the United States or any
other country, all registrations and
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recordings thereof, and all applications for letters patent of the United
States or any other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any similar
offices in any other country, including those listed on Schedule IV, and (b)
all reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of the Parent Borrower.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession
of any Collateral and any payment received from any insurer or other Person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include (a) all cash and negotiable instruments received
by or held on behalf of the Administrative Agent pursuant to the Lockbox System,
(b) any claim of any Grantor against any third party for (and the right to
sue and recover for and the rights to damages or profits due or accrued arising
out of or in connection with) (i) past, present or future infringement of any
Patent now or hereafter owned by any Grantor, or licensed under a Patent
License, (ii) past, present or future infringement or dilution of any Trademark
now or hereafter owned by any Grantor or licensed under a Trademark License or
injury to the goodwill associated with or symbolized by any Trademark now or
hereafter owned by any Grantor, (iii) past, present or future breach of any
License and (iv) past, present or future infringement of any Copyright now or
hereafter owned by any Grantor or licensed under a Copyright License and (c)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"Quarterly Update" shall have the meaning set forth in Section 4.03.
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"Secured Parties" shall mean (a) the Lenders, (b) the Administrative
Agent, (c) the Issuing Bank, (d) each counterparty to a Hedging Agreement
entered into with any Borrower or other Loan Party if such counterparty was a
Lender (or an Affiliate of a Lender) at the time the Hedging Agreement was
entered into, (e) the beneficiaries of each indemnification obligation
undertaken by any Grantor under any Loan Document and (f) the successors and
assigns of each of the foregoing.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of
shares, participations, interests or obligations and (c)(i) are, or are of a
type, dealt with or trade on securities exchanges or securities markets or (ii)
are a medium for investment and by their terms expressly provide that they are
a security governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial Asset
is or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Entitlements" shall mean the rights and property interests
of an Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Securities Intermediary" shall mean (a) a clearing corporation or (b)
a Person, including a bank or broker, that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
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"Sub-Agent" shall mean a financial institution which shall have
delivered to the Administrative Agent an executed Lockbox and Depository
Agreement.
"Trademark License" shall mean any written agreement, now or hereafter
in effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean 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, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith (excluding intent-to-use
applications), including registrations and registration applications in the
United States Patent and Trademark Office, any State of the United States or
any similar offices in any other country or any political subdivision thereof,
and all extensions or renewals thereof, including those listed on Schedule V,
(b) all goodwill associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
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ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor
hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers 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 ratable benefit
of the Secured Parties, a security interest in, all of such Grantor's right,
title and interest in, to and under the Collateral (the "Security Interest").
Without limiting the foregoing, the Administrative Agent is hereby authorized
to file one or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any
similar office in any other country) or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Grantor, without the signature of any Grantor, and
naming any Grantor or the Grantors as debtors and the Administrative Agent as
secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Administrative Agent or any
other Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
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ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the
Administrative Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant
to the Administrative Agent the Security Interest in such Collateral pursuant
hereto and to execute, deliver and perform its obligations in accordance with
the terms of this Agreement, without the consent or approval of any other
Person other than any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to the Administrative Agent for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and registrations
(other than filings required to be made in the United States Patent and
Trademark Office and the United States Copyright Office in order to perfect the
Security Interest in Collateral consisting of United States Patents, Trademarks
and Copyrights) that are necessary to publish notice of and protect the
validity of and to establish a legal, valid and perfected security interest in
favor of the Administrative Agent (for the ratable benefit of the Secured
Parties) in respect of all Collateral in which the Security Interest may be
perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements.
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(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Administrative Agent for recording by the United
States Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section
205 and the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction, to protect
the validity of and to establish a legal, valid and perfected security interest
in favor of the Administrative Agent (for the ratable benefit of the Secured
Parties) in respect of all Collateral consisting of Patents, Trademarks and
Copyrights in which a security interest may be perfected by filing, recording
or registration in the United States (or any political subdivision thereof) and
its territories and possessions, or in any other necessary jurisdiction, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to
perfect the Security Interest with respect to any Collateral consisting of
Patents, Trademarks and Copyrights (or registration or application for
registration thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording
or registering a financing statement or analogous document in the United States
(or any political subdivision thereof) and its territories and possessions
pursuant to the Uniform Commercial Code or other applicable law in such
jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable. The Security Interest
is and shall be prior to any other Lien on any of the Collateral, other than
Liens
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expressly permitted to be prior to the Security Interest pursuant to Section
6.02 of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant
to Section 6.02 of the Credit Agreement.
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ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place
of Business. (a) Each Grantor agrees promptly to notify the Administrative
Agent in writing of any change (i) in its corporate name or in any trade name
used to identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to Collateral owned by it or any office or facility at which Collateral owned
by it is located (including the establishment of any such new office or
facility), (iii) in its identity or corporate structure or (iv) in its Federal
Taxpayer Identification Number. Each Grantor agrees not to effect or permit
any change referred to in the preceding sentence unless all filings have been
made under the Uniform Commercial Code or otherwise that are required in order
for the Administrative Agent to continue at all times following such change to
have a valid, legal and perfected first priority security interest in all the
Collateral. Each Grantor agrees promptly to notify the Administrative Agent if
any material portion of the Collateral owned or held by such Grantor is damaged
or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense,
such complete and accurate records with respect to the Collateral owned by it
as is consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged, but in any event to include accounting
records sufficient to enable the preparation of financial statements in
accordance with GAAP indicating all payments and proceeds received with respect
to any part of the Collateral, and, at such time or times as the Administrative
Agent may reasonably request, promptly to prepare and deliver to the
Administrative Agent a duly certified schedule or schedules in form and detail
satisfactory to the Administrative Agent showing the identity, amount and
location of any and all Collateral.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own
cost and expense, take any and all actions necessary to defend title to the
Collateral against all
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Persons and to defend the Security Interest of the Administrative Agent in the
Collateral and the priority thereof against any Lien not expressly permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.03. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the
Administrative Agent may from time to time reasonably request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements (including
fixture filings) or other documents in connection herewith or therewith. If
any amount payable under or in connection with any of the Collateral shall be
or become evidenced by any promissory note or other instrument, such note or
instrument shall be immediately pledged and delivered to the Administrative
Agent, duly endorsed in a manner satisfactory to the Administrative Agent.
Without limiting the generality of the foregoing, each Grantor agrees
to supplement this Agreement by supplementing Schedules II, III, IV and V
hereto or adding additional schedules hereto to specifically identify any asset
or item that constitutes Copyrights, Licenses, Patents or Trademarks within 10
days after the expiration of each fiscal quarter of the Parent Borrower (a
"Quarterly Update"). Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties made by such Grantor hereunder shall be true and correct with
respect to such Collateral included in any Quarterly Update within 10 days
after the date of delivery of such Quarterly Update. Upon the delivery of
each Quarterly Update, each Grantor acknowledges that the Administrative Agent
may within 10 days of the delivery of such Quarterly Update, with the consent
of the relevant Grantor (such consent not to be unreasonably withheld),
supplement Schedules II, III, IV and V hereto or add additional schedules
hereto to specifically identify any asset or item that constitutes Copyrights,
Licenses, Patents or Trademarks. Each Grantor agrees that it will use its best
efforts to take such action as shall be necessary in order that all
representations and
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warranties made by such Grantor hereunder shall be true and correct with
respect to such Collateral within 30 days after the date of delivery by the
Administrative Agent of any such supplement specifically identifying such
Collateral.
SECTION 4.04. Inspection and Verification. The Administrative Agent
and such Persons as the Administrative Agent may reasonably designate shall
have the right (provided that such right will not be exercised in a manner
that could reasonably be expected to impair, harm or invalidate any trade
secrets or similar items of Intellectual Property), upon reasonable prior
notice, at the Grantors' own cost and expense, to inspect the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss the
Grantors' affairs with the officers of the Grantors and their independent
accountants and to verify under reasonable procedures, in accordance with
Section 5.13 of the Credit Agreement, the validity, amount, quality, quantity,
value, condition and status of, or any other matter relating to, the
Collateral, including if a Default shall have occurred and shall be continuing,
in the case of Accounts or Collateral in the possession of any third Person, by
contacting Account Debtors or the third Person possessing such Collateral for
the purpose of making such a verification. The Administrative Agent shall have
the absolute right to share any information it gains from such inspection or
verification with any Secured Party (it being understood that any such
information shall be deemed to be "Information" subject to the provisions of
Section 9.12 of the Credit Agreement and that each Secured Party shall be bound
by the confidentiality obligations of Section 9.12 of the Credit Agreement).
Notwithstanding the foregoing, unless a Default shall have occurred and shall
be continuing, the Grantors will not have any obligation to permit any visit or
inspection in any fiscal year of the Parent Borrower by the Administrative
Agent or Persons designated by the Administrative Agent if two visits or
inspections in such fiscal year have been previously conducted by the
Administrative Agent or Persons designated by the Administrative Agent.
SECTION 4.05. Taxes; Encumbrances. At its option, the Administrative
Agent may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
<PAGE> 18
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and not permitted pursuant to Section 5.05 or Section 6.02 of the Credit
Agreement, and may pay for the maintenance and preservation of the Collateral
to the extent any Grantor fails to do so as required by the Credit Agreement or
this Agreement, and each Grantor jointly and severally agrees to reimburse the
Administrative Agent on demand for any payment made or any expense incurred by
the Administrative Agent pursuant to the foregoing authorization; provided,
however, that nothing in this Section 4.05 shall be interpreted as excusing any
Grantor from the performance of, or imposing any obligation on the
Administrative Agent or any Secured Party to cure or perform, any covenants or
other promises of any Grantor with respect to taxes, assessments, charges,
fees, liens, security interests or other encumbrances and maintenance as set
forth herein or in the other Loan Documents.
SECTION 4.06. Assignment of Security Interest. If at any time any
Grantor shall take a security interest in any property of an Account Debtor or
any other Person to secure payment and performance of an Account, such Grantor
shall promptly assign such security interest to the Administrative Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Account Debtor or other Person granting the security interest.
SECTION 4.07. Continuing Obligations of the Grantors. Each Grantor
shall remain liable to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Administrative Agent and the Secured Parties from and against any
and all liability for such performance.
SECTION 4.08. Use and Disposition of Collateral. None of the
Grantors shall make or permit to be made an assignment, pledge or hypothecation
of the Collateral or shall grant any other Lien in respect of the Collateral,
except as expressly permitted by Section 6.02 of the Credit Agreement, provided
that the foregoing shall not be deemed to prohibit any license of Intellectual
Property granted by a Grantor to third parties
<PAGE> 19
19
in the ordinary course of business. None of the Grantors shall make or permit
to be made any transfer of the Collateral and each Grantor shall remain at all
times in possession of the Collateral owned by it, except that (a) Inventory
may be sold in the ordinary course of business and (b) unless and until the
Administrative Agent shall notify the Grantors that an Event of Default shall
have occurred and be continuing and that during the continuance thereof the
Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose
of any Collateral (which notice may be given by telephone if promptly confirmed
in writing), the Grantors may use, transfer and dispose of the Collateral in
any lawful manner not inconsistent with the provisions of this Agreement, the
Credit Agreement (including, without limitation, Section 6.05 of the Credit
Agreement) or any other Loan Document. Without limiting the generality of the
foregoing, each Grantor agrees that it shall not permit any Inventory to be in
the possession or control of any warehouseman, bailee, agent or processor at
any time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Administrative Agent and to waive and release any Lien held by it with respect
to such Inventory, whether arising by operation of law or otherwise.
SECTION 4.09. Limitation on Modification of Accounts. None of the
Grantors will, without the Administrative Agent's prior written consent, grant
any extension of the time of payment of any of the Accounts Receivable,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any Person liable for the payment thereof or allow
any credit or discount whatsoever thereon, other than extensions, credits,
discounts, compromises or settlements granted or made in the ordinary course of
business and consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which such Grantor is engaged.
SECTION 4.10. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage
to the Inventory and Equipment in accordance with Section 5.07 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Administrative Agent (and all officers, employees
<PAGE> 20
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or agents designated by the Administrative Agent) as such Grantor's true and
lawful agent (and attorney-in- fact) for the purpose, during the continuance of
an Event of Default, of making, settling and adjusting claims in respect of
Collateral under policies of insurance, endorsing the name of such Grantor on
any check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect thereto. In the event that any Grantor at any time or times shall fail
to obtain or maintain any of the policies of insurance required hereby or to
pay any premium in whole or part relating thereto, the Administrative Agent
may, without waiving or releasing any obligation or liability of the Grantors
hereunder or any Event of Default, in its sole discretion, obtain and maintain
such policies of insurance and pay such premium and take any other actions with
respect thereto as the Administrative Agent deems advisable. All sums
disbursed by the Administrative Agent in connection with this Section 4.10,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, upon demand, by the Grantors to the
Administrative Agent and shall be additional Obligations secured hereby.
SECTION 4.11. Legend. Each Grantor shall legend, in form and manner
satisfactory to the Administrative Agent, its Accounts Receivable and its
books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Administrative Agent for the benefit of the Secured Parties and
that the Administrative Agent has a security interest therein.
SECTION 4.12. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) To the extent commercially reasonable, each Grantor agrees
that it will use reasonable efforts not to, and will use reasonable efforts not
to permit any of its licensees to, do any act, or omit to do any act, whereby
any Patent of such Grantor's business may become invalidated or dedicated to
the public, and agrees that it shall continue to mark any products covered by a
Patent with the relevant patent number as necessary and sufficient to establish
and preserve its maximum rights under applicable patent laws.
<PAGE> 21
21
(b) To the extent commercially reasonable, each Grantor (either
itself or through its licensees or its sublicensees) will use reasonable
efforts, for each Trademark, (i) to maintain such Trademark in full force free
from any claim of abandonment or invalidity for non-use, (ii) to maintain the
quality of products and services offered under such Trademark, (iii) to display
such Trademark with notice of Federal or foreign registration to the extent
necessary and sufficient to establish and preserve its maximum rights under
applicable law and (iv) not to knowingly use or knowingly permit the use of
such Trademark in violation of any third party rights.
(c) To the extent commercially reasonable, each Grantor (either
itself or through licensees) will use reasonable efforts, for each work covered
by a Copyright, to continue to publish, reproduce, display, adopt and
distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Administrative Agent promptly if it
knows that any Patent, Trademark or Copyright material to the conduct of its
business may become abandoned, lost 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, United States Copyright Office or any court or similar office
of any country) regarding such Grantor's ownership of any Patent, Trademark or
Copyright, its right to register the same, or to keep and maintain the same.
(e) If any Grantor, either itself or through any agent, employee,
licensee or designee, files an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or
any office or agency in any political subdivision of the United States or in
any other country or any political subdivision thereof, such Grantor shall give
notice of any such action to the Administrative Agent on or prior to the date
that is 10 days after the last day of the calendar month in which such action
is taken. Upon request of the Administrative Agent, such Grantor shall execute
and deliver any and all agreements, instruments, documents and papers as the
Administrative Agent
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may reasonably request to evidence the Administrative Agent's security interest
in such Patent, Trademark or Copyright, and each Grantor hereby appoints the
Administrative Agent as its attorney-in-fact to execute and file such writings
for the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power, being coupled with an interest, is irrevocable.
(f) To the extent commercially reasonable, each Grantor will take all
necessary steps that are consistent with the practice in any proceeding before
the United States Patent and Trademark Office, United States Copyright Office
or any office or agency in any political subdivision of the United States or in
any other country or any political subdivision thereof, to maintain and pursue
each material application relating to the Patents, Trademarks and/or Copyrights
(and to obtain the relevant grant or registration) and to maintain each issued
Patent and each registration of the Trademarks and Copyrights that is material
to the conduct of any Grantor's business, including timely filings of
applications for renewal, affidavits of use, affidavits of incontestability and
payment of maintenance fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancelation proceedings against third
parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Administrative Agent and shall, if commercially reasonable, sue, within a
commercially reasonable time period, for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as are appropriate
under the circumstances to protect such Collateral.
(h) Upon and during the continuance of an Event of Default, each
Grantor shall use its best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent License or
Trademark License to effect the assignment of all of such Grantor's right,
title and interest thereunder to the Administrative Agent or its designee.
<PAGE> 23
23
SECTION 4.13 Certain Deposit Accounts. With respect to any deposit
account located in California, Hawaii, Idaho, Illinois, or Indiana or any other
state in which on the date hereof or hereafter a security interest in a deposit
account may be perfected by notifying the bank maintaining such deposit account
of a secured party's security interest in such deposit account (each,
individually, a "Notice Deposit Account"), the Grantors shall provide to each
bank maintaining such a Notice Deposit Account the notice necessary under the
laws of the applicable state to perfect the Security Interest in such deposit
account.
ARTICLE V
Collections
SECTION 5.01. Lockbox System. (a) The Grantors will establish in
the name of the Administrative Agent, and subject to the control of the
Administrative Agent pursuant to the Lockbox and Depository Agreements, for the
ratable benefit of the Administrative Agent and the other Secured Parties, a
system of lockboxes and related Collection Deposit Accounts (the "Lockbox
System") with one or more financial institutions that are reasonably
satisfactory to the Administrative Agent into which the Proceeds of Accounts
Receivable and Inventory shall be deposited.
(b) Effective upon notice to the Grantors from the Administrative
Agent after the occurrence and during the continuance of an Event of Default
(which notice may be given by telephone if promptly confirmed in writing), the
Collection Deposit Accounts will after notice to the applicable Sub-Agent,
without any further action on the part of any Grantor, the Administrative Agent
or any Sub-Agent, convert into a closed lockbox account under the exclusive
dominion and control of the Administrative Agent in which funds are held
subject to the rights of the Administrative Agent hereunder. Each Grantor
irrevocably authorizes the Administrative Agent to notify each Sub-Agent (i) of
the occurrence of an Event of Default and (ii) of the matters referred to in
this paragraph (b).
SECTION 5.02. Collections. (a) Each Grantor agrees (i) to notify
and direct promptly each Account Debtor and
<PAGE> 24
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every other Person obligated to make payments on Accounts Receivable or in
respect of any Inventory to make all such payments directly to the Lockbox
System established in accordance with Section 5.01, (ii) to use all reasonable
efforts to cause each Account Debtor and every other Person identified in
clause (i) above to make all payments with respect to Accounts Receivable and
Inventory directly to such Lockbox System and (iii) promptly to deposit all
payments received by it on account of Accounts Receivable and Inventory,
whether in the form of cash, checks, notes, drafts, bills of exchange, money
orders or otherwise, in the Lockbox System in precisely the form in which
received (but with any endorsements of such Grantor necessary for deposit or
collection), and until they are so deposited such payments shall be held in
trust by such Grantor for and as the property of the Administrative Agent.
(b) Without the prior written consent of the Administrative Agent, no
Grantor shall, in a manner adverse to the Lenders, change the general
instructions given to Account Debtors in respect of payment on Accounts to be
deposited in the Lockbox System. Until the Administrative Agent shall have
advised the Grantors to the contrary, each Grantor shall, and the
Administrative Agent hereby authorizes each Grantor to, enforce and collect all
amounts owing on the Inventory and Accounts Receivable, for the benefit and on
behalf of the Administrative Agent and the other Secured Parties; provided,
however, that such privilege may at the option of the Administrative Agent be
terminated upon the occurrence and during the continuance of any Event of
Default.
SECTION 5.03. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Administrative Agent (and all officers, employees
or agents designated by the Administrative Agent) as such Grantor's true and
lawful agent and attorney-in-fact, and in such capacity the Administrative
Agent shall have the right, with power of substitution for each Grantor and in
each Grantor's name or otherwise, for the use and benefit of the Administrative
Agent and the Secured Parties, upon the occurrence and during the continuance
of an Event of Default (a) to receive, endorse, assign and/or deliver any and
all notes, acceptances, checks, drafts, money orders or other evidences of
payment relating to the Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and
<PAGE> 25
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releases of all or any of the Collateral; (c) to sign the name of any Grantor
on any invoice or bill of lading relating to any of the Collateral; (d) to send
verifications of Accounts Receivable to any Account Debtor; (e) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any
of the Collateral or to enforce any rights in respect of any Collateral; (f) to
settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral; (g) to notify, or to
require any Grantor to notify, Account Debtors to make payment directly to the
Administrative Agent; and (h) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Administrative Agent were the
absolute owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Administrative Agent or any Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the
Administrative Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby, and no action taken or omitted to be taken by the
Administrative Agent or any Secured Party with respect to the Collateral or any
part thereof shall give rise to any defense, counterclaim or offset in favor of
any Grantor or to any claim or action against the Administrative Agent or any
Secured Party. It is understood and agreed that the appointment of the
Administrative Agent as the agent and attorney-in-fact of the Grantors for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Loan Document with respect to the
Collateral or any part thereof or impose any obligation on the Administrative
Agent or any Secured Party to proceed in any particular manner with respect to
the Collateral or any part thereof, or in any way limit the exercise by the
Administrative Agent or any Secured Party of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder,
under any other Loan Document, by law or otherwise.
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ARTICLE VI
Remedies
<PAGE> 27
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SECTION 6.01. Remedies upon Default. Upon the occurrence and during
the continuance of an Event of Default, each Grantor agrees to deliver each
item of Collateral to the Administrative Agent on demand, and it is agreed that
the Administrative Agent shall have the right to take any of or all the
following actions at the same or different times: (a) with respect to any
Collateral consisting of Intellectual Property, on demand, to cause the
Security Interest to become an assignment, transfer and conveyance of any of or
all such Collateral by the applicable Grantors to the Administrative Agent, or
to license or sublicense, whether general, special or otherwise, and whether on
an exclusive or non-exclusive basis, any such Collateral throughout the world
on such terms and conditions and in such manner as the Administrative Agent
shall determine (other than in violation of any then-existing licensing
arrangements to the extent that waivers cannot be obtained), and (b) with or
without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and, generally, to
exercise any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the generality of
the foregoing, each Grantor agrees that the Administrative Agent shall have the
right, subject to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Administrative Agent shall deem
appropriate. The Administrative Agent shall be authorized at any such sale (if
it deems it advisable to do so) to restrict the prospective bidders or
purchasers to Persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Administrative Agent shall have the right to assign, transfer and deliver to
the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future
<PAGE> 28
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have under any rule of law or statute now existing or hereafter enacted.
The Administrative Agent shall give the Grantors 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions) of the Administrative
Agent's intention to make any sale of Collateral. Such notice, in the case of
a public sale, shall state the time and place for such sale and, in the case of
a sale at a broker's board or on a securities exchange, shall state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Administrative Agent
may fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Administrative Agent may (in its sole
and absolute discretion) determine. The Administrative Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do
so, regardless of the fact that notice of sale of such Collateral shall have
been given. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be retained
by the Administrative Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Administrative Agent shall not incur any liability
in case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be
sold again upon like notice. At any public (or, to the extent permitted by
law, private) sale made pursuant to this Section, any Secured Party may bid for
or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
the Collateral or any part thereof offered
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for sale and may make payment on account thereof by using any claim then due
and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Administrative Agent shall be free to carry out such sale pursuant to such
agreement and no Grantor shall be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that after the
Administrative Agent shall have entered into such an agreement all Events of
Default shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Administrative Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Administrative Agent
shall apply the proceeds of any collection or sale of the Collateral, as well
as any Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by
the Administrative Agent or the Administrative Agent (in its capacity
as such hereunder or under any other Loan Document) in connection with
such collection or sale or otherwise in connection with this Agreement
or any of the Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all
advances made by the Administrative Agent hereunder or under any other
Loan Document on behalf of any Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy
hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts
so applied to be distributed among the Secured Parties pro rata in
accordance with the amounts
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31
of the Obligations owed to them on the date of any such distribution);
and
THIRD, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
The Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Administrative Agent
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the Administrative Agent or of the officer making
the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Administrative Agent to exercise rights and remedies
under this Article at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, each Grantor hereby grants to
the Administrative Agent an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Grantors) to use,
license or sub-license any of the Collateral consisting of Intellectual
Property now owned or hereafter acquired by such Grantor, and wherever the same
may be located, and including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof. Such
license shall include customary terms and conditions (as reasonably determined
by the Administrative Agent) with respect to the maintaining and monitoring of
the quality of goods and services advertised, marketed, made or sold using,
incorporating or in connection with such Intellectual Property. The use of
such license by the Administrative Agent shall be exercised, at the option of
the Administrative Agent, upon the occurrence and during the continuation of an
Event of Default; provided that any license, sub-license or other transaction
entered into by the Administrative Agent in accordance herewith shall be
binding
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upon the Grantors notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Subsidiary Guarantor shall be given to it at its
address or telecopy number set forth on Schedule I, with a copy to the Parent
Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the
Administrative Agent hereunder, the Security Interest and all obligations of
the Grantors hereunder shall be absolute and unconditional irrespective of (a)
any lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument, (c) any exchange, release or non-perfection of any
Lien on other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee, securing or guaranteeing all or any of
the Obligations, or (d) any other circumstance that might otherwise constitute
a defense available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation
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made by the Lenders or on their behalf, and shall continue in full force and
effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement
shall become effective as to any Grantor when a counterpart hereof executed on
behalf of such Grantor shall have been delivered to the Administrative Agent
and a counterpart hereof shall have been executed on behalf of the
Administrative Agent, and thereafter shall be binding upon such Grantor and the
Administrative Agent and their respective successors and assigns, and shall
inure to the benefit of such Grantor, the Administrative Agent and the other
Secured Parties and their respective successors and assigns, except that no
Grantor shall have the right to assign or transfer its rights or obligations
hereunder or any interest herein or in the Collateral (and any such assignment
or transfer shall be void) except as expressly contemplated by this Agreement
or the Credit Agreement. This Agreement shall be construed as a separate
agreement with respect to each Grantor and may be amended, modified,
supplemented, waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the obligations of any
other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Administrative Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 7.06. Administrative Agent's Fees and Expenses;
Indemnification. (a) Each Grantor jointly and severally agrees to pay upon
demand to the Administrative Agent the amount of any and all reasonable
expenses, including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Administrative Agent may incur
in connection with (i) the administration of this Agreement (including the
customary fees and charges of the Administrative Agent for any audits conducted
by it or on its behalf with respect to the Accounts Receivable or Inventory),
(ii) the custody or preservation of, or the sale of, collection from or other
realization upon any of the
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Collateral, (iii) the exercise, enforcement or protection of any of the rights
of the Administrative Agent hereunder or (iv) the failure of any Grantor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the
other Loan Documents, each Grantor jointly and severally agrees to indemnify
the Administrative Agent and the other Indemnitees against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other charges of
counsel, incurred by or asserted against any of them arising out of, in any way
connected with, or as a result of, the execution, delivery or performance of
this Agreement or any claim, litigation, investigation or proceeding relating
hereto or to the Collateral, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents. The
provisions of this Section 7.06 shall remain operative and in full force and
effect regardless of the termination of this Agreement or any other Loan
Document, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term
or provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent or any Lender. All amounts
due under this Section 7.06 shall be payable on written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
NOTWITHSTANDING THE FOREGOING, ALL PROVISIONS OF THIS AGREEMENT RELATING TO
THE VALIDITY, CREATION AND PERFECTION OF THE SECURITY INTEREST IN ANY NOTICE
DEPOSIT ACCOUNTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE IN WHICH SUCH NOTICE DEPOSIT ACCOUNT IS LOCATED
WITHOUT REGARD TO CONFLICTS OF LAWS
<PAGE> 34
35
PRINCIPLES TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent in exercising any power or right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent
hereunder and of the Administrative Agent, the Issuing Bank, the Administrative
Agent and the Lenders under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provisions of this Agreement or any other Loan Document or consent to
any departure by any Grantor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) below, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand on any Grantor in any case shall
entitle such Grantor or any other Grantor to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Administrative Agent and the Grantor or Grantors with
respect to which such waiver, amendment or modification is to apply, with the
prior written consent of the Required Lenders (and such other consent as may be
required by Section 9.02 of the Credit Agreement).
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER
<PAGE> 35
36
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section
7.04), and shall become effective as provided in Section 7.04. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used herein are
for the purpose of reference only, are not part of this Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto
<PAGE> 36
37
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall affect
any right that the Administrative Agent, the Administrative Agent, the Issuing
Bank or any Lender may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against any Grantor or
its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affected the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 7.14. Termination. (a) This Agreement and the Security
Interest shall terminate when all the Obligations (other than any right to
indemnification of any Secured Party with respect to any matter in respect of
which no claim has been asserted and is outstanding) have been indefeasibly
paid in full, the Lenders have no further commitment to lend, each LC Exposure
has been reduced to zero and the Issuing Bank has no further commitment to
issue Letters of Credit under the Credit Agreement, at which time the
Administrative Agent shall execute and deliver to the Grantors, at the
Grantors' expense, all Uniform Commercial Code termination statements and
similar documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Administrative Agent. A Subsidiary Guarantor shall automatically be released
from its obligations hereunder and the Security Interest in the Collateral of
such Subsidiary Guarantor shall be automatically released in the event that
<PAGE> 37
38
all the capital stock of such Subsidiary Guarantor shall be sold, transferred
or otherwise disposed of to a Person that is not an Affiliate of the Parent
Borrower in accordance with the terms of the Credit Agreement; provided that
the Required Lenders shall have consented to such sale, transfer or other
disposition (to the extent required by the Credit Agreement) and the terms of
such consent did not provide otherwise.
(b) Upon any sale or other transfer by any Grantor of any Collateral
that is permitted under the Credit Agreement to any Person that is not a
Grantor, or, upon the effectiveness of any written consent to the release of
the security interest granted hereby in any Collateral pursuant to Section
9.02(b) of the Credit Agreement, the security interest in such Collateral shall
be automatically released.
(c) In connection with any termination or release pursuant to
paragraph (a) or (b), the Administrative Agent shall execute and deliver to any
Grantor, at such Grantor's expense, all documents that such Grantor shall
reasonably request to evidence such termination or release. Any execution and
delivery of documents pursuant to this Section 7.14 shall be without recourse
to or warranty by the Administrative Agent.
SECTION 7.15. Additional Grantors. Upon execution and delivery by
the Administrative Agent and a Subsidiary of an instrument in the form of Annex
3 hereto, such Subsidiary shall become a Grantor hereunder with the same force
and effect as if originally named as a Grantor herein. The execution and
delivery of any such instrument shall not require the consent of any Grantor
hereunder. The rights and obligations of each Grantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Grantor as a
party to this Agreement.
<PAGE> 38
39
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
KNOWLES ELECTRONICS, INC,
by /s/ REG GARRATT
-------------------------------
Name: Reg Garratt
Title: CHM/CEO
EACH OF THE SUBSIDIARY
GUARANTORS LISTED ON
SCHEDULE I HERETO,
by /s/ REG GARRATT
-------------------------------
Name: Reg Garratt
Title: Authorized Officer
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by /s/ DEBORAH DAVEY
-------------------------------
Name: Deborah Davey
Title: Vice President
<PAGE> 39
SCHEDULE I TO THE
SECURITY AGREEMENT
SUBSIDIARY GUARANTORS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
GUARANTOR ADDRESS
--------- -------
--------------------------------------------------------------------------------
<S> <C>
Knowles Intermediate Holding, Inc. 1151 Maplewood Drive
Itasca, IL 60143
--------------------------------------------------------------------------------
Emkay Innovative Products, Inc. 1151 Maplewood Drive
Itasca, IL 60143
--------------------------------------------------------------------------------
Knowles Manufacturing Ltd. 1151 Maplewood Drive
Itasca, IL 60143
--------------------------------------------------------------------------------
Synchro-Start Products, Inc. 6250 West Howard Street
Niles, IL 60714
--------------------------------------------------------------------------------
</TABLE>
<PAGE> 40
SCHEDULE II
COPYRIGHTS
Synchro-Start Products, Inc. (1 listing)
<PAGE> 41
SCHEDULE II
SYNCHRO-START PRODUCTS, INC.
COPYRIGHT REGISTRATIONS
<TABLE>
<CAPTION>
----------------------------------------------------------
COUNTRY ITEM REG. NO.
----------------------------------------------------------
<S> <C> <C>
U.S. Catalog No. 7 A7328
----------------------------------------------------------
</TABLE>
<PAGE> 42
SCHEDULE III
LICENSES
License Agreement, dated 08/03/87. Between Synchro-Start Products, Inc. and
Melroe Company.
Agreement, dated 05/04/88. Between Knowles Electronics, Inc., as successor to
Industrial Research Products, Inc., and Etymotic Research, Inc.
Agreement, dated 05/29/90. Between Knowles Electronics, Inc., as successor to
Industrial Research Products, Inc., and Etymotic Research, Inc.
License, dated 07/08/92. Between Knowles Electronics, Inc. and Siemens
Audiological Technik, Erlangen.
Non-Exclusive Patent License Agreement, dated 01/15/93, amended 02/16/93.
Between Synchro-Start Products, Inc. and Trombetta Corporation.
Licensing Agreement, dated 06/04/93. Between Gas Research Institute and
Synchro-Start Products, Inc., successor to DAI Technologies, Inc.
License Agreement, dated 11/01/93. Between Claritas, Inc. and Knowles
Electronics, Inc.
Cross License Agreement, dated 04/06/94. Between Knowles Electronics, Inc. and
BML Limited Partnership.
License Agreement, dated 04/15/97. Between Phonic Ear and Knowles Electronics,
Inc.
Settlement Release and License Agreement, dated 07/07/97. Between Knowles
Electronics, Inc. and Exar Corporation.
Agreement, dated 12/05/97. Between Knowles Electronics, Inc. and Institute of
Microelectronics.
Software Development Agreement, dated 01/23/98. Between Knowles Electronics,
Inc. and Daystrom Software Ltd.
Joint Technology Support Agreement, dated 06/01/98. Between Knowles Electronics,
Inc. and *.
Joint Development Agreement, dated 06/24/98. Between Etymotic Research, Inc.
and Ruf North America, a division of Synchro-Start Products, Inc.
*Confidential Information omitted and filed separately with the Securities and
Exchange Commission.
Page 1 of 2
<PAGE> 43
Consent to Use Agreement, dated 07/15/98. Between Deltek Systems. Inc. and
Knowles Electronics, Inc.
Pegasus Project Research Agreement, dated 01/14/99, and attachments thereto.
Between Knowles Electronics, Inc. and Nova Southeastern University
Agreement, dated 12/21/98. Between Knowles Electronics Inc. and Siemens Hearing
Instruments, Inc.
Pegasus Project Software Development Agreement. Between Knowles Electronics,
Inc. and Daystrom Software Ltd. [Pending]
Agreement, dated 06/30/90. Between Knowles Electronics, Inc. and Knowles
Electronics Co.
License Agreement, dated 01/0l/94. Between Knowles Electronics, Inc. and
Knowles Electronics (Malaysia) SDN. BHD.
Agreement, dated 06/30/90, amended 11/19/90. Between Knowles Electronics, Inc.
and Knowles Electronics Taiwan, Ltd.
License and Support Agreements with Ingres Corporation
IBM Lotus Software License
Ceridian (formerly Control Data Corporation) License Agreements
Novell Netware 5 License Agreement
Internet Services Agreement with KSI-Net56
Network Services Agreement with Infonet
Network Services Agreement with Equant (pending; will replace Infonet)
Microsoft License for Speech Recognition Engine Version 4.OA
Pro E
ISO Expert
Manman System
Page 2 of 2
<PAGE> 44
SCHEDULE IV
PATENTS & PATENT APPLICATIONS
Knowles Electronics, Inc. (pp. 2-6)
Knowles IC Group (pp. 7,8)
Synchro-Start Products, Inc. (p.9)
Page 1 of 9
<PAGE> 45
KNOWLES ELECTRONICS, INC.
PATENT ASSETS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Denmark (167,299) (10/04/93) Acoustic Transducer with Improved Electrode Spacing
---------------------------------------------------------------------------------------------------------------
Switzerland (676,770) (2/28/91) Acoustic Transducer with Improved Electrode Spacing
---------------------------------------------------------------------------------------------------------------
United (2,200,013) (4/11/90) Acoustic Transducer with Improved Electrode Spacing
Kingdom
---------------------------------------------------------------------------------------------------------------
Germany (3,790,540) (11/14/91) Acoustic Transducer with Improved Electrode Spacing
(related to RE 33,718)
---------------------------------------------------------------------------------------------------------------
U.S. (4,807,612) (2/28/89) Passive Ear Protector
---------------------------------------------------------------------------------------------------------------
Denmark 6254/88 11/09/88 Passive Ear Protector
---------------------------------------------------------------------------------------------------------------
Japan (1,729,285) (1/29/93) Passive Ear Protector
---------------------------------------------------------------------------------------------------------------
U.S. (4,450,930) (5/29/84) Microphone with Stepped Response
---------------------------------------------------------------------------------------------------------------
U.S. (4,272,654) (6/09/81) Acoustic Transducer of Improved Construction
---------------------------------------------------------------------------------------------------------------
U.S. (4,592,087) (5/27/86) Class D Hearing Aid Amplifier
---------------------------------------------------------------------------------------------------------------
Canada (1,250,362) (2/21/89) Class D Hearing Aid Amplifier
---------------------------------------------------------------------------------------------------------------
Denmark 2097/86 5/06/86 Class D Hearing Aid Amplifier
---------------------------------------------------------------------------------------------------------------
Holland (190,946) (1/04/94) Class D Hearing Aid Amplifier
---------------------------------------------------------------------------------------------------------------
United (2,188,208) Class D Hearing Aid Amplifier
Kingdom
---------------------------------------------------------------------------------------------------------------
Japan (1,759,980) (5/20/93) Hearing Aid
---------------------------------------------------------------------------------------------------------------
U.S. (4,689,819) (8/25/87) Class D Hearing aid Amplifier
---------------------------------------------------------------------------------------------------------------
U.S. (4,815,560) (3/28/89) Microphone with Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
EPO (0-319-010) (2/16/94) Microphone with Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
Denmark (170,128) (5/29/95) Microphone with Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
Japan (1,814,726) (1/18/94) Microphone with Frequency Pre-Emphasis Channel Plate
---------------------------------------------------------------------------------------------------------------
U.S. (4,837,833) (6/06/89) Microphone With Frequency Pre-Emphasis Channel Plate
---------------------------------------------------------------------------------------------------------------
Denmark (168,724) (5/24/94) Microphone with Frequency Pre-Emphasis Channel Plate
---------------------------------------------------------------------------------------------------------------
Japan (2,510,714) (4/16/96) Microphone with Frequency Pre-Emphasis Channel Plate
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 9
<PAGE> 46
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. (RE 33,718) (10/15/91) Acoustic Transducer with Improved Electrode Spacing
(reissued from
USPN 4,730,283)
---------------------------------------------------------------------------------------------------------------
U.S. (5,193,116) (3/09/93) Hearing Aid Output Transducer with Self-Contained
Amplifier
---------------------------------------------------------------------------------------------------------------
Denmark 180/92 2/13/92 Class D Hearing Aid Amplifier
---------------------------------------------------------------------------------------------------------------
Germany (3,645,255) (6/09/94) Class D Hearing Aid Amplifier (related to U.S. Patent
No. 4,689,819)
---------------------------------------------------------------------------------------------------------------
U.S. (5,222,050) (6/22/93) Water-Resistant Transducer Housing with Hydrophobic Vent
---------------------------------------------------------------------------------------------------------------
U.S. (5,408,534) (4/18/95) Electret and Microphone Assembly
---------------------------------------------------------------------------------------------------------------
U.S. (5,319,717) (6/07/94) Hearing Aid Microphone with Modified High-Frequency
Response
---------------------------------------------------------------------------------------------------------------
Germany (DE 3880965T2) (5/12/93) Passive Ear Protector (related to U.S. Patent No.
4,807,612)
---------------------------------------------------------------------------------------------------------------
France (0-315-942) (4/22/93) Passive Ear Protector
---------------------------------------------------------------------------------------------------------------
United (0-315-942) (5/12/93) Passive Ear Protector
Kingdom
---------------------------------------------------------------------------------------------------------------
Italy (0-315-942) (5/12/93) Passive Ear Protector
---------------------------------------------------------------------------------------------------------------
Netherlands (0-315-942) (7/30/93) Passive Ear Protector
---------------------------------------------------------------------------------------------------------------
Germany (P68910139.2-00) (10/06/93) Microphone with Acoustic Frequency Pre-Emphasis
(related to U.S. Patent No. 4,837,833)
---------------------------------------------------------------------------------------------------------------
United (0-326-040) (10/06/93) Microphone with Acoustic Frequency Pre-Emphasis
Kingdom
---------------------------------------------------------------------------------------------------------------
Switzerland (0-326-040) (10/06/93) Microphone with Acoustic Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
Netherlands (0-326-040) (10/06/93) Microphone with Acoustic Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
Germany (DE 38878412) (6/22/94) Microphone with Frequency Pre-Emphasis (related to U.S.
Patent No. 5,025,061)
---------------------------------------------------------------------------------------------------------------
Netherlands (0-319-010) (6/22/94) Microphone with Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
Switzerland (0-319-010) (6/22/94) Microphone with Frequency Pre-Emphasis
---------------------------------------------------------------------------------------------------------------
United (0-319-010) (6/22/94) Microphone with Frequency Pre-Emphasis
Kingdom
---------------------------------------------------------------------------------------------------------------
U.S. (D 360,691) (7/25/95) Design - Hearing Aid Receiver
---------------------------------------------------------------------------------------------------------------
U.S. (D 360,948) (8/01/95) Design - Hearing Aid Receiver
---------------------------------------------------------------------------------------------------------------
U.S. (D 360,949) (8/01/95) Design - Hearing Aid Receiver
---------------------------------------------------------------------------------------------------------------
India 270/Del/94 (3/08/94) Miniature Acoustic Hearing Aid Module for Emplacement
Completely Within an Ear Canal
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 9
<PAGE> 47
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Japan (D969,496) (9/02/96) Design - Hearing Aid Receiver
---------------------------------------------------------------------------------------------------------------
Japan (D969,496-1) (8/02/96) Design - Hearing Aid Receiver
---------------------------------------------------------------------------------------------------------------
Japan (969,497) (9/02/96) Design - Hearing Aid Receiver (Slant View, Figure 1)
---------------------------------------------------------------------------------------------------------------
U.S. (5,548,658) (8/20/96) Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
Japan 5-515669 9/05/94 Electret Microphone Assembly and Method of Manufacture
---------------------------------------------------------------------------------------------------------------
India 1493/Del/94 11/22/94 Acoustic Module for a Hearing Aid
---------------------------------------------------------------------------------------------------------------
India 1492/Del/94 11/22/94 Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
U.S. (5,692,060) (11/25/97) Unidirectional Microphone
---------------------------------------------------------------------------------------------------------------
Japan 6-502312 2/16/93 Water-Resistant Receiver with Hydrophobic Vent
---------------------------------------------------------------------------------------------------------------
Japan 5-519673 9/14/93 Hearing Aid Microphone with Modified High-Frequency
Response
---------------------------------------------------------------------------------------------------------------
Australia (677,599) (5/01/97) Microphone with Modified High-Frequency Response
---------------------------------------------------------------------------------------------------------------
Japan 7-508283 8/31/94 Receiver for a Hearing Aid
---------------------------------------------------------------------------------------------------------------
United (0-664-942) (2/05/97) Hearing Aid Microphone with Modified High-Frequency
Kingdom Response
---------------------------------------------------------------------------------------------------------------
Germany (69308027.2-08) (2/05/97) Hearing Aid Microphone with Modified High-Frequency
Response (related to U.S. Patent No. 5,319,717)
---------------------------------------------------------------------------------------------------------------
Denmark (0-664-942) (2/05/97) Hearing Aid Microphone with Modified High-Frequency
Response
---------------------------------------------------------------------------------------------------------------
Netherlands (0-664-942) (2/05/97) Hearing Aid Microphone with Modified High-Frequency
Response
---------------------------------------------------------------------------------------------------------------
United (0-646-307) (9/04/96) Water-Resistant Receiver with Hydrophobic Vent
Kingdom
---------------------------------------------------------------------------------------------------------------
U.S. 08/890,075 7/09/97 Shock-Resistant Electroacoustic Transducer
---------------------------------------------------------------------------------------------------------------
U.S. 08/943,669 10/15/97 Receiver and Method of Construction
---------------------------------------------------------------------------------------------------------------
PCT PCT/US98/02347 2/06/98 Microphone with Modified High-Frequency Response
---------------------------------------------------------------------------------------------------------------
U.S. 29/083,343 2/06/98 Design - Microphone Housing
---------------------------------------------------------------------------------------------------------------
U.S. 29/083,329 2/06/98 Design - Microphone Housing
---------------------------------------------------------------------------------------------------------------
U.S. 29/083,333 2/06/98 Design - Microphone Housing
---------------------------------------------------------------------------------------------------------------
U.S. 60/076,571 3/02/98 Mitigating R.F. Interference in Hearing Aids
---------------------------------------------------------------------------------------------------------------
U.S. 09/050,508 3/30/98 Miniature Transducer
---------------------------------------------------------------------------------------------------------------
U.S. 60/080,077 3/31/98 Microphone with Reduced Sensitivity
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4 of 9
<PAGE> 48
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. 60/081,709 4/14/98 System for Separating a Distinctive Sound
---------------------------------------------------------------------------------------------------------------
PCT PCT/US98/14053 7/07/98 Shock-Resistant Electroacoustic Transducer
---------------------------------------------------------------------------------------------------------------
PCT PCT/US98/15213 7/23/98 Universal Voice-Operated Command and Control Engine
---------------------------------------------------------------------------------------------------------------
Taiwan 87112170 7/24/98 Universal Voice-Operated Command and Control Engine
---------------------------------------------------------------------------------------------------------------
U.S. 60/097,926 8/25/98 A&M for Matching Response of Microphone in Magnitude and
Phase
---------------------------------------------------------------------------------------------------------------
Germany 19847379.6 10/14/98 Receiver and Method of Construction (related to U.S.
Serial No. 08/943,669)
---------------------------------------------------------------------------------------------------------------
United 9821838.1 10/08/98 Receiver and Method of Construction
Kingdom
---------------------------------------------------------------------------------------------------------------
Netherlands 1010320 10/14/98 Receiver and Method of Construction
---------------------------------------------------------------------------------------------------------------
Denmark PA 1998/01303 10/14/98 Receiver and Method of Construction
---------------------------------------------------------------------------------------------------------------
PCT PCT/US98/25950 12/07/98 Automatic System for Optimizing Hearing Aid Adjustments
---------------------------------------------------------------------------------------------------------------
U.S. 09/193,012 11/16/98 M&A for Matching Response of Microphone in Magnitude and
Phase
---------------------------------------------------------------------------------------------------------------
Germany (P69504665.9-08) (9/09/98) Acoustic Transducer (related to U.S. Patent
No. 5,548,658)
---------------------------------------------------------------------------------------------------------------
Denmark (0-764-387) (9/09/98) Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
United (0-764-387) (9/09/98) Acoustic Transducer
Kingdom
---------------------------------------------------------------------------------------------------------------
Netherlands (0/764-387) (9/09/98) Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
United 9905081.7 3/08/99 Miniature Transducer
Kingdom
---------------------------------------------------------------------------------------------------------------
Germany 19914235.1 3/29/99 Miniature Transducer (related to U.S. Serial
No. 09/050,508)
---------------------------------------------------------------------------------------------------------------
Denmark PA-19999-00343 3/11/99 Miniature Transducer
---------------------------------------------------------------------------------------------------------------
Netherlands 1011639 3/27/99 Miniature Transducer
---------------------------------------------------------------------------------------------------------------
EPO 99301500.7 5/21/99 Mitigating R.F. Interference in Hearing Aids
---------------------------------------------------------------------------------------------------------------
U.S. (5,250,926) (10/05/93) Potentiometer With Improved Seal (assigned from
Wilbrecht)
---------------------------------------------------------------------------------------------------------------
U.S. (5,588,064) (12/24/96) Hearing Aid Battery Cover Switch (assigned from
Wilbrecht)
---------------------------------------------------------------------------------------------------------------
U.S. Not Assigned 6/07/99 Potentiometer Detent
---------------------------------------------------------------------------------------------------------------
PCT PCT/US99/07222 3/31/99 Microphone with Reduced R.F. Sensitivity
---------------------------------------------------------------------------------------------------------------
U.S. (4,956,868) (9/11/90) Magnetically-Shielded Electromagnetic Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5 of 9
<PAGE> 49
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Germany (69021165) (8/31/95) Magnetically-Shielded Electromagnetic Acoustic Transducer
(related to U.S. Patent No. 4,956,868)
---------------------------------------------------------------------------------------------------------------
Denmark (0-424-916) (7/26/95) Magnetically-Shielded Electromagnetic Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
United (0-424-916) (7/26/95) Magnetically-Shielded Electromagnetic Acoustic Transducer
Kingdom
---------------------------------------------------------------------------------------------------------------
Netherlands (0-424-916) (7/26/95) Magnetically-Shielded Electromagnetic Acoustic Transducer
---------------------------------------------------------------------------------------------------------------
U.S. (4,867,267) (9/19/89) High LF Sensitivity Hearing Aid Traducer
---------------------------------------------------------------------------------------------------------------
U.S. (5,083,095) (1/21/92) Impedance Conversion Amplifier With Suppressed Ripple
---------------------------------------------------------------------------------------------------------------
U.S. (5,068,901) (11/26/91) Electret Assembly for Electroacoustic Transducer
---------------------------------------------------------------------------------------------------------------
U.S. (5,335,286) (8/02/94) Electret Assembly for Electroacoustic Transducer
---------------------------------------------------------------------------------------------------------------
Germany (69300380) (9/28/95) Electret Assembly for Electroacoustic Transducer (related
to U.S. Patent No. 5,335,286)
---------------------------------------------------------------------------------------------------------------
Switzerland/ (0-556-792) (8/23/95) Electret Assembly for Electroacoustic Transducer
Liechtenstein
---------------------------------------------------------------------------------------------------------------
Netherlands (0-556-792) (8/23/95) Electret Assembly for Electroacoustic Transducer
---------------------------------------------------------------------------------------------------------------
United (0-556-792) (8/23/95) Electret Assembly for Electroacoustic Transducer
Kingdom
---------------------------------------------------------------------------------------------------------------
U.S. (5,337,011) (8/09/94) Pre-Amplifier for EG Hearing Aid Electret Microphone
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6 of 9
<PAGE> 50
KNOWLES IC GROUP
PATENT ASSETS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. 07/853,488 3/18/92 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
EPO 561566 3/11/93 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
Australia (659,290) (10/03/95) Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
Canada 2,092,627 3/12/93 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
Finland 931183 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
Japan 58161/93 3/18/93 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
Norway 93.0970 3/17/93 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
U.S. (5,559,892) (9/24/96) MOS Circuit With Dynamically Reduced Voltage as for Use
in an Output Buffer of a Hearing Aid
---------------------------------------------------------------------------------------------------------------
U.S. (5,490,220) (2/06/96) Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
U.S. (5,446,413) (8/29/95) Impedance circuit for a Miniature Hearing Aid
---------------------------------------------------------------------------------------------------------------
EPO 95919010.9 1/05/96 Solid State Condenser and Microphone Apparatus
---------------------------------------------------------------------------------------------------------------
U.S. 08/576,676 12/21/95 Solid State Condenser and Microphone Devices
---------------------------------------------------------------------------------------------------------------
U.S. (5,870,482) (2/09/99) Miniature Silicon Condenser Microphone
---------------------------------------------------------------------------------------------------------------
U.S. (5,740,261) (4/14/98) Miniature Silicon Condenser Microphone
---------------------------------------------------------------------------------------------------------------
EPO 95920492.8 2/08/96 Impedance Circuit for a Miniature Hearing Aid
---------------------------------------------------------------------------------------------------------------
U.S. (5,861,779) (1/09/99) Impedance Circuit for a Miniature Hearing Aid
---------------------------------------------------------------------------------------------------------------
PCT PCT/US98/03144 2/19/98 Miniature Silicon Condenser Microphone
---------------------------------------------------------------------------------------------------------------
U.S. 60/088,048 6/05/98 Solid-State Receiver
---------------------------------------------------------------------------------------------------------------
Netherlands (0-753-239) (9/02/98) MOS Circuit With Dynamically Reduced Threshold Voltage
---------------------------------------------------------------------------------------------------------------
Switzerland (0-753-239) (9/02/98) MOS Circuit With Dynamically Reduced Threshold Voltage
---------------------------------------------------------------------------------------------------------------
Denmark (0-753-239) (9/02/98) MOS Circuit With Dynamically Reduced Threshold Voltage
---------------------------------------------------------------------------------------------------------------
U.S. 60/103,415 (10/07/98) Digital Hearing Aid Microphone
---------------------------------------------------------------------------------------------------------------
Germany (69504485) (9/02/98) MOS Circuit With Dynamically Reduced Threshold Voltage
(related to U.S. Patent No. 5,559,892)
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7 of 9
<PAGE> 51
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United (0-753-239) (9/02/98) MOS Circuit with Dynamically Reduced Threshold Voltage
Kingdom
--------------------------------------------------------------------------------------------------------------
EPO 97948325.2 11/20/97 Miniature Silicon Condenser Microphone
--------------------------------------------------------------------------------------------------------------
EPO 98908587.3 2/19/98 Miniature Silicon Condenser Microphone
--------------------------------------------------------------------------------------------------------------
Japan Not Assigned 2/19/98 Miniature Silicon Condenser Microphone
--------------------------------------------------------------------------------------------------------------
Singapore Not Assigned 2/19/98 Miniature Silicon Condenser Microphone
--------------------------------------------------------------------------------------------------------------
PCT PCT/US99/11761 5/27/99 Solid-State Receiver
--------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 9
<PAGE> 52
SYNCHRO-START PRODUCTS, INC.
PATENT ASSETS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
APPLN. NO. FILING DATE
COUNTRY (PATENT NO.) (ISSUE DATE) TITLE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. (5,592,356) (1/07/97) Dual Coil Actuator with Timing Circuit
--------------------------------------------------------------------------------------------------------------
U.S. (D378,513) (3/18/97) Design - Solenoid Assembly
--------------------------------------------------------------------------------------------------------------
U.S. 08/940,558 9/30/97 Solenoid Assembly
--------------------------------------------------------------------------------------------------------------
U.S. (4,407,517) (10/04/83) Protective Boot for Solenoid
--------------------------------------------------------------------------------------------------------------
U.S. (4,922,873) (5/08/90) Electromechanical Run/Stop Actuator for Diesel Engine
--------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9 of 9
<PAGE> 53
SCHEDULE V
TRADEMARK REGISTRATIONS & APPLICATIONS
Synchro-Start Products, Inc. (pp. 2,3)
Knowles Electronics, Inc. (4-6)
Page 1 of 6
<PAGE> 54
SYNCHRO-START PRODUCTS, INC.
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
COUNTRY MARK REG. NO. REGISTERED
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. ADAM (Stylized) 1,782,546 7/20/93
----------------------------------------------------------------------------------------------------------
U.S. APECS 2,096,279 9/16/97
----------------------------------------------------------------------------------------------------------
U.S. COIL COMMANDER 2,111,637 11/11/97
----------------------------------------------------------------------------------------------------------
U.S. MINI-GEN 1,121,357 7/3/79
----------------------------------------------------------------------------------------------------------
U.S. PRO-LEAN 1,781,250 7/13/93
----------------------------------------------------------------------------------------------------------
Canada SS (Stylized) 140,791 6/11/65
----------------------------------------------------------------------------------------------------------
U.S. SYNCHRO-START 685,480 9/22/59
----------------------------------------------------------------------------------------------------------
Canada SYNCHRO-START (Stylized) 142,477 10/29/65
----------------------------------------------------------------------------------------------------------
Benelux SYNCHRO-START & Design 407,385 2/28/85
----------------------------------------------------------------------------------------------------------
Canada SYNCHRO-START & Design 142,477 10/29/65
----------------------------------------------------------------------------------------------------------
China SYNCHRO-START & Design 930,483 1/14/97
----------------------------------------------------------------------------------------------------------
China SYNCHRO-START & Design 934,174 1/21/97
----------------------------------------------------------------------------------------------------------
Taiwan SYNCHRO-START & Design 341,602 11/16/86
----------------------------------------------------------------------------------------------------------
Canada SYNCHRO-START & Design 312,726 3/28/86
----------------------------------------------------------------------------------------------------------
Japan SYNCHRO-START & Design 2,705,757 3/31/95
----------------------------------------------------------------------------------------------------------
U.K. SYNCHRO-START & Design B1237632 3/12/85
----------------------------------------------------------------------------------------------------------
U.K. SYNCHRO-START & Design B1493510 8/5/94
----------------------------------------------------------------------------------------------------------
Australia SYNCHRO-START PRODUCTS & Design B442,816
----------------------------------------------------------------------------------------------------------
Korea SYNCHRO-START PRODUCTS & Design 339,146 5/7/96
----------------------------------------------------------------------------------------------------------
Korea SYNCHRO-START PRODUCTS & Design 339,145 5/7/96
----------------------------------------------------------------------------------------------------------
Canada SYNCHRO-START PRODUCTS, INC. 312,726 3/28/86
& Design
----------------------------------------------------------------------------------------------------------
Italy SYNCHRO-START PRODUCTS, INC. 452,380 10/13/86
& Design
----------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 6
<PAGE> 55
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
COUNTRY MARK REG. NO. REGISTERED
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. SYNCHRO-START PRODUCTS, INC. & Design 910,380 3/23/71
---------------------------------------------------------------------------------------------------------
U.S. SISONIC 2,246,496 5/18/99
---------------------------------------------------------------------------------------------------------
U.S. TRANSLATOR 1,811,930 12/21/93
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 6
<PAGE> 56
<TABLE>
<CAPTION>
KNOWLES ELECTRONICS, INC.
Trademark Registrations
---------------------------------------------------------------------------------------------------------
COUNTRY MARK REG. NO. REGISTERED
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia DELTEK 720,764
---------------------------------------------------------------------------------------------------------
China DELTEK 1,137,488 12/21/97
---------------------------------------------------------------------------------------------------------
Korea DELTEK 410,155 7/15/98
---------------------------------------------------------------------------------------------------------
Taiwan DELTEK 800,755 4/16/98
---------------------------------------------------------------------------------------------------------
Australia K B305,914 3/30/77
---------------------------------------------------------------------------------------------------------
Benelux K 346,402 3/31/77
---------------------------------------------------------------------------------------------------------
Canada K 238,455 12/21/79
---------------------------------------------------------------------------------------------------------
China K 1,066,165 7/28/97
---------------------------------------------------------------------------------------------------------
Denmark K 1193-1962 6/23/62
---------------------------------------------------------------------------------------------------------
Germany K 1,015,250 3/11/81
---------------------------------------------------------------------------------------------------------
Japan K 1,894,852 4/25/86
---------------------------------------------------------------------------------------------------------
Singapore K 2769/89 5/4/89
---------------------------------------------------------------------------------------------------------
Sweden K 160,278 8/5/77
---------------------------------------------------------------------------------------------------------
Switzerland K 287,764 3/22/77
---------------------------------------------------------------------------------------------------------
Taiwan K 326,751 5/15/86
---------------------------------------------------------------------------------------------------------
U.K. K & Design 1,076,481 3/31/77
---------------------------------------------------------------------------------------------------------
U.S. K & Design 1,007,572 3/25/75
---------------------------------------------------------------------------------------------------------
Germany K & KNOWLES 990,965 9/26/79
---------------------------------------------------------------------------------------------------------
Australia KEMAR A281,980 9/24/74
---------------------------------------------------------------------------------------------------------
Benelux KEMAR 328,349 9/27/74
---------------------------------------------------------------------------------------------------------
Canada KEMAR 208,322 7/18/75
---------------------------------------------------------------------------------------------------------
Denmark KEMAR 3026-1975 8/1/75
---------------------------------------------------------------------------------------------------------
Germany KEMAR 944,946 5/26/76
---------------------------------------------------------------------------------------------------------
Japan KEMAR 1,269,088 5/16/77
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 4 of 6
<PAGE> 57
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
COUNTRY MARK REG. NO. REGISTERED
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sweden KEMAR 151,144 4/5/75
---------------------------------------------------------------------------------------------------------
Switzerland KEMAR 273,844 9/27/74
---------------------------------------------------------------------------------------------------------
U.K. KEMAR 1,035,813 9/25/74
---------------------------------------------------------------------------------------------------------
U.S. KEMAR 1,020,978 9/23/75
---------------------------------------------------------------------------------------------------------
Argentina KNOWLES 1,656,708 6/26/68
---------------------------------------------------------------------------------------------------------
Brazil KNOWLES 450,715 6/13/72
---------------------------------------------------------------------------------------------------------
China KNOWLES 887,679 10/21/96
---------------------------------------------------------------------------------------------------------
China KNOWLES 890,170 10/28/96
---------------------------------------------------------------------------------------------------------
Denmark KNOWLES 1837-1963 8/17/63
---------------------------------------------------------------------------------------------------------
France KNOWLES 1,567,459 12/5/89
---------------------------------------------------------------------------------------------------------
Germany KNOWLES 767,970 11/30/62
---------------------------------------------------------------------------------------------------------
Italy KNOWLES 435,877 6/23/86
---------------------------------------------------------------------------------------------------------
Japan KNOWLES 602,744 12/24/62
---------------------------------------------------------------------------------------------------------
Korea KNOWLES 335,547 3/20/96
---------------------------------------------------------------------------------------------------------
Malaysia KNOWLES 89/02647 5/5/89
---------------------------------------------------------------------------------------------------------
Singapore KNOWLES 2770/89 5/4/89
---------------------------------------------------------------------------------------------------------
Taiwan KNOWLES 326,747 5/15/86
---------------------------------------------------------------------------------------------------------
U.S. KNOWLES 743,319 1/8/63
---------------------------------------------------------------------------------------------------------
China KNOWLES (Block & Script) 890,169 10/28/96
---------------------------------------------------------------------------------------------------------
China KNOWLES (Block & Script) 887,678 10/21/96
---------------------------------------------------------------------------------------------------------
U.K. KNOWLES (Stylized) 848,916 5/10/63
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 5 of 6
<PAGE> 58
KNOWLES ELECTRONICS, INC.
TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
COUNTRY MARK APPL. NO. FILED
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. DELTEK 75-216,968 12/23/96
---------------------------------------------------------------------------------------------------------
U.S. DELTEK and design 75-216,785 12/23/96
---------------------------------------------------------------------------------------------------------
Canada DELTEK 827,586 11/1/96
---------------------------------------------------------------------------------------------------------
European
Community DELTEK 405,255 11/11/96
---------------------------------------------------------------------------------------------------------
Malaysia K 89/02648 5/5/89
---------------------------------------------------------------------------------------------------------
U.S. EMKAY NONE YET 6/2/99
---------------------------------------------------------------------------------------------------------
U.S. EMKAY & DESIGN NONE YET 6/2/99
---------------------------------------------------------------------------------------------------------
European EMKAY 1175959 5/18/99
Community
---------------------------------------------------------------------------------------------------------
European EMKAY & DESIGN 1179415 5/18/99
Community
---------------------------------------------------------------------------------------------------------
Taiwan EMKAY 88026111 5/29/99
---------------------------------------------------------------------------------------------------------
Taiwan EMKAY & DESIGN 88026103 5/29/99
---------------------------------------------------------------------------------------------------------
China EMKAY NONE YET Filing in
Progress
---------------------------------------------------------------------------------------------------------
China EMKAY & DESIGN NONE YET Filing in
Progress
---------------------------------------------------------------------------------------------------------
Australia KNOWLES (Stylized) 755,849 2/24/98
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 6 of 6
<PAGE> 59
Annex 1 to the
Security Agreement
LOCKBOX AND DEPOSITORY AGREEMENT dated as of
[ ], among [Name of Grantor], a [ ] corporation
(the "Grantor"), THE CHASE MANHATTAN BANK, a New York banking
corporation ("Chase"), as Administrative Agent (in such
capacity, the "Administrative Agent") for the Secured Parties
(such term, and each other capitalized term used but not
defined herein, having the meaning given it in the Security
Agreement referred to below) and [ ], a
[ ] banking corporation (the
"Sub-Agent").
A. Reference is made to (a) the Credit Agreement dated as of June 28,
1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Parent Borrower, the lenders from time to time
party thereto (the "Lenders"), Chase, as Administrative Agent for the Lenders,
Swingline Lender and as issuing bank (in such capacity, the "Issuing Bank") and
Morgan Stanley Senior Funding, Inc., as Syndication Agent, (b) the Parent
Guarantee Agreement dated as of June 30, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Parent Guarantee Agreement"),
between the Parent Borrower and the Administrative Agent and (c) the
Subsidiary Guarantee Agreement dated as of June 30, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Subsidiary Guarantee
Agreement"; and, collectively with the Parent Guarantee Agreement, the
"Guarantee Agreements"), among the Subsidiary Guarantors and the Administrative
Agent.
B. The Sub-Agent has agreed to act as collection sub-agent of the
Administrative Agent to receive and forward payments with respect to the
Accounts Receivable and Inventory on the terms and subject to the conditions
set forth herein.
<PAGE> 60
NOW, THEREFORE, the parties hereto agree as follows:
1 The Administrative Agent hereby appoints the Sub-Agent as its
collection sub-agent under the Security Agreement and authorizes the Sub-Agent,
on the terms and subject to the conditions set forth herein, to receive
payments in respect of Collateral consisting of Accounts Receivable and
Inventory.
2 The Sub-Agent has established and shall maintain deposit account
number [ ] (including all subaccounts thereof) for the benefit of the
Administrative Agent (such account being called the "Collection Deposit
Account"). The Collection Deposit Account shall be designated with the title
"The Chase Manhattan Bank, as Administrative Agent under the [ ]
Security Agreement dated as of [ ]" (or a similar title). [Subject to
the Sub-Agent's Terms for Remittance Banking (Lockbox) Services attached hereto
as Exhibit A, to the extent that the terms thereof relate to procedures or fees
and to the extent not inconsistent with the terms hereof,] all payments
received by the Sub-Agent in Lockbox Number [ ] and [ ] or any
replacements in respect thereof (the "Lockboxes") shall be promptly deposited
in the Collection Deposit Account and shall not be commingled with other funds.
All funds at any time on deposit in the Collection Deposit Account shall be
held by the Sub-Agent for application in accordance with the terms of this
Agreement. The Sub-Agent agrees to give the Administrative Agent prompt notice
if the Collection Deposit Account shall become subject to any writ, judgment,
warrant of attachment, execution or similar process. As security for the
payment and performance of the Obligations, the Grantor hereby confirms and
pledges, assigns and transfers to the Administrative Agent, and hereby creates
and grants to the Administrative Agent, a security interest in the Collection
Deposit Account, all property and assets held therein and all Proceeds thereof.
3 The Collection Deposit Account shall be under the sole dominion
and control of the Administrative Agent, who shall possess all right, title and
interest in all of the items from time to time in the Collection Deposit
Account and their Proceeds. The Sub-Agent shall be the Administrative Agent's
agent for the purpose of holding and collecting such items and their Proceeds.
Neither the Grantor nor any Person or entity claiming by, through or under the
Grantor shall have any right, title or interest in, or control over the use of,
or any right to withdraw any amount from, the Collection Deposit Account,
except that the Administrative Agent shall have the right to withdraw amounts
from the Collection Deposit Account. The Sub-Agent shall be entitled to rely
on, and
<PAGE> 61
3
shall act in accordance with, all instructions given to it by the
Administrative Agent with respect to the Collection Deposit Account. The
Administrative Agent shall have the sole power to agree with the Sub-Agent as
to specifications for Lockbox services.
4 Upon receipt of written, telecopy or telephonic notice (which, in
the case of telephonic notice, shall be promptly confirmed in writing or by
telecopy) from the Administrative Agent, the Sub-Agent shall, if so directed in
such notice (subject to the Sub-Agent's right to request that the
Administrative Agent furnish, in form satisfactory to the Sub-Agent, signature
cards and/or other appropriate documentation), promptly transmit or deliver to
the Administrative Agent at the office specified in paragraph 12 hereof (or
such other office as the Administrative Agent shall specify) (a) all funds, if
any, then on deposit in, or otherwise to the credit of, the Collection Deposit
Account (provided that funds on deposit that are subject to collection may be
transmitted promptly upon availability for withdrawal), (b) all checks, drafts
and other instruments for the payment of money received in the Lockboxes and in
the possession of the Sub-Agent, without depositing such checks, drafts or
other instruments in the Collection Deposit Account or any other account and
(c) any checks, drafts and other instruments for the payment of money received
in the Lockboxes by the Sub-Agent after such notice, in whatever form received,
provided that the Sub-Agent may retain a reasonable reserve in a separate
deposit account with the Sub-Agent in respect of unpaid fees and amounts which
may be subject to collection.
<PAGE> 62
4
5 The Sub-Agent is hereby instructed and authorized to transfer by
wire transfer or Automated Clearing House ("ACH") from the Collection Deposit
Account all funds that are from time to time deposited or otherwise credited to
such account (after such funds become available to the Sub-Agent, either
through the Federal Reserve System or other clearing mechanism used by the
Sub-Agent's branch and to the extent such funds exceed $[1,000]), to such
account as the Administrative Agent may from time to time direct, provided
that, unless the Administrative Agent otherwise instructs, no such transfer
shall be required if such transfer would result in the transfer of an amount
less than $[1,000]. Unless otherwise directed by the Administrative Agent,
such funds shall be transferred on each business day by wire transfer or ACH
and shall be identified as follows:
The Chase Manhattan Bank
ABA Number
For credit to The Chase Manhattan Bank, New York, NY 10017
Account Number
Re:[ ] Cash Collateral Account
These transfer instructions and authorizations may not be amended,
altered or revoked by the Grantor without the prior written consent of the
Administrative Agent. The Administrative Agent, however, shall have the right
to amend or revoke these transfer instructions and authorizations at any time
without the consent of the Grantor.
6 The Sub-Agent shall furnish the Administrative Agent with monthly
statements setting forth the amounts deposited in the Collection Deposit
Account and all transfers and withdrawals therefrom, and shall furnish such
other information at such times as shall be reasonably requested by the
Administrative Agent.
7 The fees for the services of the Sub-Agent shall be mutually
agreed upon between the Grantor and the Sub-Agent and shall be the obligation
of the Grantor; provided, however, that, notwithstanding the terms of any
agreement under which the Collection Deposit Account shall have been
established with the Sub-Agent, the Grantor and the Sub-Agent agree not to
terminate such Collection Deposit Account for any reason (including the failure
of the Grantor to pay such fees) for so
<PAGE> 63
5
long as this Agreement shall remain in effect (it being understood that the
foregoing shall not be construed to prohibit the resignation of the Sub-Agent
in accordance with paragraph 9 below). Neither the Administrative Agent nor
the Secured Parties shall have any liability for the payment of any such fees.
The Sub-Agent may perform any of its duties hereunder by or through its agents,
officers or employees.
8 The Sub-Agent hereby represents and warrants that (a) it is a
banking corporation duly organized, validly existing and in good standing under
the laws of [ ] and has full corporate power and authority
under such laws to execute, deliver and perform its obligations under this
Agreement and (b) the execution, delivery and performance of this Agreement by
the Sub-Agent have been duly and effectively authorized by all necessary
corporate action and this Agreement has been duly executed and delivered by the
Sub-Agent and constitutes a valid and binding obligation of the Sub-Agent
enforceable in accordance with its terms.
9 The Sub-Agent may resign at any time as Sub-Agent hereunder by
delivery to the Administrative Agent of written notice of resignation not less
than thirty days prior to the effective date of such resignation. The Sub-Agent
may be removed by the Administrative Agent at any time, with or without cause,
by written, telecopy or telephonic notice (which, in the case of telephonic
notice, shall be promptly confirmed in writing or by telecopy) of removal
delivered to the Sub-Agent. Upon receipt of such notice of removal, or
delivery of such notice of resignation, the Sub-Agent shall (subject to the
Sub-Agent's right to request that the Administrative Agent furnish, in form
satisfactory to the Sub-Agent, signature cards and/or other appropriate
documentation), promptly transmit or deliver to the Administrative Agent at the
office specified in paragraph 12 (or such other office as the Administrative
Agent shall specify) (a) all funds, if any, then on deposit in, or otherwise to
the credit of, the Collection Deposit Account (provided that funds on deposit
that are subject to collection may be transmitted promptly upon availability
for withdrawal), (b) all checks, drafts and other instruments for the payment
of money received in the Lockboxes and in the possession of the Sub-Agent,
without depositing such checks, drafts or other instruments in the Collection
Deposit Account or any other account and (c) any checks, drafts and other
instruments for
<PAGE> 64
6
the payment of money received in the Lockboxes by the Sub-Agent after such
notice, in whatever form received.
10 The Grantor consents to the appointment of the Sub-Agent and
agrees that the Sub-Agent shall incur no liability to the Grantor as a result
of any action taken pursuant to an instruction given by the Administrative
Agent in accordance with the provisions of this Agreement. The Grantor agrees
to indemnify and defend the Sub-Agent against any loss, liability, claim or
expense (including reasonable attorneys' fees) arising from the Sub-Agent's
entry into this Agreement and actions taken hereunder, except to the extent
resulting from the Sub-Agent's gross negligence or willful misconduct.
11 The term of this Agreement shall extend from the date hereof
until the earlier of (a) the date on which the Sub-Agent has been notified in
writing by the Administrative Agent that the Sub-Agent has no further duties
under this Agreement and (b) the date of termination specified in the notice of
removal given by the Administrative Agent, or notice of resignation given by
the Sub-Agent, as the case may be, pursuant to paragraph 9. The obligations of
the Sub-Agent contained in the last sentence of paragraph 9 and in paragraph
15, and the obligations of the Grantor contained in paragraphs 7 and 10, shall
survive the termination of this Agreement.
12 All notices and communications hereunder shall be in writing and
shall be delivered by hand or by courier service, mailed by certified or
registered mail or sent by telecopy (except where telephonic instructions or
notices are authorized herein) and shall be effective on the day on which
received (a) in the case of the Administrative Agent, to The Chase Manhattan
Bank, 270 Park Avenue, New York, New York 10017, Attention of [Collateral
Monitoring Department], and (b) in the case of the Sub-Agent, addressed to
[ ], Attention of [ ]. For purposes of this
Agreement, any officer of the Administrative Agent shall be authorized to act,
and to give instructions and notices, on behalf of the Administrative Agent
hereunder.
13 The Sub-Agent will not assign or transfer any of its rights or
obligations hereunder (other than to the Administrative Agent) without the
prior written consent of the
<PAGE> 65
7
other parties hereto, and any such attempted assignment or transfer shall be
void.
14 Except as provided in paragraph 5 above, this Agreement may be
amended only by a written instrument executed by the Administrative Agent, the
Sub-Agent and the Grantor, acting by their duly authorized representative
officers.
15 Except as otherwise provided in the Credit Agreement with respect
to rights of set off available to the Sub-Agent in its capacity as a Lender (if
and so long as the Sub-Agent is a Lender thereunder), the Sub-Agent hereby
irrevocably waives any right to set off against, or otherwise deduct from, any
funds held in the Collection Deposit Account and all items (and Proceeds
thereof) that come into its possession in connection with the Collection
Deposit Account any indebtedness or other claim owed by the Grantor or any
affiliate thereof to the Sub-Agent; provided, however, that this paragraph
shall not limit the ability of the Sub-Agent to, and the Sub-Agent may, (a)
exercise any right to set off against, or otherwise deduct from, any such funds
to the extent necessary for the Sub-Agent to collect any fees owed to it by the
Grantor in connection with the Collection Deposit Account, (b) charge back and
net against the Collection Deposit Account any returned or dishonored items or
other adjustments in accordance with the Sub-Agent's usual practices and (c)
(i) establish the reserves contemplated in paragraph 4 in respect of unpaid
fees and amounts which may be subject to collection and (ii) transfer funds in
respect of such reserves from the Collection Deposit Account to the separate
deposit account with the Sub-Agent as contemplated in paragraph 4.
16 This Agreement shall inure to the benefit of and be binding upon
the Administrative Agent, the Sub-Agent, the Grantor and their respective
permitted successors and assigns.
17 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.
18 EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF [ ]
GOVERN THE COLLECTION DEPOSIT ACCOUNT, THIS
<PAGE> 66
8
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
19 The Sub-Agent shall be an independent contractor. This Agreement
does not give rise to any partnership, joint venture or fiduciary relationship.
20 In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
[Name of Grantor],
by
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent,
by
------------------------------------------
Name:
Title:
[Sub-Agent],
<PAGE> 67
9
by
------------------------------------------
Name:
Title:
<PAGE> 68
Annex 2 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of June 28, 1999
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Knowles Electronics, Inc. (the "Parent Borrower"), the
lenders from time to time party thereto (the "Lenders"), The Chase Manhattan
Bank, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), Swingline Lender and as issuing bank (in such capacity,
the "Issuing Bank") and Morgan Stanley Senior Funding, Inc., as Syndication
Agent and (b) the Guarantee Agreement dated as of June 30, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee
Agreement"), among the Subsidiary Guarantors and the Administrative Agent.
The undersigned, a Financial Officer and a Legal Officer, respectively,
of the Parent Borrower, hereby certify to the Administrative Agent and each
other Secured Party as follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had
in the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed
its identity or corporate structure in any way within the past five years.
Changes in identity or corporate structure would include mergers, consolidations
and acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names
or similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
<PAGE> 69
(e) Set forth below is the Federal Taxpayer Identification Number of
each Grantor:
<PAGE> 70
3
2. Current Locations. (a) The chief executive office of each Grantor
is located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all
locations where such Grantor maintains any books or records relating to any
Accounts Receivable (with each location at which chattel paper, if any, is kept
being indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all the
places of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the names
and addresses of all Persons other than such Grantor that have possession of any
of the Collateral of such Grantor:
Grantor Mailing Address County State
<PAGE> 71
4
3. Unusual Transactions. All Accounts Receivable have been originated
by the Grantors and all Inventory has been acquired by the Grantors in the
ordinary course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are true
copies of file search reports from the Uniform Commercial Code filing offices
where filings described in Section 3.19 of the Credit Agreement are to be made.
Attached hereto as Schedule 4(B) is a true copy of each financing statement or
other filing identified in such file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
7. Filing Fees. All filing fees and taxes payable in connection with
the filings described in Section 5 above have been paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true and
correct list of all the duly authorized, issued and outstanding stock of each
Subsidiary and the record and beneficial owners of such stock. Also set forth on
Schedule 8 is each equity Investment of the Parent Borrower and each Subsidiary
that represents 50% or less of the equity of the entity in which such investment
was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct list of
all notes held by the Parent Borrower and each Subsidiary and all intercompany
notes between the Parent Borrower and each Subsidiary of the Parent Borrower and
between each Subsidiary of the Parent Borrower and each other such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by the Parent Borrower to any Subsidiary of the Parent
Borrower or made by
<PAGE> 72
5
any Subsidiary of the Parent Borrower to the Parent Borrower or any other
Subsidiary of the Parent Borrower, which advances will be on and after the date
hereof evidenced by one or more intercompany notes pledged to the Administrative
Agent under the Pledge Agreement, and (b) a true and correct list of all unpaid
intercompany transfers of goods sold and delivered by or to the Parent Borrower
or any Subsidiary of the Parent Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the corporation that owns such property as such name appears in its
certificate of incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (iii) the filing office in which
a Mortgage with respect to such property must be filed or recorded in order for
the Administrative Agent to obtain a perfected security interest therein.
IN WITNESS WHEREOF, the undersigned have duly executed this certificate
on this [ ] day of [ ].
[ ],
by
--------------------------------------
Name:
Title: [Financial
Officer]
by
---------------------------------------
Name:
Title: [Legal Officer]
<PAGE> 73
Annex 3 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to the
Security Agreement dated as of June 30, 1999, among KNOWLES
ELECTRONICS, INC., a Delaware corporation (the "Parent
Borrower"), each subsidiary of the Parent Borrower listed on
Schedule I hereto (each such subsidiary individually a
"Subsidiary Guarantor" and collectively, the "Subsidiary
Guarantors"; the Subsidiary Guarantors and the Parent Borrower
are referred to collectively herein as the "Grantors") and THE
CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as administrative agent (in such capacity, the
"Administrative Agent") for the Secured Parties (as defined
herein).
A. Reference is made to (a) the Credit Agreement dated as of June 28,
1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Parent Borrower, the lenders from time to time
party thereto (the "Lenders"), Chase, as Administrative Agent for the Lenders,
Swingline Lender and as issuing bank (in such capacity, the "Issuing Bank") and
Morgan Stanley Senior Funding, Inc., as Syndication Agent, (b) the Parent
Guarantee Agreement dated as of June 30, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Parent Guarantee Agreement"), between
the Parent Borrower and the Administrative Agent and (c) the Subsidiary
Guarantee Agreement dated as of June 30, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and,
collectively with the Parent Guarantee Agreement, the "Guarantee Agreements"),
among the Subsidiary Guarantors and the Administrative Agent.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of Security Agreement provides that additional Subsidiaries
of the Parent Borrower may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Grantor") is executing this Supplement in
accordance with the requirements of the Credit
<PAGE> 74
Agreement to become a Grantor under the Security Agreement in order to induce
the Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Administrative Agent and the New Grantor agree as
follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Administrative Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the New Grantor's right, title and
interest in and to the Collateral (as defined in the Security Agreement) of the
New Grantor. Each reference to a "Grantor" in the Security Agreement shall be
deemed to include the New Grantor. The Security Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Grantor represents and warrants to the
Administrative Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and
<PAGE> 75
3
correct schedule of the location of any and all Collateral of the New Grantor
and (b) set forth under its signature hereto, is the true and correct location
of the chief executive office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in
writing and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the Administrative
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, other charges and disbursements of
counsel for the Administrative Agent.
<PAGE> 76
4
IN WITNESS WHEREOF, the New Grantor and the Administrative Agent have
duly executed this Supplement to the Security Agreement as of the day and year
first above written.
[Name Of New Grantor],
by
-----------------------------------
Name:
Title:
Address:
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by
--------------------------------------
Name:
Title:
<PAGE> 77
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
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